D1

1
Stakeholder Readiness
1. Opportunities Constraints
Session D in Water Quality Credit Trading
PowerPoint Workbook for a Detailed Assessment of
Opportunities and Options
2. What to Trade, Where
3. Who Trades, Why
4. Trading Ratios
B.
5. Credit Generation Use
6. Market Elements, Part One
Introduction User Guide (Word)
7. Market Elements, Part Two
A. Are We Ready for Trading
8. Market Models Framework
B. Decision Process
9. Tracking
C. Stakeholder Identification
D.
10. Oversight
D. Stakeholder Readiness
11. Evaluation
E. Information Management
2
Stakeholder Participation is one foundation for
successful trading

• Trading depends on the knowledge and support of
  multiple stakeholders
• Successful trading efforts must build general
  stakeholder awareness
• Stakeholders bring diverse perspectives to the
  trading process, which range from positive, to
  neutral, to skeptical
• Stakeholder collaboration is needed for a
  successful trading program

3
This session covers these Stakeholder
Participation topics

• Guiding Principles for Stakeholder Participation
• Stakeholder Perspectives
• Assessing Roles and Perspectives Together
• Stakeholders Readiness for Collaboration on
  Trading

4
Guiding Principles for Stakeholder Participation

• Trading is voluntarystakeholders must find
  value in participation
• Building effective partnerships provides the
  foundation for a successful trading program
• Non-technical aspects of trading are critical to
  success
• They include education, outreach, building trust,
  and establishing credibility
• These are equally important to success as
  technical aspects of program development

5
Guiding PrinciplesTrading is voluntary
Stakeholders must find value in participation

• In Connecticuts nitrogen credit trading program
  for Long Island Sound, POTWs decide whether they
  want to be a buyer or a sellerthis has been a
  key to the programs success

• In several situations where states have attempted
  to set wasteload allocations for point sources
  so low as to force them to trade for nonpoint
  source credits, dischargers have
• fought the allocations
• proposed their own trading program
• elected not to trade and upgraded instead

6
Guiding PrinciplesBuilding effective
partnerships provides the foundation for a
successful trading program

• Clean Water Services depends on its partnership
  with the Tualatin Soil and Water Conservation
  District to implement its temperature credit
  program
• CWS pays the District to enroll landowners,
  complete creditable plantings, and perform or
  oversee maintenance and monitoring
• The District gets a full-time employee to manage
  enhanced programs with part of the CWS income and
  incentive payments paid to employees based on
  program enrollment

• The trading programs for dissolved oxygen and
  temperature being implemented on the Tualatin
  River are the direct result of a successful
  collaboration between the discharger, Clean Water
  Services, and its regulator, the Oregon
  Department of Environmental Quality

7
Guiding PrinciplesThe non-technical aspects of
trading can be as important as the technical ones

• Maryland stakeholders have been discussing
  trading programs since before 1998, but were
  unable to gain traction for a pilot program even
  though WERFs 2002 study showing substantial
  cost-savings could be captured through trading
• In 2006 an advisory group was be formed to
  reinitiate building the partnerships necessary to
  develop and launch a trading program

• Virginia dischargers enabled a nutrient credit
  trading program during the 2005 legislative
  sessionwithout having yet conducted detailed
  analysis of their own, but pointing to WERFs
  analysis of savings possible in Maryland and
  actual results in Connecticut
• The Virginia Nutrient Credit Exchange Association
  will conduct detailed analysis to document
  trading scenarios it will recommend for
  inclusion in the general permit for the program

8
Segment Wrap UpAre we aligned with the Guiding
Principles?

• Do we all see trading as voluntary?
• Do stakeholders find value in participation?
• Do we have or are we building partnerships?
• What non-technical aspects of trading will be
  critical to our success
• education, outreach, trust, credibility, other?
• For us, will the non-technical aspects be
  equally or more important to our success than
  technical aspects of program development and
  implementation?

