Henry Balikov, CEP Goldman Environmental Consultants May 10, 2007 The Strategic Advantage of Water Pollution Credits: Leveraging the Lessons Learned from.

Henry Balikov, CEPGoldman Environmental Consultants

May 10, 2007

The Strategic Advantage of Water Pollution Credits:

Leveraging the Lessons Learned from Trading Sulfur Dioxide and Creating a Business Strategy based on a Clean Water Commodity

Market

© 2007 Goldman Environmental Consulting. All rights reserved.

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Contents

Beyond Command and Control– Clean Air Credits

– Carbon Credits

– Clean Water Credits

Credits and Markets– Who would use them?

– What is the benefit of using them?

– Lessons learned from current programs

Be prepared. Strategic planning made easy


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Why are we here?


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Evolution

The evolution of pollution credits

– Sulfur, Carbon, and Water Who would use them? What is the benefit of using them?


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These systems can work

Clean Air Credits – are already a significant factor in overall

pollution reduction

Carbon Credits – are capturing the imagination

Clean Water Credits– can make a contribution that is worth

considering

Title IV of the Clean Air Act has significantly decreased emissions from utilities.

In the first 12 years of the Acid Rain (cap and trade) Program, sources in the Program reduced their emissions of sulfur dioxide by over 33%. That resulted in over 5 million tons less of SOx.


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Clean Air Credits

=

+


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Clean air credits: what are they?

• Started in 1990 Clean Air Act

• Initial focus on sulfur oxides from electric power utility units

• Now a “cap” on total allowed

• Units of SO2 are “retired” annually

• Unused can be banked forward


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Clean air credits: how do they work?

Have the “markets” been as efficient as “command and control” alternatives?

How has the cost per ton of reduction compared to other methods or approaches?


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Carbon Credits Redux


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Carbon Credits Redux

Various markets already exist– Kyoto “international emissions” trading

– EU-wide trading

– Several national emissions trading programs

– Voluntary reduction initiatives

California has committed to a 25% reduction in greenhouse gas emissions by 2020.


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Clean Water Credits

Sam Butcher

I like the picture but worry that if the lightin is not right you will have a tough time seeing it. If you get on our website there is a picture of a discharge pipe on one of hte pages. You might be able to lift and insert that photo?


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Clean Water Credits

Emulate Clean Air Credits or find a different methodology?

Obstacles– Regional or basin-centric?

– Onus is on the local government or regulatory body

– Point source vs. non-point source

– POTW vs. direct-discharger

– How significant are mixing zones

– How many pollutants are relevant?

– Will the market(s) have “critical mass”?


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Who would use them?

Typical organizationsPOTW or direct?

Who would manage the marketplace?

Typical organizations POTW or direct discharger? Who would manage the marketplace?


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How would the trade work?

eBay for effluents? Right now many are volunteering their

reductions to have them “permanently retired”

NGOs are stepping up to track the reductions

For trading credits will there be brokers? Will they be sanctioned by regulators?


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What are the basic benefits?

Water Quality Standards remain in place Creates a different incentive to improve

– Efficiencies improve

– Costs decrease

Collateral benefits


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Why did Oregon get involved?

Oregon’s circumstances favorable to trading include the following: – There is a "driver" that motivates facilities to seek pollutant

reductions, such as more stringent permit limits.

– Some sources can control pollution less expensively than others.

– There is something to trade. When all sources in a watershed are required to reduce pollutant loads by a large margin, opportunities for trading are reduced.

Oregon believes that where watershed circumstances favor trading, it can be a powerful tool for achieving pollutant reductions faster and at lower cost.


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For Oregon, trading is a viable tool

“Almost everyone starts out viewing trading negatively (it is seen as a way for polluters to get off the hook and buy their way out of meeting their legal obligations etc. etc.), once I have had about 20 minutes to show how we can and have used it to achieve actual gain (not just break-even) for the resource, they come around. It takes longer to win over regulators, and much longer to win over the permit holders who might actually do it. That is because they are concerned they will get sued. In a way this is a reasonable concern because there have been so many lawsuits over trivial issues.”

Sonja Bjorn-Hansen

Sam Butcher

Read the first sentence without the parenthetic statement. I am not sure it makes sense as currently puncuated. I may be wrong as my grammer is pretty bad.


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Part of the strategic plan

Toll road analogy – those who pollute should pay.

Part of business strategy. The Choice:

pay to pollute, or actually make money by NOT polluting

and selling/trading clean water credits Should there be a “use or lose” time limit?


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Can we discuss?– What might be the interests of Stakeholders?

– How to create a value proposition

Obtain professional guidance to help craft a pollution strategy and manage risk.

Limit exposure by cleaning up your act.

Pollution and the bottom line


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The fundamental process - Ask:1. What is the desired end state?

2. What is today's situation? What is the gap from that desired state and why?

3. What specific actions must be taken to close the gap between today's situation and the ideal state?

4. What resources are required to execute the activities?

Strategic planning made easy


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Strategic Analysis

Assess– Stakeholders including customers and workforce

– Competition

– Technology

– Supplier markets

– The economy

– The regulatory environment

It is rare to find all six factors having critical

importance

It is rare to find all six factors having critical

importance


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Some final thoughts

This should be part of an overall strategy for each organization.

Its value may be critical to managing key risks – reducing the environmental footprint is a proven way to reduce risk.

In a world where facilities frequently come under new ownership or management, it can help assure a better level of performance.

Obtain professional guidance to help craft a pollution strategy and manage risk.

[email protected]

www.goldmanenvironmental.com

Henry Balikov, CEP Goldman Environmental Consultants May 10, 2007 The Strategic Advantage of Water Pollution Credits: Leveraging the Lessons Learned from.

Documents

workclean air credits

clean air actinitial

clean water commodity

emissions of sulfur

ton of reduction

trading sulfur dioxide

greenhouse gas emissions

sulfur oxides