Citizen's Guide to Water Quality Trading - lsrca.on.ca Documents/reports/citizen-wqt.pdf · CITIZEN’S GUIDE TO WATER QUALITY TRADING Ogilvie, Ogilvie & Company ... to be traded

CITIZEN’S GUIDE TO WATER QUALITY TRADING

Ogilvie, Ogilvie & Company

February 12, 2013

Prototype v.3

3 Glossary

4 Foreword

51 What is the basic concept underlying water quality trading? What are the costs, benefits, and risks?

8 2 Principles for Effective Water Quality Trading

9 3 How would this apply in the Lake Simcoe watershed? How would it help solve the lake’s phosphorus problems?

10 4 Show me! ...Examples of hypothetical but realistic trades

12 5 Where has it worked? What was learned from other jurisdictions?

14 6 How would it actually work? ...Show me the process/ mechanics of a typical water quality trading system

15 7 Program Design

16 8 Next Steps

Contents

3Prepared by Ogilvie, Ogilvie & Company

Baseline – The treatment level a discharger is obligated to provide prior to buying or generating credits. For example, a Certificate of Approval provides an allowable pollution limit for industrial and municipal point sources.

Buyers – Dischargers with regulated baselines for whom pollution reduction is expensive. For these sources, it is less costly to buy pollution credits from other sources and use these credits to help achieve their baseline loads. Non-dischargers, such as watershed groups, may buy and retire credits from the market to further reduce pollution.

Credit – A unit of pollution reduction, measured as pollutant mass over a given period of time (tons/year, pounds/growing season) to be traded in the WQT market. Credits are generated for every unit of pollution reduction beyond the baseline level. Examples of credit generation include Implementing best management practices in agricultural operations beyond the baseline; and implementing advanced technologies in industrial and municipal facilities.

LID – Design of new urban development areas (greenfield development) or retrofitting of older areas to incorporate Low Impact Development measures that substantially reduce stormwater runoff volumes and pollutant loadings, beyond what is achieved by MOE Level 1 stormwater treatment.

Load Reduction – The difference between the baseline load and the reduced load following implementation of best management practices (for a non-point source) or improved treatment (for a point source).

Nonpoint Source – A diffuse source of pollution. In contrast to point source, nonpoint source pollution does not originate from a discrete point or outlet but from a large geographical area. Major nonpoint sources include runoff from agriculture and urban areas. Many nonpoint sources of pollution are not currently regulated.

Point Source – A source of pollution that discharges at a single point, usually through a pipe, channel or outlet. Point sources are often regulated under provincial law. Major point sources are sewage treatment plants and industrial facilities.

Sellers – Sellers are essentially the suppliers of credit; they are the dischargers in the watershed that reduce pollution below the baseline and generate credits for sale in the marketplace. Examples include farmers who implement best management practices and industrial facilities that install new abatement technologies.

Trade Ratio – A multiplier applied to either a buyer’s or seller’s credit value to adjust for factors such as the form of the pollutant, the location of the buyer and seller, uncertainty about effectiveness, and similar considerations.

Trading Administrator – An oversight body that administers the trading program; a mechanism that can help buyers and sellers to find each other to reduce transaction costs and increase the ability to make trades.

Water Quality Trading – A flexible watershed based program that allows for a limited increase in pollutant discharge or a required reduction from an existing discharge to be offset by greater reductions made elsewhere in the same watershed assuming a trade provides economic, equivalent, additional and accountable reductions in pollutant loading.

Glossary

4 Citizen’s Guide to Water Quality Trading

The Lake Simcoe Phosphorus Reduction Strategy identified water quality trading as an innovative way to take advantage of additional phosphorus reduction opportunities. If established, a water quality trading program would be used along with best practices and technological investments to reduce total phosphorus loadings from certain sources.

In February 2010, the Ontario Ministry of the Environment released a feasibility study of water quality trading in the Lake Simcoe Watershed, conducted by XCG Consultants1. In his covering letter, Minister John Gerretson noted that the Ministry views water quality trading as a cost-effective way to achieve phosphorus reductions, while creating incentives for investment in phosphorus-reduction projects.

