Nutrient Reduction Credits (N / P)

In short

Regulatory trading of nitrogen / phosphorus load reductions (e.g. US Chesapeake Bay). A compliance mechanism distinct from volumetric replenishment.

What it is

Nutrient trading, also called water quality trading, is a market based approach that lets sources reduce nitrogen and phosphorus loads to a watershed and sell the resulting reductions as credits to regulated point sources that must meet permit limits. Eligible activities are mainly nonpoint source practices such as agricultural best management practices that lower nutrient loads below an established baseline, and reductions are certified against that baseline. One credit generally represents one pound of total nitrogen or total phosphorus kept out of the receiving water over a defined period. Programs operate under state rules and National Pollutant Discharge Elimination System permits, often tied to a Total Maximum Daily Load.

What it rewards

The reward is a credit called a Nutrient Reduction Credit (NRC). One credit stands for one kilogram of nitrogen kept out of the water. One cubic metre of water supplied, purified or conserved. A whole period of work is issued as one batch of credits at a time, in the same way a registry issues a batch.

What gets measured

To earn NRC credits, a project has to measure and prove a few things. An independent reviewer checks the evidence before any credits are issued.

• The catchment and the kind of water work being done, such as replenishment, saving water or cleaning it up.

• The starting water balance for the catchment, before the project.

• The net amount of water benefit measured for the period, checked by an independent reviewer.

Who takes part

• Standard Registry. Owns the policy, approves participants, anchors each issuance to its evidence.

• Project Proponent. Registers the project and submits monitoring reports.

• Validation & Verification Body. Independently validates the design and verifies monitored data.

How it works

1. 1

   The project team registers the project and its plan.

2. 2

   An independent reviewer checks that the plan is sound and that the benefit is real and would not have happened anyway.

3. 3

   The team looks after the site and measures the agreed indicators over time.

4. 4

   The independent reviewer verifies those measurements.

5. 5

   Credits are issued for the verified result, and a buyer can retire a credit to claim the benefit once.