- Investigates causes tending to destroy or impair the free-market system.
- Explores and develops market-based solutions.
As the 8-state Ohio River Basin Water Quality Trading Project – the first interstate water quality trading market of its kind in the United States – is about to begin launching pilot trades between point sources and farmers in the region, there is an imminent need to establish a uniform baseline to support interstate trades. AFT proposes to analyze the impacts of different approaches to baseline issues in water quality trading markets from the standpoint of agriculture (the nonpoint source credit sellers) and then use this analysis to develop and reach consensus on a defensible, uniform baseline for the Ohio River Basin Water Quality Trading Market to support interstate trades. The work AFT proposes and its analysis will provide clarity and conformity concerning the required level of conservation that a farmer must meet in order to be able to generate a tradable conservation credit in this large-scale regional market.
Developing the white paper:
1) Complete a detailed outline of all of the issues surrounding the development of baselines in water quality trading programs including analysis of other programs, terms and distinctions, types of baselines,ways to view baselines,implications and options and recommendations (completed 8/24/12)
2) Collect and review references; discuss approaches with various USDA staff including the Economic Research Service (underway 8/24/12)
3) Begin to draft paper (9/1/12 - 2/15/23); interview program managers (12/1/12 -2/1/13); also begin to collect farm level data and test crediting protocols to test various baseline scenarios and their impacts on potential credits using actual farm level data
Update 2/19/13: Completed draft of Baseline paper includes sections on: I. Background (on water quality, agriculture and various approaches taken), II. WQT and baselines (including terminology, types of baselines and measuring and verifying baselines), III. Baselines from agriculture’s point of view (including how and why farmers adopt best management practices and feedback on baselines from producers and agricultural stakeholders), IV. How current programs are dealing with ag baselines (including interviews with program managers) and V. Sorting it out: recommendations and conclusions (including equity issues, implications of baseline options and options for more workable baselines). Paper is fully referenced. Internal review is next followed by external review planned for April 2013. Once paper is vetted, AFT plans to post both short and long version (white papers) and on-line version (with links).
AFT's proposed project will address the purposes selected above by:
• Analyzing impacts and tradeoffs of different methods for setting baseline requirements for farmers to participate in WQT programs;
• Laying out the issues from a farmer’s perspective (economic, environmental, equity);
• Synthesizing research literature on baselines (e.g., recent data show Pennsylvania farms may generate 2-3 times more credits than identical farms in Virginia, due to baseline requirements adversely affecting the economics of trading);
• Adding lessons and implications from AFT’s water quality trading experiences in Minnesota, Pennsylvania, Washington, and the ORB;
• Analyzing related issues also critical to a robust, successful market, including treatment of early adopters, farmers achieving baselines, interim credits, measurement/verification of baseline status; and
• Making recommendations for a defensible, uniform baseline for the ORB market that supports interstate trades.
Update 2/19/13: Information on existing programs supplemented by interviews with program managers
The scope of AFT's proposed project encompasses the following goals and objectives.
1) Conduct a comprehensive analysis on the impacts of different approaches to baseline issues in water quality trading markets from the standpoint of agriculture (NPS credit sellers);
2) Use findings from the analysis to make recommendations to farmers, the ORB Agricultural Stakeholder Advisory Committee, and state permitting authorities; and
3) Inform the structure of the Ohio River Basin WQT Market (along with other emerging markets) and ensure inclusion of a defensible, uniform baseline that supports farmers’ participation in interstate trades.
AFT plans to complete a white paper detailing our analysis of baselines and recommendations within the first nine months of the project. The paper will be reviewed by the ORB Agricultural Stakeholder Advisory Committee and project collaborators and the final paper will be posted on the AFT website. The EPRI ORB WQT project will also link to the report as well as the Environmental Trading Network. The recommendations in the report will help guide the EPRI ORB WQT collaborators as we develop a final market framework.
(Check sent: 7/2/2012)