Detailed program design options are now under discussion, and input from local residents and other stakeholders is important in that process. Yet our Water Quality Trading Soundings survey, conducted in the Fall of 2012, found that 20% of the respondents felt they did not know enough about water quality trading to decide if it was a good idea for Lake Simcoe. This Citizen’s Guide tries to fill that gap by providing an overview of water quality trading, to help people understand how water quality trading works and how it might be applied in the Lake Simcoe watershed.

Over the next several weeks, Ogilvie, Ogilvie and Company will be conducting a series of workshops for local residents and other stakeholders. The purpose of these workshops will be to present basic information about how water quality trading works, both in Ontario and elsewhere, and to hear from participants what concerns or questions they have about a possible water quality trading program for the Lake Simcoe watershed.

1XCG and Kieser and Associates. 2010. Water Quality Trading in the Lake Simcoe Watershed: Feasibility Study, posted on the Environmental Registry (EBR Number: 010- 8989) on February 17, 2010 for review and comment. Note that portions of this document are drawn from this feasibility study.

Foreword


Water quality in our lakes and streams is influenced by many factors, including natural processes and human activities. Managing water quality requires a variety of tools, including laws and policies, effective technology, and careful tracking of results. Water quality trading is one of the tools that can be used to improve water quality and create a framework for tracking these improvements.

In the Lake Simcoe watershed, phosphorus is the main pollutant of concern. Phosphorus is a naturally-occurring element, but excess amounts – from fertilizers, sewage treatment plant effluents, agricultural operations, and other human sources – can encourage nuisance growth of aquatic plants and algae. As those plants and algae grow and die, they alter oxygen levels in the lake, creating a threat to important aquatic species like lake trout and lake whitefish.

There are many sources of phosphorus to Lake Simcoe, both direct and indirect (see Figure 1). Many of those are now well controlled and as a result, phosphorus loadings have been reduced from about 100 tonnes/year in the 1990s to about 72 tonnes/year in 2009. Much work

remains to be done, however. The Lake Simcoe Protection Plan has set a maximum loading of 44 tonnes/year for the future, the level necessary to achieve a self-sustaining coldwater fishery in the lake. Reaching this target will require a concerted effort on the part of all dischargers, especially as population grows in the Lake Simcoe watershed and places increasing pressure on sewage treatment plants and stormwater facilities. The Lake Simcoe Protection Plan recognizes that 44 tonnes/year is an ambitious goal, and encourages the Government of Ontario to explore innovative ways of reducing pollution to the lake. Water quality trading is one such innovative solution.

Phosphorus comes from a wide range of sources (see Figure 1), and some of them can be controlled at much lower costs than others. Some sources, such as discharges from sewage treatment plants, are regulated under provincial law, and must meet specific discharge requirements. Discharges from other sources, for instance streambank erosion or runoff from agricultural operations, are presently reduced mainly through voluntary stewardship programs. Examples include projects such as streambank restoration, improved tillage practices or installing fencing along streambanks to restrict cattle access.

1What is the basic concept underlying water quality trading? What are the costs, benefits, and risks?

Figure 1 Lake Simcoe Phosphorus Sources

Holland marsh and smaller polders (3 t/yr) 4%

Watershed Streams (41 t/yr) 56%Atmospheric

(19 t/yr) 27%

STPs(5 t/yr) 7%

Septics(5 t/yr) 27%

Source: Lake Simcoe Region Conservation Authority and Ministry of the Environment Data sets on phosphorus loading for 2002 to 2007.

Streambank fencing to restrict cattle access to a stream


Water quality trading is based on the fact that sources in a watershed can face very different costs to control the same pollutant. For example, it is costly and time-consuming to upgrade infrastructure like a sewage treatment plant, whereas many on-farm improvements and conservation measures like streambank restoration can be implemented more quickly and at much lower cost.

Trading programs allow facilities facing higher pollution control costs to meet their regulatory obligations by purchasing environmentally equivalent pollution reductions from another source at lower cost, thus achieving the same water quality improvement at lower overall cost.

