Water quality trading in Florida

Read aguanomics http://www.aguanomics.com/ for the world’s best analysis of the politics and economics of water A guest post by Tina Reine of Water Investments Group

The Florida Water Quality Credit Trading Bill is now being considered in both the House (HB713) and the Senate (SB754). On April 25th it was placed on third reading in the House by the State Affairs Committee and in the Senate, it was read for a second time.

In 2008, the Florida Legislature passed HB 547 to create a pilot water quality trading program for the Lower St. Johns River Basin. After the success of that program [1], Bills HB713 and SB 754 propose to allow statewide water quality trading. The Bill authorizes the Department of Environmental Protection (DEP) to approve water quality credit trading in adopted basin management action plans.

Entities that participate in water quality credit trades must report how prices were agreed on, since they will be negotiated trades instead of determined in a public auction .Additionally, any state funding received by the facilities to the DEP must be reported. This is to prevent any tax payer money involvement in these transactions (double dipping). The DEP cannot participate in establishing the price of credits, but it will post trade information publicly. DEPs main goal is to allow stakeholders to economically achieve their obligations to restore water to a higher quality. DEP appears much more committed than they were at the start of the St John’s River Basin pilot program, in terms of using a trading platform to address water quality issues. The current Bill is broader than the original trading program in that it encourages public-private partnerships to find creative ways to address water quality, water storage on private lands and to restore surface water resources.

The Bill also clarifies that water quality credit trading is voluntary. The Bill authorizes water quality credit trading to occur under any of the numerous local, state, or federal authority pollution control programs (e.g., NPDES, Numeric Nutrient Criteria, district permits). One example of these regulatory programs is the NPDES storm water program, which regulates point source discharges of storm water into Florida surface waters from certain municipal, industrial and construction activities.

Another pollution control program in the State of Florida is the Numeric Nutrient Criteria program, which puts forth standards on Florida’s streams, estuaries and lakes. EPA approved DEP’s standards in November 2012.

The new Bill would give an additional option for reducing pollution with more flexibility and/or lower cost to entities subject to pollution controls. The only opponents to the Bill are a few environmental groups (e.g., Conservancy of Southwest Florida) that prefer regulations over markets for addressing water quality. In addition to this, there are facilities that are fearful environmental groups will come after them.

Nutrient trading is a big win for everybody. Water quality goals are being met. Credit buyers are using a less costly way to meet their reduction goals while finding ways to reduce in the longer term. And, credit sellers are being financially rewarded for finding ways to reduce pollution.

Bottom Line: Florida has made huge progress in establishing this Bill. If it passes, there would be an enormous potential for a successful statewide trading program.

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[1] The St Johns River program was considered a successful trial. The trading was limited due to uncertainty of US EPA’s promulgation of a rule bringing about nutrient criteria. Report on the Pilot Program to the Governor can be found here [pdf].

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