WQ Market Monthly

Vol. 2 No 2 - August 6, 2008

Water Photo

From the Editors

Just as water markets are gaining traction in the mainstream media, the Ecosystem Marketplace has taken a deep dive into water quality trading analysis. First, as a lead up to the Global Katoomba meeting held June 9-10 in Washington, DC, and the Private Katoomba meeting held June 11-12 on the eastern shore of the Chesapeake Bay, we posted a series of articles focused on water trading. Article topics include an overview of the State of Water Markets in the US, the infrastructure behind US Water Trading, the role of a credit aggregator in Pennsylvania, and the demand dilemma in the voluntary water markets, to name a few. In partnership with our sister organization the Katoomba Group, Ecosystem Marketplace also launched an online discussion titled the Forum on Water Markets (www.katoombagroup.org/water) to provide a platform for sharing ideas and solutions to water trading challenges in the Chesapeake Bay watershed and beyond. These issues and more were discussed at the breakout session on water at the Global Katoomba and Private Katoomba meetings. Read an article summarizing the meeting or review conference materials for both the public and private meetings including speaker presentations.

— The Ecosystem Marketplace Team

For questions or comments, please contact newsletter@ecosystemmarketplace.com



Farm Bill Recognizes Importance of Conservation Funding for Farmers

The $307 billion U.S. farm bill reauthorized last month authorizes dozens of agricultural, nutrition, energy, rural development, trade, and research programs for 5 years. Conservation programs received $17.1 billion, representing a $7.9 billion increase over the 2002 Farm Bill and a measure of the overwhelming support for governmental incentives to steer more farmers to be good stewards of the environment. Congress increased funding for the Environmental Quality Incentives Program, Conservation Innovation Grants, and Chesapeake Bay and Great Lakes Basin protection. The Farm Bill includes an Agriculture Water Enhancement Program (AWEP) that was crafted by a coalition including WEF. The program will provide $73 million in FY 2009 and 2010, $74 million in FY 2011, and $60 million in FY 2012 for partnerships to address specific local and regional watershed problems. Wastewater utilities are eligible to partner with farmers to generate pollution reductions under this program.

Read the WEF Article

Coastal Areas Worldwide Suffer from Eutrophication and Hypoxia

According to a recent report released by the World Resources Institute (WRI), coastal communities worldwide are witnessing their livelihoods choked by agricultural and industrial pollution. Excessive nitrogen and phosphorus has emerged as one of the leading causes of degraded water quality. WRI identified 415 over-enriched - or "eutrophic" - coastal areas throughout the world. Of these, 169 are depleted of oxygen, creating "dead zones" that are unable to support marine life. Another 233 of the systems identified are experiencing one or more symptoms of eutrophication, including toxic algal blooms, loss of biodiversity, and die-off of coral reefs. Only 13 of the coastal areas identified exhibit signs of recovery. Some of the coastal areas studied include the Chesapeake Bay, Baltic Sea, Gulf of Mexico, and Tampa Bay. Seventy-eight percent of the assessed continental U.S. coastal area and 65 percent of Europe's Atlantic coast are eutrophic. The sources of pollution vary by region. In the United States and Europe, agricultural sources such as animal manure and commercial fertilizers are typically the main causes of eutrophication. Sewage and industrial discharges, which usually receive some treatment, are a secondary source.The full report, Eutrophication and Hypoxia in Coastal Areas: A Global Assessment of the State of Knowledge can be found here: www.wri.org/publication/eutrophication-and-hypoxia-in-coastal-areas

House Committee Hearing Focused on Water Supply Challenges

In May, the House Science and Technology Committee held a hearing to discuss the challenge of managing water supplies to meet social, economic, and environmental needs in the U.S.“Recent droughts experienced in the west and the southeast and increased competition for water supplies suggest that we must take a closer look at how we are managing our water resources,” said Chairman Bart Gordon (D-TN).According to a 2000 report from the National Oceanic and Atmospheric Administration, eight water shortages from drought or heat waves each resulted in $1 billion or more in monetary losses over the past 20 years.

Read the article

The Governator says Hasta La Vista to Unrestricted Water Use in California

Gov. Arnold Schwarzenegger declared the first statewide drought in 17 years, intensifying California's water crisis and setting the stage for drastic cutbacks and for diverting supplies from the relatively water-rich to the water-poor. Schwarzenegger called for a 20 percent reduction in water use statewide and urged local agencies to bolster conservation programs and to work with federal and other authorities to help farmers who are suffering huge financial losses and abandoning crops in droves. Schwarzenegger lacks the authority to impose statewide rationing, though the Department of Water Resources could slash water supplies to local agencies, which then would be forced to institute rationing.

