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Credit trading program getting a test run in Ohio

American Farmland Trust (AFT) has partnered with the Electric Power Research Institute (EPRI) and other collaborators in a pilot program to help farmers in the Ohio River Basin participate in the first-ever interstate water quality credit trading program to fund on-farm installation of conservation practices.

“EPRI is building a robust pilot trading program that will allow public and private industries to test a potential regulatory compliance option to improve water quality,” said Andrew McElwaine, President and CEO of AFT. “It will also provide farmers much-needed funding for the installation of best management practices to improve the soil, reduce the cost of farming and protect water quality.”

Water quality trading is a market-based approach which allows facilities to meet required pollution reductions by paying farmers for the installation of conservation practices like heavy use protection areas for livestock, conversion of cropland to hayland and pastureland and the use of cover crops that reduce pollution by specific amounts. Those pollution reductions are then converted to verified credits that can be bought and sold.

“The agreement signed between the states of Indiana, Kentucky and Ohio to use a common definition for credits is an historic step for trading programs,” McElwaine said. “The involvement of the federal and state agencies also ensures the credit program meets federal standards so the credits can count toward pollution reductions required by the federal Clean Water Act.”

Under the EPRI program, AFT engaged farmers from the beginning to develop the program, identified and worked with county conservation districts to understand the needs of farmers and provided technical support in determining how much each conservation practice will reduce pollution loads.

“AFT provided hands-on help to farmers, state agricultural and resource agencies and soil and water conservation districts during both the application phase of the project and in the verification and monitoring phase to make sure the benefits were there for both farmers and the environment,” said Brian Brandt, the project’s agricultural coordinator. “We also brought our experience with trading programs in other regions of the country to help the project.”

Examples of the types of conservation practices installed under the program for Ohio include:

• Corn, soybean and beef cattle operation that has land in both Indiana and Ohio is putting in 80 acres of cover crops.

•Two livestock operations near creeks are installing feedlot runoff controls and manure storage facilities.

• Two dairies near creeks are installing milkhouse waste systems.

“We view this program as a four way win — for the watershed, for rate-paying utility customers, for farmers and for wastewater treatment facilities,” said McElwaine. “We want to thank EPRI, the participating utilities and other project collaborators for helping to make the first-of-its-kind program available to farmers.

In this first round of trading 16 farmers participated in the program in Indiana, Ohio and Kentucky, with approximately 20 additional farmers expected in 2014.

The projects approved so far in Indiana and Ohio will result in reducing nitrogen pollution by an estimated 37,000 pounds and phosphorus by 12,500 pounds. When the second round of projects are completed in all three states, the total estimated reductions in nitrogen are estimated to be 66,000 pounds and 33,000 pounds of phosphorus.

EPRI has set aside $300,000 for projects in the pilot program and will cover up to 75% of the installation of these best management practices.

At full-scale, the EPRI project could include up to eight states in the Ohio River Basin and potentially create credit markets for 46 power plants, thousands of wastewater facilities and other industries, and approximately 230,000 farmers.

“The stewardship credit trades made today can be used toward corporate sustainability goals and flexible compliance schedules in the future if stricter permits are issued,” Brandt said. “They are not approved to be used for compliance with current water quality permit limits.

“The pilot trades provide experience with trading so participants can become comfortable with the process and will continue under the program through 2014 and 2015 to test critical programmatic features such as an online credit registry and live trading auction.”

For more information on the EPRI Ohio River Basin Trading Project, visit: http://wqt.epri.com. For more a background on trading, visit AFT’s Water Quality Trading Markets webpage at: http://www.farmland.org/programs/environment/water-quality/water-quality-trading/What-is-Water-Quality-Trading.asp.


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