1. Environmental Incentives Tony Vessa CE397 11-18-2003

2. State of the Union Systems that do not support Designated Use –40% Rivers –45% Streams –50% Lakes Point Source Costs (1997) –Private $14 Billion –Public $34 Billion

3. Trading Objectives Pre-TMDL reduction incentives TMDL cost reductions Voluntary pollution reduction Allows potential for growth Long Term Environmental Benefit Multi-objective scenarios for mutual benefit

4. Trading Criteria WQ Maintenance Pre-TMDL Trading TMDL Trading No Tech. Based Trading Pre-Treatment Intra-Plant EPA Oversight CWA Enforcement –NPDES –Public Notice –Standard Methods –Designated Uses –Anti-Backsliding –Anti-Degridation

5. Trading Protocol Legal Authority Units of Trade Definition of Credits –Duration –Trade Ratios Compliance and Enforcement Public Participation Program Evaluation

6. Trade Example 1:1 Ratio

7. Wayland Business Center Who: Office Complex on Sudbury River Trade: Point/Non-Point Phosphorus for Waste Water Treatment Plant Ratio 3:1 How: Linked 24 faulty septic systems to complex WWTP Savings: $700K

8. Environmental Taxes Recovering Cost Principle –Minimize Externalities of Environmental. Degradation –Recover Cost for cleanup, monitoring, enforcement, health care…. Incentive Charge –Designed to influence production

9. Environmental Taxes Polluter Pay –Recovering Cost Principle –Polluter pays per mass of pollutant –Maximize Pollution Reduction for Profit Margin Consumer Pay –Incentive Charge Principle –Consumer pays levy on Enviro harmful products –Minimize Production

10. Discussion 1.What are the benefits/drawbacks of water quality trading? 2.Is water quality trading a viable tool for water quality improvement? 3.Should pollution credits be considered a resource? 4.What are the benefits/drawbacks of the recovering cost environmental tax? 5.What are the benefits/drawbacks of the incentive charge environmental tax? 6.Should industrial environmental economics be driven by incentives or by penalties?