The Lake Simcoe Protection Plan requires that future population growth be accommodated without increasing phosphorus loadings. Water quality trading offers flexibility and opportunities for collaboration in achieving the greatest phosphorus reductions at the lowest cost.

The central concept in water quality trading is the over-control of discharges. Regulated dischargers, like sewage treatment plants and industrial discharges, must still meet all of their regulatory requirements (and indeed the full trading system would be overseen by a provincial agency like the Ontario Ministry of the Environment). All dischargers must meet a baseline level of pollution reduction before they are permitted to participate in a water quality trading program. One baseline requirements have been met, those who can achieve reductions at lower cost can sell additional phosphorus control “credits” (see text box) to a discharger who would have to pay much more to achieve the same water quality benefit. The net result is that phosphorus loadings to the lake are reduced at lower cost – and often to a greater degree – than if the high-cost facility had acted alone.

Water quality trading has its own language. Here are some commonly used terms.

Baseline: The minimum level of pollution control that a discharger must achieve before being permitted to participate in water quality trading.

Credit: A unit of pollution reduction, such as kilograms or tonnes per year, that can be traded in a water quality trading market.

Buyer: A discharger with regulated baselines for whom pollution reduction is expensive. For these sources, it is less costly to buy pollution credits from other sources and use these credits to help achieve their baseline loads. Non-dischargers, such as watershed groups, may also buy credits from the market to further reduce pollution.

Seller: A supplier of credits; a discharger who is able to reduce pollution below the baseline and generate credits for sale in the marketplace. Examples include farmers who implement best management practices and industrial facilities that install new abatement technologies.

Trade administrator: An independent body that administers the trading program, helping buyers and sellers to find each other to reduce transaction costs and increase the ability to make trades.


In the Lake Simcoe watershed, credit buyers might be municipalities, private developers, industrial operations, and possibly transportation authorities. Potential credit sellers might be agricultural operations, and municipalities or other agencies with projects like advanced stormwater treatment, low-impact development practices, or streambank restoration. Sewage treatment plants that can achieve exceptionally good phosphorus reduction could also be credit sellers. Figure 2 shows the sources that have potential for inclusion in a water quality trading program.

Water quality trades do not usually occur on a one-to-one ratio. That is, when a buyer wishes to demonstrate that they have reduced phosphorus loadings by one kilogram, that buyer must actually purchase two, three, or even four

LakeSimcoe

Tributary Discharge

Direct-to-LakeDischarge

Direct-to-LakeAtmospheric Deposition

Figure 2

kilograms of reduction from a credit seller, depending on factors such as distance from the buyer’s location, the form of the phosphorus, and the expected effectiveness of the intended measure. These “trading ratios” must be approved by a regulatory agency (such as the Ministry of the Environment) and are used to ensure overall reduction in phosphorus loading.

The cost of a credit is usually negotiated between a buyer and a seller, sometimes with the help of a third-party trade administrator. It must be enough to cover the actual cost to the seller (for example, the capital cost of streambank fencing or low-impact development technology for stormwater management), but not exceed the cost that the buyer would pay to achieve the same reduction itself.


2Principles for effective water quality trading

The Feasibility Study emphasized that an effective water quality trading system should be guided by the following principles:

1. Accountable – Mechanisms must be in place to demonstrate that actual phosphorus reductions from trades are actually achieved.

2. Beneficial – WQT must result in net water quality benefits to Lake Simcoe.

3. Defensible – WQT parameters, such as credits and ratios, must be based on reliable scientific evidence and methods.

4. Economical – Reductions in phosphorus loadings to Lake Simcoe that accrue from WQT should be at an overall lower cost than traditional approaches to water quality improvement.

5. Enforceable – WQT rules, policies, and procedures must be simple and consistent, and participants must be aware of consequences of failing to fulfill trading obligations.

6. Equitable – The WQT program should seek to avoid bias in terms of participation, location of trades, and value of credits.

