Water Trading on the Ohio River

Ohio river

Transitions: Water quality trading is coming to the Ohio Basin.

In 1952, the Ohio River caught fire. This year, the two biologists who check the river daily, Jeff Thomas and Rob Tewes, expressed optimism. "The Ohio River quality is drastically better than it's been," Thomas said. "We've made great strides over the past 50 years." One of the continuing problems is that power plants, which installed scrubbers to remove SOx (sulphur oxides) and NOx (nitrogen oxides) from their stacks, clean those scrubbers with water, which can be discharged into the Ohio River.    As the utilities look to solve this problem, they face a twofold issue: what to do right now, and what to do in the long term.

The long term solutions are technical

  • Capture, store and take away,
  • Biochemically break down nutrients, or
  • Reduce pollution before it gets in the pipe.

But these technologies are new and take time.    Some are being tested before being deployed across the country, while others are still on the drawing board. EPRI (Electric Power Research Institute) has been looking at the Ohio River as a whole for several years, analyzing the issues and searching for an innovative way to reduce nutrient levels in the near term.

Market Mechanisms

Jessica Fox Jessica Fox,
Senior Project Manager, EPRI


Jessica Fox, Senior Project Manager, has been leading this effort in collaboration with power companies, federal and state agencies, agricultural organizations, academia, the private sector and industry organizations. The result is Ohio River Water Quality Trading. Fox and her team created a market mechanism to reduce pollution, help the utilities meet current and future water quality regulations, and support efforts by the many ecologically innovative municipalities along the river.    EPRI could foresee an ecological uplift, with significant community benefits, by using funds from utilities and then teaming up with land owners and farmers along the river's edge.    In addition to supporting existing local initiatives, such a plan could incent landowners to create buffer zones by replanting forests between urban and suburban areas, and encourage farmers to reduce the use of fertilizer. They decided on a clean water trading mechanism beginning with a pilot project to test the idea, work out problems and be sure of the monitoring protocols.

Clean Water trading is similar to carbon trading.

The entity (farmer, landowner, municipality) provides a measurement methodology to show the benefits in nutrient reduction of their actions. In the case of water trading, the state DEP (Department of Environmental Protection or similar agency), along with state agricultural reps, state conservation nonprofits and the permitting authority for the power plant review proposals and monitor progress.    Project principals submit a plan, and the agencies approve the crediting methodology and let principals know how many credits they will receive.Once approved, unique codes are generated by EPRI for each credit, so that they cannot be double counted. The utilities then purchase credits, balancing the amount needed to offset their own emission.

Risk Reduction

Since any project with complex aims--particularly one that involves the ecosystem  --has uncertainty, EPRI put in place plans to offset risks.  They include:

  • Aggregate several sources--projects-- to minimize monitoring and administrative overlap.
  • Generate, at a minimum, twice as many credits as technically needed, in order to achieve the needed water quality benefit.

The over-targeting is intended to balance projects that do not meet goals set by the project principals. If the results do not match the expected nutrient reductions, the credits will be retired--that is not sold to a utility. If there are more verified credits, than the utilities can use, those additional credits will be donated to a conservation agency or other nonprofit. Since any plans for the Ohio River basin will lead to changes in 15 states, the project is providing a road map for the interstate cooperation needed to for any broad based environmental remediation. Ms. Fox went on to add that nutrient loading is a huge issue globally, due to excessive emissions from anthropogenic activities: industry, sewage treatment plants, agriculture and other kinds of waste.    In the US, the Chesapeake Bay has nutrient loading that will have to be addressed, while there are dead zones in the gulf of Mexico where fish and plant life cannot survive.

Role of Utilities

For power plants, this program does not let them "get off scot-free" by just paying and continuing to pollute. Each utility has two sets of limits: a technology based effluent limit that must be engineered, and a water quality effluent limit, which can be met with solutions other than technologies.    It is the second the set of limits that the EPRI pilot program can address. There are many advantages to the program as a model, ranging from lessons to be learned, and unintended benefits. One of the latter is that the program has been bringing together community groups, utilities, landowners and municipalities to share in the discussion about their watershed.  Ms. Fox said that she was surprised by the common vision that was emerging about the future of a very important shared resource. Beyond that, she sees the potential for "credit stacking": that is creating clean water and carbon credits from a single project.  She sees the great potential for this project to show how various management systems can work.  She concluded by saying that after the first round of pilot trades, EPRI will do an assessment and make recommendations. The long term plan is to transfer the management to a fully transactional marketplace.