The U.S. Department of Agriculture Natural Resources Conservation Service (NRCS) and Missouri NRCS offices awarded Conservation Innovation Grants to the Environmental Resources Coalition and Geosyntec Consultants for two projects aimed at introducing water quality trading concepts in Missouri.
The first project, Evaluating and Practicing Innovative Conservation (EPIC), was designed to measure the cost and effectiveness of a surface water wetland and subsurface bioreactor for reducing agricultural runoff. EPIC results were used to inform the second project, the Missouri Innovative Nutrient Trading (MINT) project. MINT was designed to evaluate the feasibility of implementing a nutrient trading program in Missouri.
Through nutrient trading, state officials hope to create a market-based program that allows point and nonpoint sources with low treatment costs to earn nutrient reduction credits by reducing their nutrient discharges beyond a predetermined baseline level. The credits could then be sold to help other point sources more cost-effectively meet their nutrient discharge goals.
Geosyntec's Scope of Services
Nutrient Trading Feasibility Analysis
To identify the specific challenges facing Missouri in the development of a statewide water quality trading program, the project team evaluated how regulatory decisions related to important program design elements (trading margin, trading area, and trading ratio) would affect trading costs, participation, and overall success of a trading program. These issues were evaluated through a series of simulated point-to-point and point-to-nonpoint source trading scenarios in the North Fork Salt and Spring River Basins. Trading opportunities for dischargers to the Missouri and Mississippi Rivers also were evaluated qualitatively.
Point and Nonpoint Source Nutrient Treatment Cost Analysis
To support trading simulations, the project team evaluated nutrient treatment alternatives for 46 domestic wastewater treatment facilities as well as agricultural producers in the target watersheds. Results from the cost analysis were used to develop nutrient supply and demand estimates.
Nutrient Trading Framework Development
Study results and recommendations were incorporated into a preliminary framework for a Missouri water quality trading program. The framework is intended to serve as the basis for future water quality trading discussions with the Department of Natural Resources and other interested stakeholders.
Results were detailed in a final project report, titled "Nutrient Trading in Missouri: Critical Policy Factors and Program Recommendations." In general, the simulations showed that programmatic design and implementation decisions are critical in determining the success of a trading program.
For example, as policy decisions related to important program elements such as specific nutrient removal requirements (trading margin), participation (trading area), and credit purchases (trading ratio) become more stringent, the trading program may become less efficient, less equitable, and ultimately, less useful for achieving nutrient reduction goals. These effects were apparent in the simulations. As program restrictions increased, overall compliance costs also increased, because fewer participants could participate in the trading program. However, as program restrictions decreased, substantial cost savings and nutrient reductions were possible through trading.
Results from the Missouri trading evaluation show that successfully developing a viable trading program will require careful consideration of the policy decisions that dictate program rules and implementation. These results will be helpful for informing development of a trading program framework going forward.