Water Quality Trading
Water quality trading is a market-based approach that states, tribes, and territories may wish to pursue as an effective means to attain water quality improvements. Water quality trading is an approach to control pollutants from multiple sources that collectively impact water quality conditions. When more stringent regulatory standards are put in place, water quality trading allows one source of pollution to control a pollutant at levels greater than required and sell "credits" to another source, which uses the credits to supplement their level of treatment in order to comply with regulatory requirements. Pollutant reductions achieved through water quality trading must result in water quality that is as good as—or better than—what would be achieved through treatment and must not create pollutant “hot spots.”
Water quality trading can encourage private investment capital, provide additional resources for conservation, and serve as a catalyst for developing innovative, practical solutions for improving water quality at a lower cost. Water quality trading has had a critical role in implementing TMDLs and other water quality-based NPDES permit requirements. For example, many municipal wastewater treatment plants across the country are seeing more stringent nutrient limits in their permits. Traditionally, those facilities would have to pay for new treatment technologies at the plant to meet the new limits. Water quality trading can allow facilities subject to strict requirements to purchase nutrient reductions from other treatment plants, farms, or other nutrient sources to achieve the same or better water quality outcome at a lower cost.
Water quality trading can provide greater flexibility on the timing and level of technology a facility might install, reduce overall compliance costs, and encourage voluntary participation of nonpoint sources within the watershed. Nonpoint source projects (e.g., streamside buffers, conservation tillage) installed as part of a water quality trade can provide other environmental benefits, such as reducing carbon emissions, reducing flood potential, stabilizing streambanks and providing wildlife habitat.