Agriculture Reference
In-Depth Information
physical models. For instance, the Revised Soil Loss Equation (RUSLE) (Renard et al.,
1991) estimates nutrient loss to the edge of a farm field for sediment-bound
phosphorus. Other models, e.g., SEDMOD (Fraser et al., 1996), can then be used to
assess how much of the sediment-bound phosphorus reaches the nearest water body.
Similarly, nitrogen models such as the Chesapeake Bay Model (Cerco et al., 2002)
provide estimates for both the attenuation of nitrogen within river segments and from
various river segments to different points of interest within a watershed.
3.
Some nutrient trading programmes allow trading between pollutants. An equivalence
ratio, which refers to how much of one pollutant should be reduced compared to
another, can be used in these situations. For example, in Minnesota a trading permit
requires eight units of phosphorus to be reduced for every unit of BOD discharged.
Establishing baselines
Baselines are important for ensuring the integrity of nutrient trading programmes.
Similar to the concept of 'additionality' in the GHG trading world, baselines are
established to prohibit unregulated sources from selling reductions from management
practices that are already required or have already been implemented. To avoid the
difficulties associated with operationalising the concept of additionality in the GHG
world, baselines can be set by the trading programme. In many instances for water quality
trading, non-point source baselines are a minimum set of baseline practices, e.g., a
nutrient management plan, which must be in place before the non-point source can
generate reductions to sell. Establishing a required set of baseline practices for non-point
sources ensures that “bad actors” are not rewarded for their ability to generate low-cost
reductions by implementing basic good steward practices that should have been
implemented in the first place, and that most other non-point sources may have already
implemented. Baselines for point sources are typically straightforward, as many have
permitted nutrient discharge limits that can be used to form the baseline.
Who holds compliance liability
Liability issues — who holds liability and how liability is determined — often pose
significant challenges to the implementation of nutrient trading programmes. Liability for
credit malfeasance could potentially rest with either the buyer or the seller of credits.
What frequently occurs with buyer liability is that it fails to foster market development. If
a buyer cannot be assured that the purchased credits are viable reductions, it is difficult
for the buyer to effectively manage the cost of their exposure, making them more unlikely
to participate in a trading programme. Therefore, seller liability is often an important
element to achieving well-functioning environmental commodity markets. Small sources
wishing to sell reductions, however, may find this a deterrent to participating in nutrient
trading markets.
One approach to addressing liability issues is using a bank to aggregate non-point
source credits. Credit buyers purchase credits from the bank, which in turn guarantees the
creditworthiness of the credit. The bank is responsible for ensuring that non-point sources
comply with their contracts and providing the agreed-upon reductions. The bank may also
keep a 'credit reserve' to mitigate any risk of non-point sources failing to implement a
BMP or when a BMP fails to function properly, therefore assuming liability for the
creditworthiness of the reductions.
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