Download - National Environmental Services Center - West Virginia ...

J U R I E D A R T I C L E
Small Flows Quarterly, Fall 2004, Volume 5, Number 4
44
$160
$140
$120
$100
$80
$60
$40
$20
$0
Stephenville
Clifton
FIGURE 5 Estimated monthly household cost of phosphorus removal for North Bosque WWTPs.
Figure 5. Estimated monthly household cost of phosphorus removal for North Bosque WWTPs.
Cost-Effectiveness
Effectiveness, within a water
quality context, can be considered
an improvement in a water quality
measure that is associated with
impairment. Ambient phosphorus
concentrations in rivers and lakes
have been shown to correlate,
under certain circumstances, with
excessive algal growth. Effectiveness
is here defined as the estimated
TP load removed from WWTP
effluent as a result of phosphorus
control, as reported in Table 2.
While bearing some resemblance
to affordability measures,
cost-effectiveness ratios are more direct
measures of efficiency and are
calculated by dividing the total cost
of phosphorus removal by total
pounds of phosphorus removed.
Cost-effectiveness ratios, as presented
in Table 4, indicate that the cost
of TP removed at North Bosque
WWTPs ranged from $14/lb
($31/kg) for the Stephenville plant
to $331/lb ($730/kg) for the Iredell
plant (an almost 24-fold difference).
Figure 6 reveals the inverse
relationship between estimated
per pound phosphorus removal
costs and plant size.
Trading Implications
The concept of trading marketable
effluent permits to achieve
environmental quality is of relatively
recent origin. Dales (1968) is
Meridian
Hico
Valley Mills
credited with first setting out the
parameters of the type of “cap
and trade” program for water
quality receiving widespread attention
today. The basic components
of the program involve setting
a cap on the total waste load,
issuing emission permits, the aggregate
of which equals the cap,
and allowing the sale and purchase
of permits among dischargers.
Marketable credits are formed
when dischargers with low removal
costs reduce loads below
permitted levels. These credits can
in turn be sold to entities with
high removal costs such that both
parties gain, thereby generating
savings in meeting the total waste
load allocation.
The trading of emission credits
has been implemented in a number
of national programs to
achieve air pollution goals (Tietenberg,
1999). Having achieved
notable successes in the air arena,
economists and policy makers
have investigated the potential of
applying the tradable permit concept
to water pollution control
and several programs have been
developed (e.g., see Environmonist,
1999; EPA, 2001).
In 1996, EPA issued a Draft
Framework for Watershed-Based Trading
(EPA, 1996), which was designed
to promote, encourage, and
facilitate trading wherever possible
provided that equal or
greater water pollution
control can be attained
for an equal or
lower cost. This was
followed in January
2003 by a Water
Quality Trading Policy
to “encourage
states, interstate agencies
and tribes to develop
and implement
water quality trading
programs for nutrients,
sediment and
other pollutants
where opportunities
exist to achieve water
quality improvements
at reduced costs”
(EPA, 2003).
For a trading program
to be successful,
a number of conditions
must apply.
Among them, first,
there must be substantive difference
in compliance costs at the
margin. Second, all potential trading
entities must be given a verifiable
and enforceable pollution reduction
obligation. Third, there
must be legal authority for trading
and an administrative system
must be developed to track trades
and verify compliance. Fourth, the
potential cost savings from trading
should exceed the administrative
and information costs (broadly referred
to as transactions costs) of
setting up and operating the program.
Because the trading among
North Bosque WWTPs involves
only point sources it avoids the
complexities in determining nonpoint
loads (see, e.g., Malik et al.,
1993) that would be required for
“point source/nonpoint source”
trading. In addition, all entities are
subject to the same regulatory
regime—delegated NPDES authority—thereby
further simplifying potential
implementation of a trading
program. For the present example,
we assume that each North
Bosque WWTP is obligated to reduce
loads by an amount equal to
that needed to consistently achieve
ending effluent levels of 1 mg/L.
Trading of TP loads among
North Bosque WWTPs would entail
the removal of TP by one or more
Iredell