7. Flexible – Information about WQT operation and water quality improvements must be reviewed from time to time and used to adapt trading to changing knowledge and technology.

8. Transparent – The WQT program should be designed using a participatory approach involving users, planners and policy-makers. The operation of the program should be accessible and transparent to users and the public, to maintain confidence in the WQT program and its achievements.

Challenges can arise when one or more of these principles are not met in program design or operation. In particular, users, regulators, and members of the public want to be confident that credit-related work is actually completed, works as expected, and achieves real pollutant reductions. People want assurance that the program is fair and doesn’t favour one party or group over another. Transparency in program design and operation is especially important because this is an unfamiliar approach to water quality management, and people must understand why certain decisions have or have not been taken.

Streambank deterioration and associated erosion, Eastern Creek Eastern Creek following streambank restoration to reduce erosion and phosphorus loss


3 How would this apply in the Lake Simcoe watershed?

How would it help solve the lake’s phosphorus problems?

It is important to emphasize that water quality trading is not a “license to pollute”. Every discharger must still comply with regulatory requirements, but trading offers a flexible method to achieve phosphorus compliance goals in situations with high treatment costs, or when addressing new loading from population growth. Trading ratios are set to ensure that pollution reductions are at least as great as those that a buyer’s facility would otherwise have been able to achieve, and often more. Verification of pollutant reductions and public disclosure of results provide proof to trading partners, regulatory agencies, and the public that that water quality improvement actions have been implemented as intended.

Trading doesn’t work for all pollutants; for example, it would not be desirable to allow trading of highly toxic materials. Phosphorus is however a suitable pollutant for trading, and is the basis of many water quality trading programs around the world.

In the Lake Simcoe watershed, allowing phosphorus trading among dischargers could help average citizens by controlling sources that might otherwise not be controlled or controlled to the same degree, and achieving higher overall phosphorus reductions at lower cost. Trading also has the benefit of building awareness of phosphorus control needs and benefits across a wider audience, and allowing a broader range of dischargers to participate in cleanup activities.

Water quality trading works best where there is a strong incentive to reduce pollutant loadings (as in the case of the Lake Simcoe Protection Plan goal of 44 tonnes/year) and when dischargers have significantly different costs to control the pollutant. There must be enough credit sellers available to generate sufficient phosphorus reductions to meet the needs of potential credit buyers. Watershed stakeholders and regulators must also be willing to try an innovative approach to pollution control.


4 Show me! ...Examples of hypothetical but realistic trades

There are many forms of water quality trading, and many types of trades.

Point Source–Point Source Trading

The simplest form of water quality trading is trading between two “point sources” (see box). An example would be a case where two sewage treatment plants discharge to the same river. One has installed advanced technology that allows it to achieve pollutant reductions well beyond those required for other plants. The second plant is facing significant costs to upgrade its treatment technology. The second plant might decide that it is more cost-effective to buy pollution reduction credits from the newer plant, and thus delay the requirement for upgrading. The lake or river receiving the discharges benefits because total pollutant loadings are reduced, often beyond what would have been required under individual permits. (Note however that trading only targets one pollutant, for example phosphorus. If other kinds of improvements are necessary, then trading may not be an option and the plant may have to upgrade immediately.)

Point source-to-point source trading is easy to manage and enforce because the pollutant discharges from each plant are easy to identify and measure. Both dischargers operate under existing regulatory approvals, and the effectiveness of existing and potential technologies is well understood, and there is little uncertainty about the expected water quality improvement. However, major point sources in the Lake Simcoe watershed face similar challenges and costs, making point source-point source trading unlikely in this area.

A point source is a pollutant discharge from a single place or point, such as a pipe, whose location and ownership is clear. Examples include effluent discharges from industrial facilities or sewage treatment plants.

A nonpoint source is diffuse and not discharged into a water body from a single point. Nonpoint source pollution often arises from a large land area owned by many parties. Examples include overland runoff from urban areas and from agricultural activities such as cropland or animal husbandry operations.


