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Indiana, Ohio part of world’s largest cap-and-trade water program

by Jennifer Ginn ~ September 2012 ~ Stateline Midwest »
A signing ceremony this summer set up the world’s largest water quality cap-and-trade program. It’s not centered in Europe or on the East or West coasts, but in the Midwest.
Indiana, Kentucky and Ohio became the first states to adopt the same set of trading policies and procedures to limit the amount of nitrogen and phosphorus running off into the Ohio River. Under the Ohio River Basin Water Quality Trading Project, farmers will adopt best practices that limit nutrient runoff; power and wastewater treatment plants will then be able to buy credits, even across state lines, from the farmers.
This project is the brainchild of the Electric Power Research Institute. Jessica Fox, a senior scientist at the institute, says excess nitrogen and phosphorous in the Ohio River eventually end up in the Gulf of Mexico.
These nutrients lead to algae growth, which consumes all the oxygen in the water, killing fish and coral and resulting in a large dead zone in the gulf each summer.
Algae growth is also a major concern for waters in the Midwest; Ohio, for example, has launched a new initiative to curb the problem in Lake Erie.
“There are forms of algae that can make you sick if it’s in your drinking water,” says Peter Tennant, executive director of the Ohio River Valley Water Sanitation Commission. “The water utilities ultimately have to do extra treatment if there’s an algae bloom going on, so there is a financial cost as well as an environmental one.”
According to Fox, various sources — power plants, agriculture, wastewater treatment plants and even cars — add to the nutrient load in water.
“You have to get stakeholders together who normally never sit across from each other at a table,” Fox says.
For a project to succeed, she adds, there must be up-front benefits for the stakeholders. Under the new multi-state demonstration project, farmers will receive funding to employ conservation practices that not only reduce nutrient runoff (buffer strips between a field and waterway, for example), but also improve their operations. Industries, meanwhile, can buy water-pollution credits rather than make more-costly plant upgrades.
According to a 2011 Wisconsin study, Illinois, Michigan, Minnesota and Ohio have intrastate water-quality trading programs in place for individual watersheds and specific pollutants. This year, Wisconsin legislators passed SB 557, which will establish a trading program in that state.
Article written by Jennifer Ginn, associate editor of The Council of State Governments. It first appeared in CSG’s Capitol Ideas E-Newsletter. Tim Anderson, publications manager for CSG Midwest, also contributed to this piece.