The wastewater treatment plant in Medford, Ore., removes organic solids, oils and other pollutants from sewer and storm runoff before dumping the water into the Rogue River. Even though the process cleans the water, it's still polluted with heat. Warm waters hold less oxygen and can provide a dangerous advantage to invasive species.

The state allows each heat-pollution source in a watershed to contribute a maximum number of kilocalories per day so river temperatures won't rise above 13 degrees Celsius, the ideal temperature for salmon to spawn.

Required by law to cool its wastewater, Medford considered traditional solutions, but refrigeration units or cooling towers are expensive and rely on power generated by river-blocking dams or coal. Instead, the city opted for an innovative new approach -- restoring trees and shrubs on riverbanks left bare by logging and agriculture. The resulting shade keeps the water cool naturally, at a cost roughly half that of mechanical means.

Medford's project is part of a growing effort to allow utilities and power plants to mitigate their warm-water emissions using temperature credits -- units of temperature rise prevented by shade -- generated by the restoration of damaged riparian areas on farms and ranches. This approach uses market forces to address environmental harm, and in a challenging economic climate, it may give Northwest municipalities a way to restore miles of riparian habitat that would otherwise go untreated.

By placing an economic value on an ecosystem service like temperature reduction, says Joe Whitworth, director of The Freshwater Trust, the nonprofit developing Medford's shade credits, we "integrate the currencies of environmental benefits into how (farmers) run their business. …They can grow bushels of nature as much as they grow bushels of beans."

The program's foundations were laid in 2001 by Clean Water Services, Washington County's water resource management utility, after the Oregon Department of Environmental Quality issued a permit that set strict heat maximums for the watershed. The new permit limits would have required Clean Water to spend up to $150 million for refrigeration units to cool wastewater before discharging it.

The utility began investigating how to cool water with natural shade instead. But most of Oregon's river frontage is private, so Clean Water had to enlist landowners -- including farmers and ranchers, a group historically reluctant to participate in government-sponsored restoration programs.

Working with the local Soil and Water Conservation District, the utility developed programs that established and monitored plantings. It paid farmers for 20-year leases -- the projected life of the infrastructure the utility would otherwise have had to install. By 2010, Clean Water had restored about 36 miles of rural and urban stream corridors, removing invasive species, providing woody debris for fish and tadpoles to hide in, planting native trees and shrubs, and buffering the water from nutrient runoff.

Lyle Spiesschaert, who farms on a tributary of the Tualatin, was one of the first to participate, in 2004. "(Now) we see a lot more birds, a few pheasants and some beavers," he says. "(Trout) pretty much disappeared when the streams got warmer after everybody cut down to the river's edge, but I think we might get them back soon."

He and many other landowners have asked Clean Water to permanently enroll their riverfronts. "At this point, you can see all the benefit it has for your business and the health of your land," Spiesschaert says.

To encourage shade crediting across the Northwest, the Willamette Partnership, a nonprofit conservation coalition in Oregon, codified the lessons learned in the Tualatin. They gathered a panel of government entities and nonprofits, including the Oregon Department of Environmental Quality, Ecotrust and The Nature Conservancy, to create protocols for several kinds of ecosystem markets. These included rules for generating and verifying shade credits. The Medford project will be the first to use those protocols for shade crediting.

This summer, the U.S. Department of Agriculture gave the Willamette Partnership a $1.5 million grant to work with Washington and Idaho DEQs to develop a standard policy for trading across all three states.

Credits are measured in heat that's prevented from entering the waterway. A reduction of one kilocalorie per day generates one temperature credit. Credits are verified by a third-party auditor, who ensures that the restorations follow the rules: Plantings need to be higher-density and require more frequent monitoring and maintenance than typical restoration projects. If projects don't generate the amount of shade promised after several years, both credit supplier and purchaser will incur hefty fines. Serial numbers ensure credits are sold only once.

The program does have its critics, who say it takes pressure off landowners, the largest contributors to heat pollution in waterways, by not requiring them to mitigate the heat impacts of their grazing, farming and logging. Nina Bell, the executive director of Northwest Environmental Advocates, argues that landowners should be responsible for addressing the heat pollution from their river frontage, while utilities should mitigate the heat pollution that comes from their treated wastewater. Otherwise, utilities and others end up paying for restoration projects that should be the landowner's obligation, Bell says: "We get into a situation where people think market forces are leading to pollution cleanup when they are just moving cash around."

Though temperature credits can't solve all the complex problems of watersheds, Bobby Cochran, the executive director of the Willamette Partnership, says they're at least a start. "Redirecting the money that would have gone into concrete toward restoring natural systems -- that's a step in the right direction."