Sustainable Water Quality Management Policy: The Role of Trading: The U.S. Experience (Alliance for Global Sustainability Bookseries)

152 Pages·2007·0.81 MB·English

by  C. Pharino

Sustainable Water Quality Management Policy
ALLIANCE FOR GLOBALSUSTAINABILITYBOOKSERIES
SCIENCE AND TECHNOLOGY: TOOLS FOR SUSTAINABLE DEVELOPMENT
VOLUME 10
Series Editor: Dr. Joanne M. Kauffman
Laboratory for Energy and the Environment
Massachusetts Institute of Technology
1 Amherst St., Room E40-453
Cambridge, Massachusetts 02139 USA
[email protected]
Series Advisory Board:
Dr. John H. Gibbons
President, Resource Strategies, The Plains, VA, USA
Professor Atsushi Koma
Vice President, University of Tokyo, Japan
Professor Hiroshi Komiyama
University of Tokyo, Japan
Professor David H. Marks
Massachusetts Institute of Technology, USA
Professor Mario Molina
Massachusetts Institute of Technology, USA
Dr. Rajendra Pachauri
Director, Tata Energy Research Institute, India
Professor Roland Scholz
Swiss Federal Institute of Technology, Zürich, Switzerland
Dr. Ellen Stechel
Manager, Environmental Programs, Ford Motor Co., USA
Professor Dr. Peter Edwards
Department of Environmental Sciences, Geobotanical Institute, Switzerland
Dr. Julia Carabias
Instituto de Ecología, Universidad Nacional Autónoma de México, México
Aims and Scope of the Series
The aim of this series is to provide timely accounts by authoritative scholars of the results of
cutting edge research into emerging barriers to sustainable development, and methodologies
and tools to help governments, industry, and civil society overcome them. The work presented
in the series will draw mainly on results of the research being carried out in the Alliance for
Global Sustainability (AGS).
The level of presentation is for graduate students in natural, social and engineering sciences as
well as policy and decision-makers around the world in government, industry and civil
society.
Sustainable Water Quality
Management Policy
The Role of Trading: The U.S. Experience
by
C. Pharino
MIT, Cambridge, MA, U.S.A.
AC.I.P. Catalogue record for this book is available from the Library of Congress.
ISBN-10 1-4020-5862-4 (HB)
ISBN-13 978-1-4020-5862-2 (HB)
ISBN-10 1-4020-5863-2 (e-book)
ISBN-13 978-1-4020-5863-9 (e-book)
Published by Springer,
P.O. Box 17, 3300 AADordrecht, The Netherlands.
www.springer.com
Printed on acid-free paper
All Rights Reserved
© 2007 Springer
No part of this work may be reproduced, stored in a retrieval system, or transmitted
in any form or by any means, electronic, mechanical, photocopying, microfilming, recording
or otherwise, without written permission from the Publisher, with the exception
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A G S
LLIANCE FOR LOBAL USTAINABILITY
An International Partnership
Alliance for Global Sustainability
International Advisory Board (IAB)
Chairman:
Mr. Lars G. Josefsson,President and Chief Executive Officer, Vattenfall AB
AGS University Presidents:
Prof. Hiroshi Komiyama,President, University of Tokyo
Dr. Susan Hockfield,President, Massachusetts Institute of Technology
Prof. Karin Markides,President, Chalmers University of Technology
Prof. Ernst Hafen,President, Swiss Federal Institute of Technology, Zürich
Members:
Dr. Thomas Connelly,Chief Science and Technology Officer, DuPont
Dr. Hiroyuki Fujimura,Chairman of the Board, Ebara Corporation
Mr. Lars Kann-Rasmussen,Director, VKR Holding A/S
Dr. Paul Killgoar,Director, Environmental Physical Sciences & Safety, Ford Motor
Company
Mr. Masatake Matsuda,Chairman, East Japan Railway Company
Mr. Nobuya Minami,Advisor, Tokyo Electric Power Company, Inc.
Prof. Jakob Nüesch,Honorary Member, International Committee of the Red Cross
Mr. Kentaro Ogawa,Chairman of the Board & CEO, Zensho Co., Ltd.
