The Legal Status of Environmental Credit Stacking EPRI Public Webcast February 11th, 2014 Phone: 877-789-2085 Today’s Speakers Attendee PIN: 7712 Jessica Fox Royal C. Gardner Technical Executive Professor of Law and Director Electric Power Research Institute Institute for Biodiversity Law and Policy Stetson University College of Law © 2014 Electric Power Research Institute, Inc. All rights reserved. 2 Phone: 877-789-2085 Webcast Recording Attendee PIN: 7712 • Today’s webcast will be recorded. Your participation in this webcast provides your consent to the recording. • Recording will be posted to http://wqt.epri.com © 2014 Electric Power Research Institute, Inc. All rights reserved. 3 Phone: 877-789-2085 EPRI & Stetson Disclosure Attendee PIN: 7712 • No portion of this webcast or associated publication constitutes legal advice, opinion, or guidance from EPRI or Stetson University. • EPRI and Stetson University are not promoting any specific policy or laws. • This is an academic research effort with observations and conclusions intended to inform the public. © 2014 Electric Power Research Institute, Inc. All rights reserved. 4 Phone: 877-789-2085 Ecology Law Quarterly, 40(4):713-758 Attendee PIN: 7712 #1 Download in last 60 days in four SSRN categories: • Environmental Economics • Natural Resources Law and Policy • Environmental and Natural Resources Law • Environmental Law and Policy © 2014 Electric Power Research Institute, Inc. All rights reserved. 5 Phone: 877-789-2085 What is Environmental Credit Stacking?Attendee PIN: 7712 © 2014 Electric Power Research Institute, Inc. All rights reserved. 6 Phone: 877-789-2085 The Crux of Stacking Attendee PIN: 7712 Can you get paid twice for the same conservation action? • Drive to maximize Economic Returns • Concern over Ecological Validation • Development of Policy © 2014 Electric Power Research Institute, Inc. All rights reserved. 7 Phone: 877-789-2085 Terms, Agencies, and Policies Attendee PIN: 7712 Credit Type Oversight Agency Many markets, many agencies, many terms. Carbon Private organizations, DOE, EPA, USDA Terms: • Bundling Endangered FWS, state • Unbundling Species Departments of Fish • Credit stacking and Game, NOAA • Payment stacking • Double dipping Wetlands U.S. Army Corps of • Double counting Engineers, NOAA, • Horizontal stacking EPA • Vertical stacking Water EPA, Office of Water. • Temporal Stacking Quality Some states. © 2014 Electric Power Research Institute, Inc. All rights reserved. 8 Phone: 877-789-2085 Regulatory Uncertainty Attendee PIN: 7712 • Thumbs Up from USDA: – USDA allows for “the sale of carbon, water quality, or other environmental credits” associated with federal grants (EQIP, CRP, WRP). • Thumbs Down from EPA & USACE: – United States Army Corps of Engineers (USACE) and USEPA have issued a regulation that precludes the use of CRP or WRP monies to generate wetland credits. © 2014 Electric Power Research Institute, Inc. All rights reserved. 9 Phone: 877-789-2085 Perspectives and Responsibilities Attendee PIN: 7712 • Agencies: Regulatory agencies need to ensure that the credits appropriately offset impacts. This can be challenging even in one market type. When credits are stacked the question of “additionality” becomes even more prominent. • Landowners: Shouldn’t credit producers expect to be compensated for the range of environmental benefits they support? • Project Managers: Even in the absence of clear direction from agencies and standard protocols, pilot projects are proceeding to test the possibilities of credit stacking. • Ecosystems: Credits represent mitigation. When credits are stacked, so are the risks to the ecosystem if credits fail. © 2014 Electric Power Research Institute, Inc. All rights reserved. 10 Phone: 877-789-2085 Gardner & Fox Paper: Overview Attendee PIN: 7712 • Background on Markets – Wetland Mitigation Banking – Conservation Banking Preserved/Enhanced Upland Forest -Endangered Species Habitat Farm: Reduced Fertilizer Use/No Till -Carbon Sequestration – Water Quality Trading -Improved Water Quality -Carbon Sequestration – Carbon Offsets • Stacking scenarios Non-wetland Riparian Vegetative Buffer – Unbundling not -Endangered Species Habitat -Improved Water Quality permitted – Unbundling permitted • Considerations for a Restored Forested Wetland -Endangered Species Habitat Stacking Protocol -Improved Water Quality -Carbon Sequestration © 2014 Electric Power Research Institute, Inc. All rights reserved. 11 Phone: 877-789-2085 Wetland Mitigation Banking Attendee PIN: 7712 • Principal drivers: CWA, Corps and EPA regulations, and similar state laws and regulations • Commodity (credit currency): functional or areal measure © 2014 Electric Power Research Institute, Inc. All rights reserved. 