Read the San Francisco Gate article

High Cost of Water Spawns Farmers to Behave Like Environmentalists

Prior to regulatory requirements imposed in 1999, California farmers were voluntarily ensuring that the water leaving their farms was as clean as it was coming onto their farms. Because of the high cost of water, farmers implemented all manner of best management practices to keep what little water they were allocated on their crops. Some have installed costly recirculation systems to catch excess water from the fields and then pump it back to the top of the fields and reapply to crops.

Read the full article

Water Purification is a Growth Industry

Drought conditions and worries about clean water supplies are turning water into a growth industry in California and beyond. Big companies like GE and Siemens have big plans to bring water to developing countries but these days even small companies are realizing big profits from the growing demand for clean water. Drug and biotech firms, soft drink and food companies and other industrial users of water have raised purity standards in recent years. Business is also growing for those providing recycling technology as citizens and businesses are concerned about having sufficient supplies of water. Businesses operating on either the purification or recycling side of the industry are at the leading edge of the new water frontier, one where experts predict global demand for water growing 40 percent by 2025.

Read the full article in the New York Times


Re-Raising the Red Barn

Two lean years after setting up shop, Pennsylvania water credit aggregator Red Barn Trading cut a dream deal enabling the town of Fairview to slash both emissions and costs by helping chicken farmers manage their animal waste. Red Barn itself, however, is struggling to make the business pay – and some say the state's entire water quality trading scheme will have to be overhauled if the success is to be replicated.

Read the article on the Ecosystem Marketplace

A Nutrient Offset Program for the Chesapeake Bay

Most everyone understands the concept of carbon offsets; paying a fee to erase the carbon emissions associated with a specific activity. Some are pondering the possibility of such an initiative with nutrients in the Chesapeake Bay watershed. Could a mechanism be created allowing a company-or individual-to purchase offsets that erase the "nitrogen footprint" of operating their vehicles, heating their homes or fertilizing their lawns? Such a program could soon become a reality. The U.S. Department of Agriculture's Natural Resource Conservation Service recently awarded a $500,000 Conservation Innovation Grant to the Chesapeake Bay Foundation and several partners, including Ecosystem Marketplace’s parent organization Forest Trends. to develop such a "nutrient neutral fund," tentatively named the Chesapeake Clean Water Fund, patterned after existing voluntary carbon markets. The hope is that citizens who want to improve their own stewardship, or businesses that want to enhance their green credentials, would buy offsets from the fund that would in turn support cleanup efforts.

Read the full article

Read a related article


The Dirty on Squeaky Clean

Senator Carl Levin (D-MI) and Senator George Voinovich (R-OH), co-chairmen of the Senate Great Lakes Task Force, introduced legislation this week aimed at reducing nutrient pollution by limiting the use of phosphates in automatic dish detergents.The legislation would require EPA to ban the sale of residential dishwashing detergent with more than 0.5 percent phosphorous beginning in 2010. "This mandated nationwide change to a household product Americans use everyday will make a difference in the health of the nation's most important natural resources from this day forward," Voinovich said. "By limiting phosphates that enter Lake Erie, we will reduce harmful algal blooms and the dead zone that emerges every summer in the lake."Thirteen states and the District of Columbia already have passed legislation or have bills pending that would ban phosphates in automatic dish detergent in 2010.

Read the article in WEF

House Subcommittee Holds Hearing on Great Lakes Legacy Act

In late May, the House Water Resources and Environment Subcommittee held a hearing on reauthorization of the Great Lakes Legacy Act, which provides funding for cleaning up contaminated sediment from various areas of concern throughout the Great Lakes basin.Authorization for program funding under the 2002 Great Lakes Legacy Act expires Sept. 30. The current law authorized $270 million from fiscal years 2004 through 2008 to clean up toxic sediments in portions of the Great Lakes.Witnesses urged that this amount be increased to $150 million annually.Congressman Vern Ehlers announced at the hearing that he intends to offer legislation soon that would reauthorize the Act at the increased funding level, which is similar to funding levels suggested in a Senate-introduced version of the bill, S. 2994, co-sponsored by Senators Carl Levin (D-MI) and George Voinovich (R-OH).