Point Source–Nonpoint Source Trades

Trading between point sources and nonpoint sources is a more promising approach for managing phosphorus loads to Lake Simcoe, in large part because of the variety of sources. The main advantage of point source-nonpoint source trades is the tremendous difference in the costs of pollution reduction. While point sources usually control pollution through costly technology, nonpoint sources are more often controlled by modest changes in operating practices (such as tillage practices, or use of buffer strips along streams) or lower-cost LID infrastructure such as infiltration trenches.

Point source-nonpoint source trades benefit both trading partners. The point source partner can achieve pollutant reductions faster and at lower cost than would be required for technology upgrades, while the nonpoint source partner obtains a revenue source to improve environmental controls and increase the efficiency of the operation. The community benefits because water quality is improved at reduced cost. And the environment benefits, because many trades create environmental benefits such as reduced erosion, improved fish habitat, and recreational opportunities well beyond those offered by the pollutant reduction targeted in the trade itself.

The main issue associated with point source-nonpoint source trading is uncertainty about load reductions. Evaluating the actual performance of a nonpoint source measure, whether urban or agricultural, is therefore important. Somewhat higher trading ratios are often used for nonpoint source trades to account for this uncertainty, and when there is doubt, more conservative values are usually used. For example, a typical trading ratio for retrofitting an urban stormwater pond would be on the order of 2:1 to 2.5:1, recognizing that design approaches for such ponds are well established and their performance over time is well understood. By contrast, a ratio of 4:1 might be used for an agricultural measure such as buffer strips or streambank fencing, because there is more uncertainty about how much phosphorus reduction can actually be expected from a specific measure in a specific location.

A variety of other trading scenarios are possible, some involving multiple partners and/or a third-party organization (a “trade administrator”) to arrange and track trades.


5 Where has it worked? What was learned from other jurisdictions?

Ontario already has a well-established water quality trading system in place in the southeastern part of the province. The South Nation Total Phosphorus Management Program was established in 1998 and was the first trading program in Ontario. It is a point source-nonpoint source trading system, with municipal sewage treatment plants buying credits from the agricultural sector. Like many other successful trading systems, it was built on an existing conservation program that was already familiar to producers.

South Nation trades have financed agricultural projects such as feedlot runoff controls, manure storage facilities, milk house wastewater treatment, cattle fencing, conservation tillage, and cover cropping. The system uses a standard trading ratio of 4:1, with credits valued at $300 per kilogram. A credit buyer must therefore pay $1,200 (4 x $300) to buy one kilogram of phosphorus reduction. The South Nation Conservation Authority acts as a trade

administrator, but the agricultural community actively participates in program delivery, deciding on project eligibility and auditing actual performance. The program is considered one of the most successful in North America and in 2007 was awarded an Honorable Mention in the Canadian Council of Ministers of the Environment Pollution Prevention Awards.

In the United States, water quality trading is a growing part of the water quality management toolkit, building on earlier experience with air emissions trading as part of acid rain controls. It has taken time to work through challenges such as appropriate regulatory controls, estimation of nonpoint source loadings, and lack of stakeholder awareness and support, but today there are a number of effective trading systems in the US. Examples include:

• ApilotwaterqualitytradingprogramintheGreat Miami River watershed, Ohio, was so successful that it has become the recognized model for point source to nonpoint source trading in the United States. In this program, sewage treatment plants buy phosphorus or nitrogen reduction credits from upstream nonpoint source sellers. Trading ratios vary, depending on the location of the point source and the quality of the lake or stream that receives its discharge. Lower trading ratios provide an incentive for buyers to purchase credits in advance of compliance deadlines, thus creating an early environmental benefit. More than 650,000 pounds of phosphorus and nitrogen have been reduced by just five of over 300 potential point source buyers in the watershed who have participated to date.

• InBarron County, Wisconsin, the City of Cumberland paid farm operators approximately $18.50 per acre to convert to no-till farming. This was a more cost-effective approach for the city than upgrading its sewage treatment plant and paying the annual operating costs for phosphorus removal. The program was also attractive to participants and residents because it created additional benefits such as enhanced wildlife habitat that would not have been possible if the phosphorus reduction had been achieved solely through a sewage treatment plant upgrade.