12 Phone: 877-789-2085 Conservation Banking Attendee PIN: 7712 • Principal drivers: ESA, FWS and NMFS guidance, and similar state laws and regulations • Commodity (credit currency): areal measurement of habitat and/or numbers of breeding pairs © 2014 Electric Power Research Institute, Inc. All rights reserved. 13 Phone: 877-789-2085 Water Quality Trading Attendee PIN: 7712 • Principal drivers: CWA, EPA policy, and similar state provisions • Commodity (credit currency): pounds of reduction © 2014 Electric Power Research Institute, Inc. All rights reserved. 14 Phone: 877-789-2085 Carbon Offsets Attendee PIN: 7712 • Principal drivers: state laws and regulations • Commodity (credit currency): short tons or metric tons (tonnes) of carbon dioxide equivalent (tCO2e) reductions © 2014 Electric Power Research Institute, Inc. All rights reserved. 15 Phone: 877-789-2085 Stacking scenarios: Attendee PIN: 7712 Wetlands and endangered species • Van Vleck Ranch Mitigation Bank (CA) – Wetland and vernal pool fairy shrimp credits Source: Westervelt Ecological Services http://www.wesmitigation.com/mitigation-conservation-projects/van-vleck-ranch- mitigation-bank.cfm#page=photos © 2014 Electric Power Research Institute, Inc. All rights reserved. 16 Phone: 877-789-2085 Stacking scenarios: Attendee PIN: 7712 Wetlands and water quality • Neu-Con Umbrella Wetland Mitigation and Stream Restoration Bank (NC) – Wetland and nutrient offset credits Source: North Carolina State University http://www4.ncsu.edu/~grhess/PhotoOfTheMonth/archive/ © 2014 Electric Power Research Institute, Inc. All rights reserved. 17 Phone: 877-789-2085 Stacking scenarios: Attendee PIN: 7712 Wetland functions • Spellbottom Mitigation Bank (TX) – Temporary Storage of Surface Water (TSSW) – Maintenance of Plant and Animal Communities (MPAC) – Removal and Sequestration of Elements and Compounds (RSEC) Source: Mitigation Solutions USA http://www.msusa.com/banks/texas/SpellbottomMitigati onBank_Map.html © 2014 Electric Power Research Institute, Inc. All rights reserved. 18 Phone: 877-789-2085 Stacking scenarios: Attendee PIN: 7712 multiple species (federal) • Ohlone Conservation Bank (CA) © 2014 Electric Power Research Institute, Inc. All rights reserved. 19 Phone: 877-789-2085 Stacking scenarios: Attendee PIN: 7712 Multiple species (federal) © 2014 Electric Power Research Institute, Inc. All rights reserved. 20 Phone: 877-789-2085 Stacking scenarios: Attendee PIN: 7712 Multiple species (federal) © 2014 Electric Power Research Institute, Inc. All rights reserved. 21 Phone: 877-789-2085 Stacking scenarios: Attendee PIN: 7712 Multiple species (federal and state) • Lyonia Preserve (FL) Source: Volusia County Florida www.volusia.org © 2014 Electric Power Research Institute, Inc. All rights reserved. 22 Phone: 877-789-2085 Stacking scenarios: Attendee PIN: 7712 Endangered species and carbon • Florida Panther Conservation Bank – Panther credits and reservation of right to seek carbon credits in the future Source: The Florida Panther Conservation http://pantherconservation.com/ © 2014 Electric Power Research Institute, Inc. All rights reserved. 23 Phone: 877-789-2085 Stacking scenarios: Water Quality Attendee PIN: 7712 Phosphorous and Nitrogen • Maryland’s (nascent) water quality trading program Chesapeake Bay Source: Fairfax County http://www.fairfaxcounty.gov/dpwes/environmental/cbay/ © 2014 Electric Power Research Institute, Inc. All rights reserved. 24 Accounting Units & Defensible Stacking Scenario • Species Bundles of Ecosystem Values • Wetlands (Acres) • Carbon Defined Accounting Units (tons, pounds) • Water Quality Based on our analysis, the most appropriate credit stacking scenario is when the accounting units are pollutant-specific, such as pounds of nitrogen in water quality trading, and tons of CO2 equivalents in carbon markets. © 2014 Electric Power Research Institute, Inc. All rights reserved. 25 Phone: 877-789-2085 Attendee PIN: 7712 Considerations for a Credit Stacking Protocol “Credit stacking could provide great economic incentives for effective conservation, but only after the fundamental considerations described here are addressed.” Consideration 1: Ecosystem credits that consist of a suite of functions should not be stacked and unbundled. Consideration 2: Stacking and unbundling credits should not result in habitat loss. Consideration 3: Managing the site for one credit type should not denigrate the ecological values represented by other credit types. © 2014 Electric Power Research Institute, Inc. All rights reserved. 26 Phone: 877-789-2085 Attendee PIN: 7712 Considerations for a Credit Stacking Protocol Consideration 4: Regulatory agencies need the resources and capacity to confirm the ecological validity of the transactions. Consideration 5: Any stacking and unbundling of credits should