6. Conclusion
Currently, overall transactions costs for nutrient trades involving perpetual term phosphorus credit in Virginia do not appear to act as a barrier to trade. The levels of transactions costs experienced to date are modest largely due to the type of activities currently being credited: simple land conversions. Land conversion projects are straight-forward to plan and evaluate, as Virginia provides clear and uncomplicated procedures to quantify credits and projects typically do not involve the implementation and consideration of baseline practices. Verification and monitoring is straight-forward and can be done via remote monitoring of tree cover. In contrast, if credits were to be generated using management, vegetative, and/or structural practices, the procedures will become more complex to assess and monitor. Based on best available evidence gathered from other similar programs, the administrative transactions costs of creating credits on working agricultural lands using management and structural BMPs are likely to be significantly more costly on a per project basis relative to credits generated from land conversions (the dominant agricultural NPS credit-generating practice in Virginia). It is estimated that it may be 2 to 16 times costlier to the administrator and credit provider to generate credits from working land BMPs than for land conversion and retirement. Costs need to be compared to the relative value created in terms of nutrient reductions. For example, the estimated transactions costs of term credits could exceed the costs of BMP implementation and are several times larger than the price of nutrient credits currently being charged under the point source trading program.