Soybeans planted in wheat stubble in a no-till agricultural operation


• InWashington County, Oregon, Clean Water Services (a wastewater and stormwater management utility) has secured easements or management contracts with riparian landowners to encourage maintenance of a healthy stream environment within the Urban Growth Boundary (UGB). Funded projects include channel restoration, invasive species control, habitat creation, and revegetation of streambanks. Outside the UGB, local farmers participate in the Tualatin Soil and Water Conservation District’s enhanced Conservation Reserve Enhancement Program (CREP). In the normal CREP program, participating farms receive $26 per acre per year to plant trees to cool the warm waters of the Tualatin River. In the enhanced program, participants receive an additional $128 per acre, which is paid by Clean Water Services. The goal of the enhanced program is to fulfill the utility’s obligation to reduce the temperature of stormwater discharged from its facilities.

• IntheNeuse River Basin, North Carolina, a group of point source dischargers have individual and group allocations for total nitrogen discharges. Members of the

association are permitted to trade with each other as long as the total discharges are less than the group allocation. If the cap is exceeded, individual members would be required to comply with their individual limits, and the state government could take enforcement action against the group or any member. As new dischargers are added to the group, the group cap is modified. A discharger that cannot meet its individual limits and finds that there are not sufficient credits available from other group members may pay into a Wetlands Restoration Fund – but at double the normal rate, and only if the purchased credits are sufficient to fund 30 years of nitrogen reduction.

• TheSouthern Minnesota Beet Sugar Cooperative (SMBSC) was not permitted to expand its wastewater treatment plant without offsetting its phosphorus loading. To meet this requirement, SMBSC contracts with more than 200 shareholders every year to install conservation practices such as cover crops to reduce their phosphorus loads to the stream. SMBSC also has a long-term contract with a local beef operation to install best management practices that reduce phosphorus loads.


6 How would it actually work? Show me the process/ mechanics of a typical water quality trading system

As the previous section has demonstrated, water quality trading programs are developed to address water quality challenges in a specific location and in the context of a specific set of players. While each trading system is therefore unique, most include the following eight steps:

1. Potential credit buyers determine whether water quality trading would be a cost-effective way of achieving required pollutant reductions. This is a discussion that the potential buyer might have with its regulator (such as the Ministry of the Environment) and with any third party organization that serves as the administrative hub for a trading program.

2. Credit sellers offer credits for sale, either directly to a buyer or through a third-party administrative agency. Here is where it is advantageous to have a third-party trade administrator to bank credits, offer information to potential credit sellers, and evaluate the feasibility of a particular project as a source of credits.

3. The cost and life of pollutant credits are established. The buyer and seller can negotiate these factors directly, or a third-party administrator can assist in the process. In the latter case, the administrator may have established a standard cost and life for a particular kind of credit, as has been the case in the South Nation program in southeastern Ontario.

4. Credit buyers determine whether sufficient credits are available to achieve the intended pollutant reduction. The buyer’s regulator will have specified the required (baseline) level of pollution control. The buyer will then assess how many credits would be necessary to meet that limit, and find out (possibly from a third-party trade administrator) whether sufficient credits are available in an appropriate location, and what those credits would cost. They must then decide whether it is preferable to buy available credits or, if the cost is too high, to achieve the necessary reduction through in-house technology upgrades or other means.

5. A draft trade agreement is developed between the trading partners. The agreement can be developed by the two parties alone, or through a third-party administrator.

6. The draft trade agreement is approved by the third-party administrator (if used) and the regulatory agency. Credit buyers and sellers are not free to approve a trade on their own; they must obtain the approval of the regulatory agency with responsibility for oversight of pollution reduction. In Ontario, that is the Ministry of the Environment.

7. Credit-related work is completed and verified by the third-party administrator (if used) or directly by the buyer. Credit buyers understandably want to ensure that the work they have paid for has actually been completed to appropriate standards. Verification is therefore an important part of the trading process.