Read the WEF article

St. Lawrence Compact, to protect Great Lakes from water diversion

On July 23, Congressional leaders announced the introduction of the bipartisan legislation, the St. Lawrence River Basin Water Resources Compact, to protect the Great Lakes from water diversion.The Council of Great Lakes Governors (CGLG), a partnership of the governors of the eight Great Lakes states and the Canadian provincial premiers of Ontario and Quebec, was directed by Congress in 2000 to create a new common conservation standard, known as the Great Lakes Compact.The compact, which will manage water diversions, withdrawals, and consumptive use proposals, has been approved by the eight state legislatures, and it now must be consented to by Congress to achieve full force and effect as an interstate compact.

Read More

WEF Urges Congress to Address Water Resource Impacts of Climate Change

Prior to Congress considering climate change legislation, a coalition of eight national water organizations, called on senators and representatives to recognize the severe impacts that global climate change will likely have on water resources in the United States. The groups are urging Congress to ensure that future climate change legislation includes federal support and incentives to help drinking water providers, flood and stormwater agencies, and wastewater systems confront the impacts of climate change.A joint statement urged Congress to establish a comprehensive federally sponsored applied research program, increase federal financial support, and provide federal support and incentives to enable utilities to reduce greenhouse gas emissions when feasible.

Read the WEF article


More on "Dead Zones"

An article in the Economist reports that too much nitrogen being washed into the sea is causing an alarming spread of dead zones. Hundreds of the world's coastal regions have dead zones. They mostly occur when spring rainfall gathers on land, makes its way into streams and rivers, and eventually tumbles down to the ocean. The rivers carry with them a cargo of nutrients, in particular nitrogen, from farms in the watershed. When this nitrogen reaches the sea it causes a brief frenzy of algal growth which depletes the water of oxygen. Fish, clams, shrimp, crabs, entire mussel reefs and other bottom-dwelling animals can be wiped out.

Read the article in the Economist

Spain: A Black Market for Water

Southern Spain has long been plagued by cyclical droughts, but the current crisis, scientists say, probably reflects a more permanent climate change brought on by global warming. And it is a harbinger of a new kind of conflict. Murcia, traditionally a poor farming region, has undergone a resort-building boom in recent years, even as many of its farmers have switched to more thirsty crops, encouraged by water transfer plans, which have become increasingly untenable. The combination has put new pressures on the land and its dwindling supply of water. This spring, farmers are fighting developers over water rights. They are fighting one another over who gets to water their crops. And in a sign of their mounting desperation, they are buying and selling water like gold on a rapidly growing black market, mostly from illegal wells.

Read the Blue Ridge Now article

When Will Inflation Hit the Water Market?

Water, traditionally an undervalued and unappreciated resource, may soon be the latest ubber-commodity. Increased demand for clean water is driving up the cost, bad news for a world already concerned about rising food prices. The scarcity of clean water is widely known yet it’s still one of the cheapest commodities in the world. Analysts predict that one day soon we will realize it is one of the most important commodities and quickly becoming one of the scarcest. Global water consumption is rising, clean water supplies are dwindling and water infrastructure is aging. All factors point to higher water prices. Fixing the problems associated with the emerging water crisis will take time and money and proper market-based incentives which will ultimately lead to more intelligent use of water resources.

Read the full MarketWatch story

Water Prospector Plans to Sell Melting Glacier Water

Two years ago Sextant Capital Management of Canada settled on the next big commodity—water, which they deemed undervalued, underappreciated and growing scarce. They purchased 95-year water rights to three glaciers in northern Europe, all close to ports. They plan on siphoning off the melting glacier water, put it on tankers and ship it to thirsty companies and countries around the globe. Sextant is in talks with major commodity exchanges which hopes will lead to a global market in water futures, fed in part by their glaciers.

Read the full article in FT.com

Can Market Forces Such as Trading Help Solve Global Water Shortages?

Some experts are suggesting that a global lack of water could prove to be a bigger threat to mankind than rising food prices or the depletion of energy resources. Sir Nicholas Stern, who reviewed the economics of climate change in a big report for the British government in 2006, is worried too. He points to some big local problems, for example in the Himalayas, where melting glaciers risk disrupting supplies of usable water in the region, just as many underground aquifers are drying up. He argues that water—at least the fresh sort—is not a renewable resource, and because it is not priced properly it has been “mined” without restraint. Given the increasing appetite for freshwater and the threat of diminishing supplies, prices are surely to rise. Enter the role of markets to bring rationality to the pricing and distribution of this most basic of commodities. Better functioning water markets would be one way to share out water more efficiently. Once governments have defined water rights clearly, farmers, and others who use water, could be encouraged to trade, first with each other and with industrial and urban users.