9
Stakeholder Perspectives

• Identifying our stakeholders was the first step
• The next step involves understanding
  stakeholders potential roles and perspectives in
  a way that is meaningful for our effort
• Session C focused on examining potential roles
• This segment focuses on examining perspectives
• Most stakeholders are proponents, neutrals, or
  skeptics
• We could also look at degree of support
• We can use narrative labels, low-medium-high
  indicators, or numerical rankings to assess
  stakeholders roles
• There is no single best schemethe key is to
  develop a system that works for us

10
Stakeholder PerspectivesOne System for
Understanding Stakeholders

• Perspectives during development and
  implementation about aspects of trading vary
• Proponents have generally favorable views about
  trading and are pre-disposed to support at least
  exploring the concept, if not already supportive
  of implementation
• Neutrals may truly be indifferent, or may have
  views somewhere between mildly positive to mildly
  negative
• Skeptics come to the table with concerns about
  trading in its entirety, or certain aspects of
  itthey may or may not be willing to engage in
  efforts to see how it could be workable in their
  watershed

11
Stakeholder RolesCharacterizing Perspectives

• At the beginning, perspectives may be
• implicit or explicit
• flexible or rigid
• conveyed through actions (e.g., coming or not
  coming to a meeting)
• conveyed through communication (e.g., verbal,
  written, body language)
• Perspectives can shift or change over the course
  of the effort
• As more information and analysis becomes
  available
• As trust and credibility among the stakeholder
  group is built or remains tenuous

12
Stakeholder PerspectivesImplications for Our
Effort

• If the majority of involved stakeholders are
• Proponents ? education and outreach can be more
  focused on the technical aspects of the trading
  effort
• Neutral ? we will need to fill gaps to build and
  reinforce existing trust and understanding in
  parallel with technical activities
• Skeptics ? it will be critical that events be
  initiated to build trust and understanding prior
  to embarking on any significant technical work
• We will need to evaluate stakeholder perspectives
  early on and reassess periodically to maintain
  the proper level and type of team-building
  activities and not let technical demands get
  ahead of comfort with concepts

13
Proponents

• Have generally favorable views about trading
• At a minimum, are pre-disposed to support
  exploration
• At a maximum are strong advocates and key
  champions
• Will tend to have a stake in the success of a
  trading effort
• Cost-savings
• Faster attainment of water quality goals
• Interest in innovation and/or cooperative
  approaches
• Maybe not a sure trader, but want to make sure
  the option exists
• Likely to take active technical roles when
  possible
• including contributing financial or in-kind
  resources to the effort
• Often willing and able to participate in
  education and outreach with other stakeholders

14
ProponentsExamples

• Dischargers who see an opportunity for
  cost-savings, faster compliance, or greater
  watershed stewardship through trading
• The City of Boise, Clean Water Services,
  Montgomery Water Works and Sanitary Sewer Board,
  and Virginia dischargers all championed trading
  options
• State agencies interested in innovative
  approaches willing to work collaboratively
• NPDES regulators in Colorado, Connecticut,
  Florida, Idaho, Oregon, Pennsylvania, Texas, and
  Virginia have all supported trading initiatives
• Stakeholders who would be the provider or
  beneficiary of creditable activities
• A variety of landownersagricultural and
  otherwisetheir trade associations, and
  governmental agencies involved in nonpoint source
  management programs have frequently supported
  trading initiatives

15
Neutral

• Neutral parties may be so for a variety of
  reasons, including
• Nothing important at stake for them
• Supportive of traditional regulatory/watershed
  management structure
• Ambivalent about trading
• Believe some/all sources should do more on their
  own first
• Neutral parties may be
• completely indifferent
• have views between mildly positive to mildly
  negative
• uncertain about what trading is and isnt
• Neutral parties may or may not have allegiances
  with other stakeholdersit will be important to
  determine if they do, what the basis for the
  relationship is, and how strong the empathy is
• Neutral parties may remain neutral for the
  entirety of the effort or could shift their
  perspectives to be more or less supportive

16
NeutralExamples

• Dischargers concerned that trading is proposed as
  a solution to TMDL allocations they see as unfair
  or technically unsound
• Numerous individual dischargers and several local
  and national associations have taken a neutral
  position on the concept of trading
• State agencies concerned that trading will
  require more resources than are available given
  other programmatic requirements
• NPDES regulators in several states have
  effectively taken a neutral position on trading
  by being unwilling or unable to participate in
  stakeholder-initiated efforts, ranging from only
  attending meetings and making no other
  commitments to explicitly opting out of the
  process
• Stakeholders who are uncertain about what trading
  involves, or who understand the concept but are
  concerned that sources arent doing enough under
  existing programs
• This category typically includes a wide variety
  of stakeholders with as many different reasons
  for their neutrality

