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EPA and USDA Pledge Actions to Support America's Growing Water Quality Trading Markets

Posted by Ann Mills, USDA Deputy Under Secretary for Natural Resources and Environment and Ellen Gilinsky, EPA Office of Water Senior Policy Advisor in Conservation
Feb 21, 2017

Cross-posted from the EPA Connect blog:

In September of 2015, EPA and USDA sponsored a three-day national workshop at the Robert B. Daugherty Water for Food Institute in Lincoln, Nebraska that brought together more than 200 experts and leaders representing the agricultural community, utilities, environmental NGOs, private investors, states, cities, and tribes to discuss how to expand the country’s small but growing water quality trading markets. Recently we released a report that summarizes the workshop’s key discussions and outlines new actions that we and others will take to further promote the use of market-based tools to advance water quality improvements.

Over the last decade, states and others have discovered that they can meet their water quality improvement goals through lower costs and greater flexibility by using a voluntary water quality trading program. Trading is based on the fact that sources in a watershed can face very different costs to control the same pollutant. Trading programs allow facilities facing higher pollution control costs (like a wastewater treatment plant or a municipality with a stormwater permit) to meet their regulatory obligations by purchasing lower cost environmentally equivalent (or superior) pollution reductions (or credits) from another source, including farms that use conservation practices to efficiently reduce the movement of nitrogen, phosphorus and sediment from their fields into local waterways. For example, Virginia’s nutrient trading program to offset stormwater phosphorous loads from new development has saved the Commonwealth more than $1 million in meeting state water quality goals while providing economic incentives to local agricultural producers to reduce soil erosion and runoff.

It’s a proven approach that creates new revenue streams for America’s farmers and ranchers while delivering significant environmental results.

While relatively few robust state and tribal water quality trading programs are in existence today, there is growing interest in markets as a tool for achieving water quality and ecosystem sustainability goals.

Our report summarizes the primary obstacles to market expansion and participants’ recommendations on how to simplify development of trading markets in their states.

It also captures the participants’ recommendations to the Administration on steps it can take to promote the use of environmental markets and water quality trading, which include:

  • Supporting a national dialogue series over the next three years, convened by the National Network On Water Quality Trading, to advance collective understanding of water quality program design, implementation, and operation across sectors and communities;
  • Increasing state awareness of water quality trading, through support of the Association of Clean Water Administrators working directly with state agencies;
  • Highlighting successful trading programs that have attracted private capital, or are otherwise financially sustainable;
  • Compiling a list of known, voluntary conservation program design frameworks that use market-like approaches;
  • Pursuing efforts to develop a national registry for water quality trading programs;
  • Forming a stakeholder group to develop a list of tools that meet the minimum requirements of the federal and state agencies that must verify trades Increase targeted stakeholder engagement; and,
  • Working with federal and state partners to actively engage in locations where increasing participation in market-based programs may result in more rapid nutrient decreases to address immediate problems such as harmful algal blooms.

These recommendations complement the USDA-EPA Water Quality Trading Roadmap and EnviroAtlas, products our agencies have jointly developed to simplify stakeholders’ efforts to establish their own trading markets.

States, communities, and farmers and ranchers who’ve championed this innovative idea are creating momentum for others to follow.  We look forward to supporting the expansion of these markets to help America more efficiently protect its water quality while supporting a vibrant agricultural economy in communities nationwide.

For more information, visit the USDA Environmental Markets website and EPA’s Water Quality Trading website.

Category/Topic: Conservation

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Comments

Elizabeth Nussbaumer
Aug 04, 2016

Contrary to the statement that water quality trading is allowing states to improve water quality, there is not a documented case of pollution trading that has resulted in cleaner waterways. Although these agencies point to Virginia and the Chesapeake Bay to support their claim, the Bay has seen no improvement in water quality in recent years and remains heavily impaired.

Water quality trading (also known as water pollution trading) is a deregulation of pollution controls under the Clean Water Act that have successfully cleaned our water ways for the past 40 years. Under these pay-to-pollute schemes, industries have finally found a way to evade meaningful and enforceable limits on their discharges. Food & Water Watch released a report last year based on over 1,000 documents obtained from two states where trading programs are already occurring: Pennsylvania and Ohio. They show a broken system of inherently unaccountable and highly questionable practices, through which agricultural operations such as factory farms will only continue to pollute our waterways, while power plants and other pollution sources that purchase credits will get to discharge more. To read the report, go to: http://www.foodandwaterwatch.org/insight/water-quality-trading-pollutin…

Ecosystem Marketplace
Aug 08, 2016

The Environmental Protection Agency identifies 15,000 water bodies struggling with nutrient-related impairments. Though still considered to be emerging, water quality trading is considered to be a cost-effective solution to this challenge because it draws funding from industrial and urban dischargers to pay for reductions in the countryside. Advocates say it can address hard-to-reach areas and unregulated activities like small-scale agriculture, which is exempt from regulatory oversight even though runoff from farmland is a big factor when it comes to nutrients flowing into lakes and rivers. The practice holds potential to involve farmers and implement best management practices on farmland. The National Water Quality Trading Alliance says that trading can broaden the field of stakeholders investing in water quality and produce additional environmental benefits such as wildlife habitat, land conservation, human health benefits and carbon reductions. The Alliance's founder and an environmental lawyer, Brooks Smith, says, "what we find in practice is that markets can help to advance restoration."

The Electric Power Research Institute's Ohio River Basin Trading Project is one example of a trading project making headway. It's helping small-scale farmers reduce their runoff and generate a revenue stream for doing so. Project developers estimate the program has reduced discharges by more than 100,000 pounds.

As noted, water quality trading is still emerging and by its proponents' own accounts, not a panacea. However, in order to solve the monumental challenge of pollution in US waterways, stakeholders will have to think past traditional approaches in order to achieve meaningful improvements.

For more information on water quality trading and the Ohio River Basin Trading project visit Ecosystem Marketplace: http://www.ecosystemmarketplace.com/articles/water-quality-trading-work…