Introduction to Water Quality
Water Quality Trading
July 22-23, 2003
The Cost of Cleaner Water
Thirty years of progress!
In 1997, $14 billion private and $34 billion public
point source control costs, annually
$80 billion paid - 190 million served (165 million
with secondary or better waste water treatment).
In 1998 the estimated annual cost to develop TMDLs
is about $69 million for the next 15 years
Annual TMDL implementation costs range from $900
million to $4.3 billion
The Challenges Ahead
Different challenges call for different approaches: end-o-pipe controls to watershed
management, prescriptions to partnerships and command – and – control to market-based
~45 % of assessed waters don’t support designated
uses; 40,000 TMDLs need to be developed.
Storm water runoff from unregulated “nonpoint”
sources, legacy pollutants and atmospheric
deposition are major sources of pollution.
Growth and development will place greater demands
on water quality and supply.
The widening gap, “doing more with less”.
What is Water Quality Trading?
Trading is the voluntary exchange of pollutant
reduction credits between sources to meet regulatory
obligations or voluntary water quality goals.
Pollution reduction credits are created when a source
reduces pollution beyond the level required.
Trading achieves greater efficiency by capitalizing
Economies of scale within sectors.
Control cost differentials across sectors.
“Water quality trading” is based on water quality
standards and aligned with the Clean Water Act.
Trading offers cleaner water, quicker and cheaper
EPA estimated potential cost savings of $650
million to $7 billion annually from all types of
A World Resources Institute study found the cost
of controlling phosphorus from point sources in
Wisconsin, Michigan and Minnesota could be
reduced 40% to 80% through trading with
Connecticut’s Nitrogen Credit Exchange is
projected to result in 56 fewer capital projects and
save over $200 M over 14 years.
Types of Trading
Point Source (PS) Trading
Connecticut Nitrogen Exchange
Point/Nonpoint Source (P/NPS) Trading
Cherry Creek, Colorado
Lower Boise River, Idaho
Nonpoint Source (NPS) Trading
Grasslands Tradable Loads Program, California
Intraplant (Cross-outfall) Trading
Iron and Steel Effluent Guidelines
Factors To Consider
Water quality requirements or goals (Drivers):
Maintaining high quality waters.
Restoring impaired waters.
Ancillary environmental benefits.
Watershed characteristics (Trading Area and Sources):
Size of the trading area.
Unique features (impoundments, floodplains and wetlands).
Type, number, mix and relative loads of sources.
Economic conditions (Trading Potential):
Control cost differentials among and between sources.
Development and land use changes.
Partnerships (Support and Implementation).
Voluntary Pre-TMDL watershed programs.
Offsetting new and increased discharges to maintain high
Trading to achieve ancillary environmental benefits:
• Wetland restoration to improve water quality and provide habitat.
• Agricultural changes to improve water quality and mitigate green
house gas emissions.
Trading for smart growth or to mitigate legacy pollutants.
Type of program (PS, PS/NPS, NPS).
Pollutant (reductions) or other parameters traded.
Common Elements (continued)
Surplus reductions required to create credits.
Required PS or NPS controls and management practices.
Credit creation and duration.
Reductions greater than water quality based requirements.
Existing environmental quality.
Base year land uses and management practices.
Pollutant, spatial and temporal equivalence.
NPS load variability and control efficiencies.
NPS quantification uncertainty.
Common Elements (continued)
Mechanisms to establish NPS accountability.
Program evaluations, including monitoring.
Public participation and access to information.
Trading registry to track trades and evaluate
How Can Trading Be Implemented?
National Pollutant Discharge Elimination System
General or watershed permits.
Alternate or variable permit limits.
Performance requirements in lieu of limits.
TMDLs and watershed plans with trading
Trading under state regulations.
State revolving fund programs.
Conservation Innovation Grants.
The Formula for Success
Establish political support for a trading
Build stakeholder consensus and
recommendations for implementation.
Leverage programs and resources through
partnerships at the federal, state and local