Mr. Kazuo Ogura,President, The Japan Foundation
Mr. Dan Sten Olsson,CEO, Stena AB
Mr. Motoyuki Ono,Director General, The Japan Society for the Promotion of Science
Mr. AlexanderSchärer,President of the Board, USM U. Schärer Söhne AG
Dr. Stephan Schmidheiny,President, Avina Foundation
Mr. Norio Wada,President, Nippon Telegraph and Telephone Corporation (NTT)
Prof. Francis Waldvogel,President, ETH Board, Switzerland
Ms. Margot Wallström,Member of the European Commission
Prof. Hiroyuki Yoshikawa,President, National Institute of Advanced Industrial
Scienceand Technology
Dr. Hans-Rudolf Zulliger,President Stiftung Drittes Millenium, Board of Directors,
Amazys Ltd.
TABLE OF CONTENTS
Preface xi
Chapter1:Background 1
Introduction 1
1.1 DefinitionofWaterQualityandWaterPollution 2
1.1.1 WaterQuality 2
1.1.2 WaterPollution 3
1.1.3 WaterPollutionSystem 3
1.1.4 WaterQualityIndicators 6
1.2 WaterQualityRegulationandPolicyReviews 7
1.2.1 BriefHistoryandEvolutionofWaterPollutionPolicyintheUS 7
1.2.2 ProgressandChallengesfortheTradingApproach 12
1.3 IntroductiontoWaterQualityTrading 13
1.3.1 Description 13
1.3.2 IncompleteExperienceofEffluentTradingintheUS 15
1.3.3 ComparisonbetweenAirandWaterTrading 15
Chapter2:Concept,FrameworkandConsiderationsfor
WaterQuality Trading 19
Introduction 19
2.1 ConceptaboutTradablePermitSystems 20
2.1.1 DefinitionandClassification 20
2.1.2 TypeofTradablePermit 20
2.1.3 PermitLifetime 22
2.1.4 AllocationStrategy 22
2.1.5 TradablePermitSchemes 23
2.2 FrameworkforEstablishingWQTSystems 28
2.2.1 LegalElements 28
2.2.2 EconomicElements 29
2.2.3 TechnicalElements 30
2.3 ConsiderationsinEstablishingTradablePermitSchemes 30
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viii TableofContents
2.3.1 LegalandInstitutionalConsideration 31
2.3.2 EconomicConsideration 35
2.3.3 EnvironmentalConsideration 42
Chapter3:OverviewofObservationsinWaterQualityTrading 45
Introduction 45
3.1 OverviewofWaterTradingProgramsintheUS 46
3.1.1 ProgramStructures 48
3.1.2 Pollutants 52
3.1.3 MarketStructure 54
3.1.4 SizeoftheWatershed 56
3.1.5 NumberofParticipantsinaTradingProgram 58
3.1.6 TradingRatios 60
3.2 ObservationsDerivedfromTradingPrograms 60
3.2.1 BankingandBorrowing 61
3.2.2 NumberofTradesOccurringinEachProgram 61
3.2.3 TransactionCosts 63
3.2.4 CostSavings 65
Chapter4:PotentialRoleofTradinginWaterArea 69
Introduction 69
4.1 ASpecificRoleofTrading 69
4.1.1 GrasslandAreaFarmersTradingProgram(CA) 69
4.1.2 Tar-PamlicoTradingProgram(NC) 72
4.1.3 LakeDillonTradingProgram(CO) 74
4.1.4 RahrMaltingCompanyTradingProgram(MN) 75
4.1.5 LongIslandSoundNitrogenTradingProgram(CT) 75
4.1.6 PassaicValleySewerageCommissioners(PVSC)
PretreatmentTradingProject(NJ) 77
4.1.7 TheTruckeeRiverWaterQualitySettlementAgreement
andTruckeeMeadowsWastewaterReclamationFacility
Permit(NV) 78
4.1.8 ChesapeakeBayNutrientTradingProgram(VA,MD,PA
andWashingtonDC) 79
4.2 ImportantBarriersHinderingtheRoleofTrading 80
4.2.1 RegulatoryRelatedBarriers 81
4.2.2 EconomicRelatedBarriers 84
TableofContents ix
4.2.3 TechnicalandEnvironmentalRelatedBarriers 86
4.3 GenericRolesofWaterQualityTrading 88
Chapter5:Conclusion 93
Introduction 93
5.1 WhatDistinguishestheSuccessofOneWQTProgram versus
Another? 94
5.2 HowWellDotheWQTProgramswithintheUSPerform? 95
5.3 WhyDidWQTProgramsFailtoHaveActiveTrading 98
5.3.1 RegulatoryRelatedBarriers 98
5.3.2 EconomicRelatedBarriers 99