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Skeptics

• On one or more aspects of trading, skeptics are
• passively not supportive
• actively against
• A skeptic could have one or more of several
  concerns, including
• Philosophical disagreement with the concept
• Lack of understanding or information
• Knowledge of/experience with trading efforts that
  were not successful
• Belief that prospective traders are not doing
  enough on their own
• Past bad experiences with other stakeholders
• Fundamental problem with technical or
  equity-related aspects of a TMDL and allocations
  that are driving trading
• If their issues are heard and addressed, skeptics
  may move toward more neutral or supportive
  stances
• Some skeptics may never budge, but should be
  included in the process exclude only as a last
  resort

18
SkepticsExamples

• Dischargers who believe trading is never
  voluntary but are forced by a regulatory system
  that disproportionately controls point sources
• State and federal agencies concerned that trading
  will result in backsliding, hot spots, or
  dischargers saving too much money
• Though rarely conveyed under letterhead, staff of
  a number of states and a few EPA regions, have
  verbally expressed these views
• Stakeholders who believe that every source should
  do as much as technically possible, no matter the
  cost, or those that support trading in theory,
  but believe sufficient safeguards will never
  exist
• Though not always, these stakeholders frequently
  invoke the Clean Water Act goal of zero
  discharge as antithetical to trading

19
Stakeholder PerspectivesSummarizing The Situation

• To help understand the potential trading
  landscape, it can be useful to chart out and
  summarize stakeholders, their perspectives, among
  other information
• It may be useful to add more information to our
  stakeholder identification checklist about stated
  or assumed perspectives
• We could fill out a table like this one

20
Stakeholder PerspectivesAnother Summary Method

• This approach provides more flexibility in
  labeling perspectives beyond the three
  categoriesthis table accepts checkmarks within a
  range

SKEPTIC
PROPONENT
NEUTRAL
?
?
?
?
?
21
Segment Wrap UpAssessing our Stakeholder
Perspectives

• Examine the list of identified stakeholders
  relative to their perspectives, and ask
• Do we have a sufficient number of proponents
  and/or neutrals to get started?
• How many skeptics are there (and why?), how
  strong are their positions, and how influential
  are they?
• Are the proponents sufficient in number and
  influence to carry the day?

• What are the chances to move skeptics or
  neutrals into more supportive positions on the
  continuum?
• What opportunities exist to address skeptics
  issues?

22
Assessing Roles Perspectives Together

• Using our stakeholder identification checklist as
  a reference, we could develop a table with the
  three categories each for role and perspective
• We can use
• check marks
• a narrative system that further indicates degree
  of role or intensity of perspective
• a numerical scale with defined references

23
Roles Perspectives Summarizing our Situation

• We could combine the two individual tables for
  roles and perspectives into one table, like this

24
Roles Perspectives Another Categorization

• If we dont like the labels in previous examples,
  and instead want to use another system, here is
  one alternative focusing on involvement and
  support, instead of roles and perspectives

25
Roles Perspectives Narrative Approach

• In addition to the simple checks used in the
  previous examples, we also could format the table
  to allow a narrative assessment to comment in
  the various cells

26
Roles Perspectives A Matrix Summary

• We could take the assessment further and create a
  matrix like either of these and fill in the cells
• with totals for a quick count
• with names to document results
• with names and comments for a detailed assessment

27
Roles Perspectives A Color-Coded Flag Matrix

• When using the matrix approach, we will want as
  many stakeholders in proponent to neutral
  combinations as possible
• Green-flagged boxes are critically important
• Yellow-flagged boxes may or may not be
  deal-makers or deal-breakers
• Red-flagged boxes are problematic

28
Segment Wrap Up Assessing Roles Perspectives

• In this segment, we learned to understand
  stakeholders and the overall situation by
  examining the role stakeholders play in the
  trading process and the perspectives they bring
  to the table
• These exercises also showed us how narrow or
  broad our stakeholder base is
• These assessments should be done at the outset
  of a trading effort
• We also may wish to revisit the stakeholder
  assessment process as roles and perspectives
  evolve

29
Our Trading Collaboration Profile

• In order to develop and implement a successful
  trading program, stakeholders must
• Have a basic understanding of and agreement about
  the water quality problems and opportunities for
  improvement
• Have some positive experiences working together
  on non-trading watershed issues to build
  onstarting from scratch is harder, but possible
• Trust and respect one another from the outset,
  or be able to achieve this during the process
• The following 12 assessment questions address
  these attributes of stakeholder groups
• Our answers will help us evaluate how willing,
  ready, and able we are to collaborate on a
  trading initiative

Base your answers on past statements, actions,
writings, etc.
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Trading Collaboration Profile12 Questions in
Three Areas

