RTI International RTI International is a trade name of Research Triangle Institute. www.rti.org Nutrient Trading as an Incentive to Achieve Agricultural Baseline Compliance for the Chesapeake Bay TMDL Ross Loomis, RTI International ACES 2012
RTI International
RTI International is a trade name of Research Triangle Institute. www.rti.org
Nutrient Trading as an Incentive to Achieve
Agricultural Baseline Compliance for the
Chesapeake Bay TMDL
Ross Loomis, RTI International
ACES 2012
RTI International
Chesapeake Bay TMDL
41
14 12
0
20
40
60
80
100
120
Nit
rog
en
(m
illi
on
deli
ve
red
lb
s/y
ea
r)
Average Annual Nitrogen Delivered to the Chesapeake Bay
TMDL Allocation Required Reduction
RTI International
Nutrient Trading
One potential incentive is the ability to sell nutrient
credits for reductions beyond baseline requirements.
How much of agriculture’s baseline reduction could be
achieved through nutrient trading?
Parameters Baseline Practice Creditable Practice
Total Reductions 5 7
Baseline 5 5
Additional Reductions 0 2
Cost $10 $15
Price per Credit $10 $10
Profit -$10 $5
RTI International
Analytical Framework
Adapted
framework to
estimate potential
savings from
nutrient trading
2 million
agricultural, 4,000
wastewater, and
18,000 urban
stormwater
options
4
RTI International
Defining the Baseline Requirements
Baseline requirements most often discussed in the
context of sectors without required reductions
– E.g., Clean Development Mechanism carbon credits
For the Chesapeake Bay, agricultural reductions are part
of the TMDL.
Baseline Requirement = 2010 – TMDL
Credit = Total Reduction – Baseline Requirement
RTI International
Required Nutrient Reductions
37
3
15
23 2.0
0.1
0.8
1.5
0.0
1.0
2.0
0
10
20
30
N P N P N P
Agriculture Wastewater Regulated Urban
Ph
osp
ho
rus (
millio
n d
elivere
d l
bs/y
ear)
Nit
rog
en
(m
illio
n d
elivere
d l
bs/y
ear)
RTI International
Progress to Baseline Requirements
0% 20% 40% 60% 80% 100%
No participation by areas
with baseline requirements
Full participation by areas
with baseline requirements
RTI International
Scenarios
Sector Demand
– Wastewater (SigPS-AgrNPS)
– Wastewater + Regulated Urban Stormwater (SigPS-AgrNPS-Urban)
Wastewater Demand
– High - Same nutrient reductions as without trading
– Low - Excess allocations available for trading, lower reduction
Geographic Restrictions
– Within major river basins and states (Basin-State)
– Within major river basins (Basin)
Agricultural Trading Ratio
– 1.1 to 1
– 2 to 1
RTI International
Results for Basin, PS-Ag, 1.1 to 1, High
9% 4%
0
0.5
1
1.5
2
2.5
3
3.5
4
0
5
10
15
20
25
30
35
40
45
Agriculture Demand Sectors Agriculture Demand Sectors
N P
Ph
os
ph
oru
s (
milli
on
deli
vere
d l
bs/y
ear)
Nit
rog
en
(m
illi
on
deli
vere
d l
bs/y
ear)
Contribution to Required Reduction Remaining Baseline Requirement
Sold Credits Purchased Credits
Uncertainty Reserve
RTI International
Results Across Scenarios - Nitrogen
1% 2% 1% 1% 5% 7% 3%
5% 9% 10% 10% 8%
16% 18% 19% 23%
0
5
10
15
20
25
30
35
40
45
Basin
Basin
-Sta
te
Basin
Basin
-Sta
te
Basin
Basin
-Sta
te
Basin
Basin
-Sta
te
Basin
Basin
-Sta
te
Basin
Basin
-Sta
te
Basin
Basin
-Sta
te
Basin
Basin
-Sta
te
1.1 2.0 1.1 2.0 1.1 2.0 1.1 2.0
PS-Ag PS-Ag-Urban PS-Ag PS-Ag-Urban
Low High
Nit
rog
en
(m
illi
on
deli
vere
d l
bs/y
ear)
Contribution to Required Reduction Remaining Baseline Requirement
Sold Credits Uncertainty Reserve
RTI International
Results Across Scenarios - Phosphorus
1% 1% 1% 1% 2% 2% 1% 2% 4% 4% 6% 5% 7% 6% 7% 9%
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
Basin
Basin
-Sta
te
Basin
Basin
-Sta
te
Basin
Basin
-Sta
te
Basin
Basin
-Sta
te
Basin
Basin
-Sta
te
Basin
Basin
-Sta
te
Basin
Basin
-Sta
te
Basin
Basin
-Sta
te
1.1 2.0 1.1 2.0 1.1 2.0 1.1 2.0
PS-Ag PS-Ag-Urban PS-Ag PS-Ag-Urban
Low High
Ph
os
ph
oru
s (
milli
on
deli
vere
d l
bs/y
ear)
Contribution to Required Reduction Remaining Baseline Requirement
Sold Credits Uncertainty Reserve
RTI International
Summary
Findings
– Nutrient trading alone could provide sufficient incentive to
achieve between 1% and 23% of agriculture’s baseline N
requirements (1% and 9% of P) depending on trading rules.
– Increased demand for credits increases agriculture’s baseline
contribution from nutrient trading.
– No general predictions for the impact of geographic restrictions or
trading ratios on baseline contribution from nutrient trading.
Policy Implications
– Nutrient trading should support lower public regulatory costs or
greater compliance.
– Implications for incentive programs depend on program structure
– subject of future applications of model
RTI International
More Information
Ross Loomis
Senior Economist
919.541.6930
CBC Report
http://www.chesbay.us/Publications
/nutrient-trading-2012.pdf
EPA Report
http://www.epa.gov/research/docs/
chesapeake-bay-pilot-report.pdf
RTI International
Distribution of Delivered Nitrogen Relative to No Trading
14
RTI International
Distribution of Delivered Nitrogen Relative to No Trading
15
RTI International
Distribution of Delivered Phosphorus Relative to No Trading
16
RTI International
Distribution of Delivered Phosphorus Relative to No Trading
17