5.3.3 EnvironmentalRelatedBarriers 100
5.4 WhatShouldtheRolesofTradingBeinWaterQuality
Management? 101
5.5 WhatIstheSuggestedGuidanceforDesigningWQTPrograms? 104
5.5.1 RelevantIssues 104
5.5.2 Principles 105
5.6 HowtoPromoteaWQTImplementation? 111
5.6.1 Approach1:DevelopaRealCap-and-TradeProgram
forWQT 111
5.6.2 Approach2:EncourageaGeneralPermitoraMulti-Party
Permit 112
5.6.3 Approach3:PromoteaStatewideTradingPolicy 113
5.6.4 Approach4:SetUpaHybridTradingSystem 114
5.6.5 Approach5:SupportaPilotProgram/Simulation 115
Appendix:Summary DetailsofWaterQuality TradingPrograms 117
A.1 PartIRegardingActivity,TypeofParticipants,Pollutants
andMarketStructure 117
A.2 PartIIRegardingSizeofWatershed,NumberofPS,Trading
Ratio,NumberofTrade,andCharacteristicsofParticipants 121
A.3 PartIIIRegardingTMDLintheProgram,Cost-Savingand
References 126
A.4 SummaryofAnalysisResultsfromAppendicesA-1,A-2,A-3 130
References 135
PREFACE
After the success of the Acid Rain Program, pollution trading became a more
acceptablepolicyindealingwithpollutionproblems.Tradingofpollutioncredits
and allowances helps to achieve environmental goals faster and more cost-
effectively. Although for the past 20 years water pollution trading had been in
effectforaslongasairpollutiontrading,manywaterqualitytradingprograms–as
comparedtoairpollutiontradingprograms–lacksuccessintheimplementation
oftrading.Themotivation factor formywork camefrom aninterest in learning
andunderstandingwhatthedifferenceswerethatculminatedindifferentlevelsof
successbeingachievedbetweenwaterpollutiontradingprogramsandairpollution
trading programs. Moreover, anotherincentive wasnot only tounderstandwhat
the role of trading should be for managing water quality, but also how to better
improvethewaterqualitytradingprogramsinordertobecomesuccessful.
This book focuses on the examination of problems existing within a market-
basedsystemforwaterpollutioncontrolpolicyintheUnitedStates,andprovides
essentialinformationforintroducingmarket-basedinstrumentsforwaterquality
management, presents general situations where trading may or may not work,
andoffersarecommendationforthoseinterestedindevelopingnewwatertrading
programsasasuitableoptionforsolvinglocalizedwaterpollution,forfine-tuning
thesystemafterimplementation,andforovercomingtradingobstacles.
The book is divided into 5 chapters. Chapter 1 explains the background of
waterpollution,evolution,andperformanceofthecurrentwaterpollutioncontrol
regulation.Chapter2presentsdetailed information on howtodevelop a trading
program and important elements which include the current theory and related
empirical studies essential for pollution trading function. Chapter 3 presents the
systematicanalysis,withfocusoncurrentexperiences,ofallwaterqualitytrading
programs in the United States. Chapter 4 explains how specific water quality
trading programs proved to be successfully implemented, and discussions about
howtheiruniquecharacteristicsledtoeachprogram’ssuccess.Chapter5provides
recommendationsfortherolesoftradingandessentialelementsforawaterquality
tradingprogramtopromotesuccessfultradinginthefuture.
I would like to thank all of those who supported me in writing this book. I
am especially indebted to the AGS, especially Professor David H. Marks for his
unconditional support and encouragement from the initial start to completion
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