8. Pollutant concentrations and project status are monitored by the third-party administrator (if used) or directly by the buyer, and reported to the regulatory agency as appropriate. Ultimately, the goal of trading is water quality improvement. For that reason, it is important to monitor the performance of individual credit-generating measures and water quality in the lake or river where improvement is needed.


7 Program Design

Experience in other jurisdictions demonstrates that a number of factors are important in designing a water quality trading program and approving individual trade agreements. An appropriately crafted trading program will address issues such as:

•Thefateandtransportofphosphorusdischarged from different sources

•Howloadreductionsshouldbeestimated

•Thelengthoftimeareductionpracticeiseligible to generate credits (credit life)

In a system where buyers and sellers are negotiating directly, these kinds of considerations can form part of the negotiations. In a multi-trade environment, such as the South Nation program, it is far more efficient to work through a third-party trade administrator that can negotiate with regulators to arrive at a standard set of rules and expectations.

Low impact development measures like rain gardens and bio-swales are effective stormwater management approaches for public and private lands

Ongoing monitoring.

Complete and verify credit- related work.

Is WQT a cost-effective

approach?

What is the water quality goal?

Determine credit life and cost.

Are sufficient credits available at low enough cost?

Draft and approve trade agreement


8 Next Steps

XCG Consultants are now exploring the possible design of a water quality trading program for the Lake Simcoe watershed. The Lake Simcoe Region Conservation Authority (LSRCA) is proposing to undertake a pilot trading arrangement, to see where the process works especially well, or where issues might arise. Among the elements XCG and LSRCA are considering are

Eligible trade boundaries•Shouldcreditbuyersandsellersbelocatedinthesame

political jurisdiction, for example York Region?

•Shouldcreditbuyersandsellersbelocatedinthesamewatershed?

•Shouldacreditsellerbelocatedupstreamofacreditbuyer?

Credit supply•Whatkindsofcreditsshouldbemadeavailable?(e.g.,

urban stormwater pond retrofits, low-impact design stormwater retrofits, polder water treatment, streambank restoration, septic system disconnections or upgrades, effluent reuse, etc.)

•HowmanyopportunitiesofeachtypeexistwithintheLake Simcoe watershed?

•Whataretherelativemeritsofcreditgenerationbypublic vs. private parties?

Trade ratios•Whattraderatiosshouldbeusedforeachfeasiblecredit

type?

•Shouldtraderatiosbeadjustedforcreditsthataremoredistant from a credit buyer? For example, should a higher trade ratio be used if the credit seller is located in an adjacent subwatershed, not near the credit buyer?

Credit generating partners•Whoshouldbeallowedtobuycredits?Publicagencies

and authorities, such as municipalities? Private developers? Industrial dischargers? Private landowners? What are the risks and benefits of each approach?

Credit life•Howshouldcreditlifebedetermined?

•Shoulditbebasedontheexpecteddurationofthephosphorus reduction project or technology (including replacement costs if necessary?

•Oronthelifeofapermitorotherregulatoryinstrument?

•Oronthelifeofacontractualagreementbetweenthecredit seller and the credit buyer?

Credit estimation methods•Howshouldthephosphorusreductionvaluebe

calculated for each type of project?

•Shouldthemethodbespecifictothetypeofproject,or are more generic estimation tools available (and appropriate)?

•Shouldestimationmethodsbesite-specific?

Trade Administrator• Isitagoodideatohaveathird-partytrade

administrator? Or should buyers and sellers work directly with each other and with regulators?

• Ifathird-partyadministratorisused,whatshoulditsrole(s) be? (e.g., tracking and “banking” available credits, acting as a broker for trades, assisting in development of contractual agreements, verifying work performed, monitoring effectiveness, reporting, liaison with external agencies such as regulators, etc.)

• Ifathird-partyadministratorisused,shoulditbeanexisting agency or authority, like LSRCA, or should it be some new organization?

•Whatresourceswouldanadministratorrequiretodoitswork? Where would the funds come from?


Notes