• Basic Understanding and Agreement on Problems and
  Opportunities
• Is there a basic understanding of the water
  quality problems and/or management challenges and
  their causes and contributing factors?
• Is there general agreement about the relative
  loading contributions, responsibilities for
  action, and opportunities for improvement?
• Is there a common understanding of what trading
  is and isnt?
• Is there a shared vision for what can be
  accomplished with trading?
• Prior Experience and Successful Collaboration
• Have we had past experiences collaborating on
  watershed-related issues?
• Have they gone well?
• Can we use those processes and mechanisms to
  support a trading initiative?
• Are they well suited to the complexities of
  trading?
• Trust, Respect, and Credibility
• Do stakeholders trust the current watershed
  custodiansregulators, dischargers, public land
  managers, private land owners, third-party
  stewards?
• Do the custodians trust each other?
• Do stakeholders believe the allocation of
  pollutant control and other water quality
  responsibilities is equitable in the absence of
  trading?
• Do stakeholders believe that trading is a fair
  addition to the current allocation without
  tradingi.e., trading does not let anyone off
  the hook, nor does it effect extortion

31
Trading Collaboration ProfileGuidance for
Answering the Questions

• We can use a variety of approaches to answer the
  questions
• Simple Yes/No
• Flags
• Red, Yellow, Green as used previously in this
  tool kit
• With this system, narrative definitions are
  needed to go along with our flags, for example
  low-med-high, or no-maybe/somewhat-yes
• Narrative Definitions without flags
• Numerical with Definitions
• 1, 2, 3 e.g., low, medium, high no,
  maybe/somewhat, yes
• 1, 2, 3, 4, 5
• Very Negative, Somewhat Negative, Neutral,
  Somewhat Positive, Very Positive
• Strongly Disagree, Disagree, Mixed, Agree,
  Strongly Agree
• Pick which one we like
• This segment has a template for using a 3-answer
  system

32
Trading Collaboration ProfileBasic Understanding
and Agreement on Problems and Opportunities

• These questions are important to determining
  whether stakeholders general knowledge and
  level of consensus about water quality issues
  provide a sufficient basis to even begin to talk
  about alternative options such as trading

ANSWER No Somewhat Yes

• Is there a basic understanding of the water
  quality problems and/or management challenges and
  their causes and contributing factors?
• Is there general agreement about the relative
  loading contributions, responsibilities for
  action, and opportunities for improvement?

33
Trading Collaboration ProfileBasic Understanding
and Agreement on Problems and Opportunities

• These questions are important to determining
  whether stakeholders understand the basic
  concept of tradingincluding the opportunities
  it presents, as well as its limitations

• Is there a common understanding of what trading
  is and isnt?
• Is there a shared vision for what can be
  accomplished with trading?

ANSWER No Somewhat Yes
34
Trading Collaboration ProfileBasic Understanding
and Agreement on Problems and Opportunities

• Yes Answers
• were in good shape
• identify any gaps, or areas that could be
  improved
• Somewhat Answers
• we may have a sufficient basis to move forward
• we could spend some time on activities to improve
  understanding and agreement first
• or incorporate dialogue and consensus building
  into the process

• No Answers
• we might want to wait to move forward
• a lack of understanding and/or disagreement about
  problems and opportunities will make developing a
  trading program more difficult
• we should consider some significant education and
  outreach first, before we start talking about
  trading
• include a targeted outreach and dialogue
  component as an early and parallel activity in
  our process

35
Trading Collaboration ProfilePrior Experience
and Successful Collaboration

• These questions help us think about other times
  our stakeholders have worked together on
  important and possibly controversial issues and
  whether we have a good foundation for our trading
  effort

ANSWER No Somewhat Yes

• Have we had past experiences collaborating on
  watershed-related or other issues?
• Have they gone well?

36
Trading Collaboration ProfilePrior Experience
and Successful Collaboration

• These questions ask us to think about the
  framework we used for previous efforts and
  whether they could support our trading
  initiativeif we havent had any past experience
  as stakeholders, think about the processes and
  mechanisms we might use when answering this
  question

ANSWER No Somewhat Yes

• Can we use those processes and mechanisms to
  support a trading initiative?
• Are they well suited to the complexities of
  trading?

