First Interstate Water Credits Program Launched in the Ohio River Basin

The Electric Power Research Institute (EPRI) on March 11 officially launched the first water quality pilot trades in the Ohio River Basin. The pilot, which is the world’s only interstate water quality trading program, is part of a new initiative to test water quality improvement strategies. Duke Energy, American Electric Power and Hoosier Energy were the first buyers of the interstate water credits.

Water quality trading is a market-based approach that could enable facilities to meet permit limits using nutrient reduction credits from farmers who implement conservation practices, EPRI says.

Several parties, including industrial sources, farmers and the general public, contribute to nutrient loading -- which may lead to serious ecological problems. The transactions will produce cleaner watersheds, advance sustainability practices and test more cost-effective regulatory compliance options, according to EPRI.

The companies altogether purchased 9,000 stewardship credits, agreeing to retire the associated nutrient and ecosystem benefits, rather than apply them towards possible future permit requirements. The buyers can use the credits to meet corporate sustainability goals, and the credits may also be considered for future flexible permit compliance schedules by the participating states.

“These early credit transactions will immediately improve watershed and farm health, and will serve as a foundation for ongoing discussions on the potential for water quality trading to meet regulatory compliance obligations in the future,” said Jessica Fox, an EPRI technical executive and director of the water quality trading program.

Due to the fact that the affected watersheds cross state lines, working on an interstate basis is essential, according to EPRI. In August 2012, Indiana, Ky. and Ohio signed the first interstate trading plan where the states can operate under the same rules so that a water quality credit generated in one state can be applied in another. This framework set the stage for the pilot trades. At full-scale, the project could include up to eight states in the Ohio River Basin and potentially create credit markets for 46 power plants, thousands of wastewater facilities and other industries, and around 230,000 farmers.

Stewardship credit trades will continue through 2014 and 2015 to test critical programmatic features such as an online credit registry and live trading auction.

Water scarcity increasingly is becoming difficult to ignore, especially in California, which is facing one of the worst droughts in its history. Recognizing how climate change-related natural disasters such as droughts is crippling communities, President Barack Obama last month announced plans to pitch to Congress a $1 billion climate change resilience fund intended to help communities facing climate change-induced negative weather.

The global population will need 40 percent more water by 2030, according to a recent report by the U.N.’s World Water Assessment Program (U.N.-Water). The report highlights the threat to water supplies posed by the conflicting interests of a growing global population for energy and food, as well as water itself. The list is extensive and includes regulations and governance that lead to perverse outcomes, as well as threats from water contamination, pollution, climate change and the often profligate ways in which we use and manage freshwater resources.

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Based in San Francisco, Mike Hower is a writer, thinker and strategic communicator that revels in driving the conversation at the intersection of sustainability, social entrepreneurship, tech, politics and law. He has cultivated diverse experience working for the United States Congress in Washington, D.C., helping Silicon Valley startups with strategic communications and teaching in South America. Connect with him on LinkedIn or follow him on Twitter (@mikehower)