Bill Holman and Lydia OlanderNicholas Institute, Duke University

Urban Water Sustainability Leadership Conference October 3-5, in Milwaukee WI

Green Infrastructure FinanceWhat’s Old is New and What’s Really New

Sources of Water Finance

• Your money – water rates– Base fees and volumetric fees– Revenueshed

• Other people’s money – leverage– Credits– Markets– Incentives

Historic Source Water Protection Boston & Asheville

Ongoing Source Water ProtectionUtah & NC

Willingness to Pay

• Assured supplies of clean water– Essential to public health, environment ,economy

and electricity • Value of water is increasing – Water risk is a business issue

• Protect water quantity as well as quality– Value of capacity

• Utility $ leverage other $• No public awareness = No willingness

Source Water Protection Theory

• Identify risks• Increase public awareness & support• Implement policies to reduce risks– Adopt rules, conserve land, clean up sites…

• Limited program success• How could this program be improved?

Terms

Financing for Green Infrastructure can include:• Payment for Ecosystem Services• Payment for Watershed ServicesInterchangeable terms for common ideas

Ecosystem Service Markets are a variation on this theme

Why Payment for Ecosystem Services?

• Need to engage private landowners

• Need new money for watershed services

Types of financing

1. Traditional financing

2. Regulation driven ES financing• Water quality trading (developers); wetland and stream

mitigation

3. Privately funded social marketing

4. Other ES programs that provide watershed services

Traditional financing

• Funding (public)– User fees, bonds, state or federal funds

• Actions– Conserve lands (easements, fee simple purchase)– Manage lands (implement BMP)– Buy water rights/permits

• Drivers– avoid regulation, reduce risks, save money

(filtration waver, avoid sediment and pollutant loads)

Traditional financing – New design

• Auctions/ Bidding– Conestoga Watershed Reverse Auction (PA) -P loading- CIG grant to

test new payment approach- paying for best bids (P/$) – Flint River Drought Protection Auctions (GA)- state auction pays

landowners to retire water permits

• Revolving fund for BMPs– Conserve to Enhance (Tucson AZ) – EPA grant pays subsidies for

participants to install water harvesting features in homes, participants track water use and pay amount saved on water bills back to the program

• Cross boundary PES– The Upper Neuse Clean Water Initiative (NC) – City of Raleigh is

paying the neighboring (upstream) county for land conservation and resulting water benefits using water fees.

Regulation driven ES financing• Funding (regulated entities)

– Clean Water Act• Land developers for wetland and stream mitigation • Wastewater dischargers (NPDES and State) – water quality trading

– Endangered Species Act• Land developers for habitat mitigation (Salmon in NW; others?)

• Actions– Mitigation for damages (restore or create required ecosystem

acreage and services; often conservation)– Offset for pollutant discharges – trading permits to pollute

(Management to reduce pollutant loads or impacts) • Issue

– How to harness all of this funding and activity so that it provides benefits for your watersheds?

Becca Madsen et al. 2010; Ecosystem Marketplace.

Water Quality Trading• Active NPS trading only

happening in a few places.

• Often to meet state rules• Funding is from: (1)

treatment facilities, (2) developers; or (3) grants

• Examples• Southern Minnesota

Beet Sugar Cooperative P trading

• NC Tar-Pamlico storm water offsets

• Great Miami Watershed WQT

• Tualatin Basin in OR• Want benefits in critical

parts of watershedOregon’s Tualatin Basin – Temperature trading program

Regulation driven activity

• Harnessing potential benefits of mitigation and trading programs

• Needs integrated planning and management across federal, state agencies, municipal govts and other funding opportunities. – Way to encourage priority siting and types of

projects (value adder; service/trading area priorities)

• New money from developer funded activities

Voluntary -Social benefits market/PES

• Bonneville Environmental Foundation “Water Restoration Certificates”– Private entities pay for water restoration certificates for

their marketing/social benefits– Pay landowners to take actions that restore water flow– Credits are retired, not traded– Avoids potential regulatory risks

• Wal-Mart’s Acres for America program – voluntary program to permanently protect an acre for every acre of land developed for its stores (no specific intention to match quality of habitat)

Other payments/markets

• Carbon Market for Avoided Conversion and Land Management (water benefits)– Avoided forest conversion; afforestation; forest

management (CAR)– Urban forestry (CAR)– Avoided grassland conversion– Agricultural management (croplands, ranch lands, and

animals) – Wetlands (avoided loss and restoration)

• Using federal cost share programs (was 6 billion/yr; NRCS- CSP, CRP) to help meet water quality objectives

For more information http://nicholasinstitute.duke.edu/

What we know about GI/ES

• We know general relationships– Wetlands slow down and clean up water– Forests moderate flow and reduce sediment loads

• We don’t know (without research)– Specific production functions– What type of wetland, how big and where will

have how much impact on water flow and quality– How much forest and where will have how much

impact on water flow and sediment loads