U.S. Department of Agriculture Policy on Market-Based Environmental Programs
USDA Roles in Market-based Environmental Stewardship
In this Secretary's Memorandum, USDA states that it supports these market opportunities for its constituents and partners, and will assist by providing technical tools and developing accounting practices. USDA will also form an internal council to support activities related to environmental markets.

Iowa Farm Bureau and University of Iowa join forces for the environment (4/20/2005)
Contact: Laurie Groves, Iowa Farm Bureau, (515) 225-5414;
Ferman Milster, University of Iowa, (319) 335-5132
WEST DES MOINES, Iowa – April 20, 2005 – In conjunction with Earth Day celebrations, the Iowa Farm Bureau Federation (IFBF) and the University of Iowa today announced their first transaction of carbon credits to help reduce the emission of carbon dioxide into the atmosphere.
The University of Iowa is the first Iowa-based commercial entity to enter into an agreement with the Chicago Climate Exchange by purchasing 2,000 tons of carbon credits for its power plant operations from Iowa farmers through the IFBF program. The University Power Plant is embarking on an innovative biomass project, burning oat hulls from Quaker Oats in Cedar Rapids. The plant burned 27,000 tons of oat hulls last year. Each ton burned displaces more than a half ton of coal. Burning that amount of coal puts 2.5 tons of carbon dioxide into the atmosphere.
In 2003, IFBF initiated a carbon credit sequestration program for farmers. Carbon sequestration involves capturing carbon dioxide and storing it in soil. To date, more than 83,000 acres of Iowa farmland have been enrolled in the four-year pilot program that recognizes that carbon dioxide is removed from the atmosphere when crop land is farmed with no-till practices or when grasslands are established. Each acre of land that is not tilled pulls a half ton of carbon dioxide from the air per year. In the future, Iowa farmers could potentially remove several million tons of carbon dioxide from the air annually through increased use of conservation tillage practices.
“The carbon credit sequestration program provides incentives to farmers to encourage them to use conservation tillage practices,” said Dave Miller, director of research and commodity services for IFBF and manager of the IFBF carbon program.
“By participating in the program, farmers can achieve higher soil fertility, increased yields and other outcomes that aid local populations economically, environmentally and socially.”
"That’s why the Iowa Farm Bureau’s carbon sale with the U of I is so environmentally significant,” Miller added. “The sale of 2,000 carbon credits to the University of Iowa represents the carbon dioxide sequestration from 4,000 acres of Iowa farm land.”
With its entry into the Chicago Climate Exchange, the University of Iowa committed to reduce greenhouse gas emissions by 1 percent in 2003, 2 percent in 2004, 3 percent in 2005 and 4 percent in 2006 according to Ferman Milster, associate director of utility and energy management for the University of Iowa.
“We have a biomass to energy project underway at the University utilizing oat hulls and expect to generate our own credits in the future. But, to meet our commitments for 2003, we need to buy some credits to offset our emissions.”
“We are very pleased to be a part of this historic development of the carbon market,” says Miller. “It is very encouraging that voluntary, market-based options are emerging to deal with environmental issues. Iowa’s farmers are great stewards of the land and the benefits of this carbon credit exchange combined with no-till and soil erosion control plans will safeguard the land and air for generations to come.”

STATE OF VIRGINIA PASSED BILL FOR A CHESAPEAKE BAY WATERSHED NUTRIENT CREDIT EXCHANGE PROGRAM
Summary and full text of the bill.

