Trading efficiency in water quality markets

A crucial factor in the success of any water quality trading market is its ability to cost-effectively reallocate nutrient allowances from initial holders to those users who find them most valuable; the market's trading efficiency. We explore causes of and solutions to trading inefficiency by assessing the impact on participant transaction costs and the tradeoffs that occur as a result of policy design decisions. Differing impacts of baseline-credit and cap-and-trade markets, the impact of trading rules and monitoring regimes are discussed in this endeavour. Possible solutions of increased information flows and regulatory certainty are also discussed. We then apply this framework to three existing water quality trading schemes; two from the US, and one from New Zealand. We use this experience to extract general recommendations for policy makers looking to maximise trading efficiency when designing future water quality trading markets.Nutrient trading, trading efficiency, water quality markets, transaction costs, Community/Rural/Urban Development, Environmental Economics and Policy, Health Economics and Policy, International Relations/Trade,

Clean Water Grow: Go or No Go?

The $43 billion US wastewater treatment industry is a landscape in which the high costs of capital construction and the need for economies of scale feature prominently. The US Environmental Protection Agency estimates that between 2004 and 2024, over$200 billion will need to be spent upgrading and expanding America’s wastewater infrastructure. One significant challenge in maintaining treatment infrastructure is the build-up of struvite. Struvite accumulates inside treatment facility pipe networks, reducing capacity and increasing operating and maintenance costs. But discharging the components of struvite – the nutrients nitrogen and phosphorous – into the environment also has negative consequences. Concentrated amounts can cause significant harm to aquatic ecosystems. Clean Water Services (CWS) is the public wastewater utility for Washington County, Oregon USA, providing sewage and stormwater treatment services to more than 500,000 homes and businesses. Responsible for the health and management of a public good – the 83-mile long Tualatin River – CWS is subject to regulations over the temperature and quality of the water it discharges into the natural environment. This case follows Clean Water Services in its pilot test of a home garden fertilizer product that is linked to the environmental benefits and operational efficiencies gained through an innovative treatment technology. In 2009, CWS implemented a groundbreaking solution to the challenge of struvite; one that also had the potential to turn a waste stream into a revenue stream. An advanced \u27nutrient recovery technology\u27 removes the nutrients that form struvite and pollute the environment if discharged, recycling them into an effective, safe to handle garden fertilizer. In mid 2012, the CWS Board gave the green light to produce Clean Water GROW™, its own brand of fertilizer, and test its commercial viability in the local consumer market. The case educates students on the challenge of finding innovative ways to operate and maintain wastewater infrastructure in the face of population growth and increased pressure on natural systems. It provides detail on the development and commercial pilot of the GROW fertilizer product, and the packaging, pricing and distribution options that were analyzed. It asks students to conduct the crucial steps of analyzing the implications of marketing mix options in terms of break-even quantity and return on investment, and recommending a \u27go\u27 or \u27no go\u27 decision to the CWS board

Trading efficiency in water quality markets

A crucial factor in the success of any water quality trading market is its ability to cost-effectively reallocate nutrient allowances from initial holders to those users who find them most valuable; the market's trading efficiency. We explore causes of and solutions to trading inefficiency by assessing the impact on participant transaction costs and the tradeoffs that occur as a result of policy design decisions. Differing impacts of baseline-credit and cap-and-trade markets, the impact of trading rules and monitoring regimes are discussed in this endeavour. Possible solutions of increased information flows and regulatory certainty are also discussed. We then apply this framework to three existing water quality trading schemes; two from the US, and one from New Zealand. We use this experience to extract general recommendations for policy makers looking to maximise trading efficiency when designing future water quality trading markets