Water Quality Trading
Advancing voluntary and market-based solutions for improving water quality in a manner that maximizes economic efficiency and maintains environmental integrity.
Eutrophication, the over-enrichment of freshwater and coastal ecosystems with nutrients (nitrogen and phosphorus), is a rapidly growing environmental crisis. Sources of nutrients include agriculture, sewage treatment plants, and urban and suburban stormwater. Designing an effective response to nutrient pollution is a challenge. Some pollutant sources are regulated but others are not. Point source practices (such as upgrades to wastewater treatment plants and retrofits to stormwater systems) generally cost more than nonpoint source practices (like nutrient management or grass buffers along stream banks). This cost differential creates an ideal environment for nutrient trading. Trading allows sources with higher pollution control costs to purchase pollution reductions from sources with lower costs. Those with higher costs can save money, while those with lower costs can earn new revenue.
Beginning with our seminal publication, Fertile Ground, over a decade ago, WRI has helped advance water quality trading from theory to practice. Since our initial emphasis on “making the case” for water quality markets, our focus has now shifted to operationalizing trading. We work primarily in the Chesapeake Bay watershed, the Mississippi River basin, and China on policy analysis, tool development, and policy design and implementation. In addition, WRI assesses the state of water quality trading globally, and works to strengthen and enforce best practices for water quality trading markets.
WRI develops strategies and tools to reduce nutrient discharges in the Mississippi River basin.
WRI conducts policy analysis and develops tools that identify and facilitate the most cost-effective reductions in nutrient discharges to improve eutrophication in rivers, lakes, and the Gulf of Mexico. WRI also encourages multi-state information exchange and federal, state, non-governmental, and stakeholder cooperation; and assists in the development of intrastate, regional, and basin-wide nutrient trading programs.
Specifically, WRI:
conducts outreach and education to the Mississippi River Basin point source, agricultural, and regulatory communities to disseminate findings on our MRB nutrient trading feasibility study including potential benefits and costs, technical and cultural issues, and program design considerations. In so doing, WRI encourages and assists in the development of state nutrient trading policy and programs.
facilitates the development of USDA’s Nutrient Tracking Tool (NTT) with Tarleton State University as field-level assessment tool and the Comprehensive Economic and Environmental Optimization Tool (CEEOT) for watershed-scale assessment for a variety of policy applications, including: evaluation of the environmental cost-effectiveness of federal and state cost-share programs, implementation of local water quality policies (e.g., Total Maximum Daily Loads or TMDLs); assessment of local water quality benefits of concentrated targeting actions, and provision of technical and economic services to farmers to accelerate adoption of the most cost-effective nutrient reducing strategies.