VIRGINIA NUTRIENT TRADING PLAN MAY END CHESAPEAKE GROUP’S SUIT (April 4, 2005)
A new nutrient trading plan in Virginia aimed at reducing nutrient discharges to the Chesapeake Bay may help resolve pending lawsuits by environmentalists that are seeking stricter nutrient discharge requirements for point sources in the state, according to an environmental group source. A source with the Chesapeake Bay Foundation (CBF) says the
organization’s lawsuits against Philip Morris USA and the town of Onancock, VA, remain pending, but if the state implements its planned stricter water quality standards and a nutrient trading plan, then the legal arguments in the cases will become moot. CBF announced plans last summer to sue EPA and specific sewage treatment plants -- and challenge state permitting decisions -- in a broad effort to reduce nutrient discharges in the bay’s watershed (Water Policy Report, June 28, 2004, p16).
Late last month Gov. Mark Warner (D) signed legislation creating a nutrient trading plan for point sources and appropriating $50 million to the state’s Water Quality Improvement Fund earmarked for the design and installation of biological nutrient removal technologies at publicly owned treatment works (POTWs). The state’s Water Control Board has also adopted new standards, based on EPA criteria, for dissolved oxygen, chlorophyll-a and water clarity that sources say are indicators of nutrient levels and will aid in limiting nutrient discharges. The new standards will not become final until EPA approves them, which will likely happen this summer, a state source says. Relevant documents are available on InsideEPA.com.
Virginia is unique among the states in the Chesapeake Bay watershed because 33 percent of the commonwealth’s nutrient discharges -- the largest single source -- come from point sources, the CBF source says. Agriculture contributes only 29 percent of nutrient discharges in Virginia but is the largest source of discharges in Maryland and Pennsylvania, the source says. Although a point-source trading plan is not a “magic pill,” it will go a long way toward reducing nutrient discharges, the source says. As part of an agreement with EPA and other states in the bay’s watershed, Virginia has pledged to reduce its nutrient discharges by 28 million pounds by 2010. The source says that if all POTWs in the state upgrade to state-of-the-art nutrient treatment technologies, nutrient discharges would be reduced by 20 million pounds.
The state source says regulators still must work out some of the implementation details of the nutrient trading plan, but the state will issue a watershed general permit by Jan. 1, 2006, that will cover approximately 120 significant nitrogen and phosphorus dischargers. The general permit, which will supersede individual permits for nitrogen and phosphorus discharges affecting the Chesapeake Bay, will include wasteload allocations for each of the Virginia tributaries that drain into the bay and a schedule of compliance, according to the legislation.
The CBF source says environmentalists are particularly pleased the new law limits nutrient trading to within the same tributary. Earlier versions of the legislation would have allowed trading between different tributary watersheds, the source says.
Connecticut has a similar nutrient trading program for Long Island Sound, but state sources say Virginia’s plan is larger and contains some unique provisions.
For example, wasteload allocations are based on the flow of the discharge multiplied by the concentration of nutrients, and there are technical limits on the amount of nutrients that can be removed, the state source says. This means that a new POTW plant, or one planning a significant expansion, might be unable to obtain a discharge permit because it would be technologically unable to meet a tributary’s wasteload allocation even with state-of-the-art technology. Under the trading plan, the plant could offset some of the required reductions through best management practices (BMPs) intended to reduce nonpoint source nutrient discharges, such as planting riparian buffers to prevent agricultural runoff from reaching streams, the source says.
The state’s Department of Environmental Quality will need to work closely with the Department of Conservation & Recreation to ensure that BMPs implemented under the trading program are not “double counted” under a parallel effort by conservation officials to control nonpoint source nutrient discharges, the state source says. If a new POTW uses BMPs as part of its discharge offset, the BMP will be tracked through the plant’s individual discharge permit covering all other discharge limits other than nutrients, the source says.
The plan creates a cap on loads, not a cap on growth, the source says. Another unique aspect of the Virginia trading program is that it allows permitted entities to pay into the Water Quality Improvement Fund if, for reasons out of their control, a planned trade did not occur or extreme weather destroyed BMPs, the source says. The state is still determining how this will work but may create a nutrient banking system similar to a wetlands mitigation bank, the source says. While the goal is not to penalize trading participants for events out of their control, “you can’t be buying your way out of compliance,” the source says.
Source: Water Policy Report via InsideEPA.com
Date: April 4, 2005
Issue: Vol. 14, No. 7
© Inside Washington Publishers

EPA Announces Landmark Clean Air Interstate Rule
"CAIR will permanently cap emissions of sulfur dioxide and nitrogen oxides in the eastern United States. When fully implemented, CAIR will reduce SO2 emissions in 28 eastern states and the District of Columbia by over 70 percent and NOx emissions by over 60 percent from 2003 levels." Read the full USEPA press release. March 10, 2005.

Bush Plan Could Drain Effort to Clean Up Waters
Under his budget, funds for an antipollution program would be about half the 2004 level. Other environmental projects also face cuts. By Miguel Bustillo and Kenneth R. Weiss, Times Staff Writers, February 9, 2005. Read full Los Angeles Times Story

Chesapeake Bay Blue Ribbon Panel recommends $15B Cleanup Fund
The panel calls for a $15b fund with the federal government and states splitting 80:20. It calls for flexible approaches including trading. The panel promotes point-point trading but specifically says: "The Panel did not see a model of point/nonpoint-source trading which it could endorse at this time, although it was informed that some jurisdictions are interested in developing such a program." Bay Journal article
See quote on page 30 of report.