37
Trading Collaboration ProfilePrior Experience
and Successful Collaboration

• Yes Answers
• were in good shape
• identify any gaps, or areas that could be
  improved
• Somewhat Answers
• we may have a sufficient basis to move forward
• we could spend some time tailoring or otherwise
  enhancing our processes and institutional
  mechanisms to better support our trading
  initiative
• or we could work to ready our framework for a
  trading initiative prior to starting

• No Answers
• we might want to wait to move forward
• a lack of any past experience, or bad experiences
  may not be the strongest foundation for a trading
  effort
• identify whether our weakness is related to
  experiences, available mechanisms, or both
• depending on our need, identify or create the
  necessary groups and forums and consider a small
  effort where success can lay the foundation for a
  trading initiative

38
Trading Collaboration ProfileTrust, Respect, and
Credibility

• These questions get at the fundamental basis for
  collaborationpeople can disagree about data and
  approaches, but do they do so respectfully, and
  are they honest and forthright in their words and
  actions?

ANSWER No Somewhat Yes

• Do stakeholders trust the current watershed
  custodiansregulators, dischargers, public land
  managers, private land owners, third-party
  stewards?
• Do the custodians trust each other?

39
Trading Collaboration ProfileTrust, Respect, and
Credibility

• These questions address fundamental issues of
  fairness and equitypeople must believe the
  baseline responsibilities are fair and that
  trading gives no one an unfair advantage or
  disadvantagefor a trading initiative to succeed

ANSWER No Somewhat Yes

• Do stakeholders believe the allocation of
  pollutant control and other water quality
  responsibilities is equitable in the absence of
  trading?
• Do stakeholders believe that trading is a fair
  addition to the current allocation without
  tradingi.e., trading does not let anyone off
  the hook, nor does it effect extortion

40
Trading Collaboration ProfileTrust, Respect, and
Credibility

• Yes Answers
• were in good shape
• identify any trust- or credibility-building
  opportunities
• Somewhat Answers
• we may have a sufficient basis to move forward
• we should spend some time on outreach and
  information sharing to build trust and address
  any equity issues directly first
• or make sure these activities occur early and
  often in our process

• No Answers
• we should seriously consider waiting to move
  forward
• we may need some dedicated time to build or
  rebuild trust among all stakeholders, or between
  a critical set
• we may need to engage a facilitator that has
  credibility with different stakeholders
• if concerns exist about baseline allocations and
  how trading would relate to them, we need to
  address equity and fairness issues before we
  start, or as a first step in our process

41
Trading Collaboration ProfileAssessing our
Results

• If we answered YES to most these questions, we
  are ready to begin developing a trading program
• If we answered SOMEWHAT to most of these
  questions, we should identify our weaknesses and
  take steps to address themeither before we
  start, or as an integrated part of our process
• If we answered NO to most of these questions, we
  may need to develop and implement an outreach and
  information sharing program that will build trust
  and credibility prior to initiating a trading
  project

42
Trading Collaboration ProfileA Template for the
12 Questions
43
Segment Wrap UpTrading Collaboration Profile
Results

• The 12 questions helped us explore how our
  stakeholders collectively feel about trading and
  helped us evaluate whether we have the
  collaborative framework needed for trading
• Things to keep in mind
• Outreach and information sharing programs take
  time to implement
• Trust building occurs over time

44
Session Wrap Up

• In this session we
• Covered principles for stakeholder participation
  in trading initiatives
• Examined our stakeholders perspectives about
  trading
• Assessed stakeholder roles and perspectives
  together
• Evaluated our stakeholders readiness for trading
  using a Trading Collaboration Profile

45
Session Wrap Up

• Are we aware of organizational and individual
  perspectives about trading and whether they are
  supportive or skeptical?
• Has the evaluation of roles and perspectives
  across our stakeholder group helped us determine
  if we have a good distribution based on our
  needs?
• Do we have, or can we achieve during the course
  of the program development process
• A basic understanding and agreement on problems
  and opportunities?
• Some basis for working together, such as prior
  experience with successful collaboration?
• Sufficient trust, respect, and credibility to
  move forward, especially where uncertainty exists
  and where phased or adaptive approaches need to
  be taken?

46
Our Next SessionInformation Management
1. Opportunities Constraints

• Session E addresses
• Needs and Expectations
• Public Participation Access to Information
• Categories of Options

2. What to Trade, Where
3. Who Trades, Why
4. Trading Ratios
5. Credit Generation Use
6. Market Elements, Part One
Introduction User Guide (Word)
7. Market Elements, Part Two
A. Are We Ready for Trading
8. Market Models Framework
B. Decision Process
9. Tracking
C. Stakeholder Identification
10. Oversight
D. Stakeholder Readiness
E. Information Management
11. Evaluation