Read the full article in the July 19th Economist

The Bellagio Conversation on Payment for Watershed Services Projects

For a week in March 2007, a small group of leading water experts met on the shores of Lake Como to discuss lessons learned from recent global experiences with payment for watershed services (PWS). Selected participants, including practitioners, investigators and investors, brought to bear detailed knowledge of some 24 such schemes from around the globe. The goal of the meeting was to consider how these experiences and knowledge could be used to improve the efficiency of watershed management.

Read the full report (pdf)


Water Quality Credit Trading Workshop August 19-20

A workshop on water quality credit trading will take place August19 and 20, 2008, at the Troy-Hayner Cultural Center in Troy, Ohio. Farmers, agricultural advisors, wastewater utilities and power companies are invited to attend the two-day workshop, hosted by the Conservation Technology Information Center (CTIC).

Water quality credit trading programs bring together agriculture and utilities to solve difficult water quality issues. In conjunction with the Environmental Trading Network (ETN), the Water Environment Federation (WEF) and Certified Crop Advisers, CTIC offers this detailed, intensive training program on water quality trading for agricultural operators, ag advisors, potential water quality trading aggregators and municipal wastewater facilities. Expert speakers will introduce the concepts, benefits and challenges of trading and the steps involved in developing a trading program. The training will include interactive breakout sessions to give participants specific skills to develop or participate in a trading program. Case studies will be highlighted so participants can learn from existing programs. For more information or to register for the workshop, please go here or contact CTIC at 765-494-9555 orctic@conservationinformation.org.

World Water Week in Stockholm, August 17-23

Water and ecosystem management encompass aquatic biodiversity, environmental flow requirements, water pollution control, and wetlands management. An integrated water resource perspective ensures that environmental, social, economic and technical dimensions are taken into account in the management and development of water resources. Multiple sessions at the conference will explore these issues. This is an annual event on water and development for professionals from more than 100 countries. It is expected to attract more than 2500 people from business, government, water management, science and NGOs. The conference is organized and hosted by the Stockholm International Water Institute. Visit the conference website at: www.worldwaterweek.org

Market-Based Conservation Incentives Workshop September 10-11

Market-based approaches, such as payments for biodiversity offsets and watershed services, provide effective incentives to turn private forests into even greater assets, encouraging sustainable forestry, and combating fragmentation and land use change.However, there are few positive examples of functioning markets that involve family forest owners.To address this issue, the American Forest Foundation is hosting a workshop on September 10th and 11th, 2008, bringing together organizations and individuals interested in developing strategies for increased family forest owner participation in market-based approaches to conservation.This first-of-its-kind national workshop is intended to fill a void and start an ongoing dialogue focused on how family forest owners can capitalize on the ecological and economic benefits of ecosystem services markets.

Registration Fees: $125 before 7/21/08; $145 after 7/21/08

Deadline with Turf Valley Resort for hotel reservations at the group rate of $155.00 per night is August 1, 2008.

Visit the Workshop Website

3rd Annual Chesapeake Watershed Forum October 2-5

Alliance for the Chesapeake Bay will hold this annual event in Shepherdstown, WVA. The Chesapeake Watershed Forum, is an annual conference for watershed organizations and local government officials from around the multi-state Chesapeake Bay region. It is an opportunity to learn the latest scientific techniques in Bay restoration and protection, address specific organizational capacity building needs, focus on regional and watershed-wide needs, network with other watershed organizations, and enjoy the beauty of the watershed.

Click here to register for the 2008 Watershed Forum


Research Fellow positions at the Pinchot Institute
The Pinchot Institute currently has openings for several Research Fellow positions and is seeking applicants.
  • Research Fellow – Bioenergy -- will focus on analysis of the status and trends in wood bioenergy development in several distinct regions of the United States, influence of current and proposed policies (financial, tax, regulatory and other policies at the national and state level) on the future development of sustainable wood bioenergy capacity.
  • Research Fellow – Ecosystem Services -- will coordinate the development of practical methods for specifying ecosystem services commitments, verification, and financial transaction.The primary near-term focus is on a regional case study of the six-state Chesapeake Bay ecosystem, and will involve close collaboration with several federal, state and local governments, nongovernmental organizations, and private land owners.
Research Fellow positions are a one-year appointment renewable for a second year.Visit http://www.pinchot.org/about_pic/opportunities for more details.


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