Can Water Quality Trading Help Us Address Our Growing Nutrient Challenge?

It is no secret that nutrient pollution is a significant problem affecting waterbodies across the United States.  Excess nitrogen and phosphorous are contributing to some of the largest algal blooms, fish kills, shellfish poisonings, and deadzones in the country. More than 60% of the rivers and bays in every coastal state are moderately to severely degraded by nutrient pollution. Unfortunately, however, most efforts to curb nutrient pollution have addressed only point source dischargers while leaving nonpoint sources unaddressed. This situation has occurred primarily because these nonpoint sources—like agricultural operations—are exempt from the water pollution control requirements of the Clean Water Act.

According to the U.S. Geological Survey and the U.S. Environmental Protection Agency’s water quality data, runoff and groundwater leaching from agricultural fields are the major sources of nutrient pollution impairing U.S. waters.  Yet we continue to focus on point sources at increasingly high costs and with diminishing environmental returns on investment. These high costs are occurring at time of huge funding gaps and massive regulatory burden on utilities, requiring utilities and other stakeholders to take more innovative, market-based and watershed-based approaches to dealing with a growing array of Clean Water Act regulatory requirements. 

The problem with continuing to focus on point sources is summarized in a recent article in Water World (written by Hannah Mellman, NACWA manager of legislative affairs):

This leaves the brunt of the work to mitigate nutrient pollution to the POTWs [publicly owned treatment works], which rely on expensive technology controls and upgrades to reduce their nutrient loadings. While these utilities strive for compliance, there are two problems with this model.

First, nutrient removal technology is extremely expensive. In the Chesapeake Bay for example, EPA recently issued a permit to the Blue Plains Wastewater Treatment Plant in Washington, D.C., requiring a further reduction in effluent nitrogen from just over five million to 4.7 million pounds per year. This nitrogen removal project will incur a capital cost of $900 million to ratepayers yet only result in a 0.4% reduction of total nitrogen flowing into the Chesapeake Bay.

And second, even if a utility is able to completely remove the nutrients from its discharge, it may not lead to sizable reductions in overall nutrient loads in waterways and improvements in water quality. [Water World article, page ?]

So what is the answer? The bottom line is that we need a more holistic watershed-based management approach that includes an option for market-based water quality trading:

[P]ermitted emitters like POTWs with high abatement costs could purchase equivalent nutrient reductions from a cheaper source, like agriculture, to help meet their regulatory requirements.

There are three main benefits to water quality trading. First, water quality trading has the potential to meet nutrient load requirements at lower overall costs. The cost to remove a pound of nitrogen or phosphorus from farm runoff and drainage is typically four to five—and sometimes up to 10 to 20—times less than the cost to remove the same amount from municipal wastewater or stormwater.

Secondly, the economic incentive created for farmers who engage in nutrient management activities means that water quality trading can potentially generate environmental benefits beyond those that would be achieved under traditional regulation, like wildlife habitat and floodwater control.

Finally, water quality trading helps move water quality control efforts towards a watershed-based approach, collectively addressing all sources and activities contributing to watershed degradation.

EPA’s 2003 Water Quality Trading Policy provides some guidance on developing and implementing a water quality trading program. Unfortunately, however, barriers remain that prevent states and interstate agencies from taking full advantage of this potentially powerful tool to improve water quality. Barriers include unclear language in the guidance and the complicated  total maximum daily load (TMDL) requirement: “Relying on a TMDL to establish a trading program is constraining and could hamper the development of new domestic markets.”

If we truly want to make progress in improving water quality in the United States, we need to be able to use as many options as possible. There is no one-size-fits-all approach. And water quality trading can play a significant role, particularly in areas like the Gulf of Mexico, where POTWs are only responsible for 12% of the phosphorus and 9% of the nitrogen delivered to the Gulf, compared to agricultural and range land, which is responsible for 80% and 71%, respectively. To that end, NACWA is working with EPA to ensure that water quality trading remains a viable option to achieving our Nation’s water quality goals.


This entry was posted in Clean Water Act, Nutrients, Water Quality Standards and tagged , . Bookmark the permalink.

One Response to Can Water Quality Trading Help Us Address Our Growing Nutrient Challenge?

  1. Pingback: Defending Water Quality Trading in Court—The Right Thing To Do | NACWA

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