Watershed-based and Effluent Trading
This page is intended to keep interested people informed as to the basis and status of watershed-based trading, and effluent trading, throughout the United States. Key elements of watershed-based trading are basin-wide water quality analysis and evaluation, inventory of basin dischargers, facility best management practices (BMP), site monitoring, and cost-efficient effluent trading through markets and watershed optimization tools. The following projects address many vital effluent trading issues and are discussed in detail later in this section:
Watershed-based Trading Background
Lower Boise River Effluent Trading Demonstration Project
Acid Rain Program Sulfur Dioxide (SO2) Allowance Trading
Chesapeake Bay Nutrient Trading
EPA Water Quality Trading Policy
EPA Draft Framework for Watershed-Based Trading
Watershed-based Trading BackgroundWatershed-based trading has great potential for providing cost efficient pollution reduction in response to Total Maximum Daily Load (TMDL) requirements being established throughout the United States. Presently few tools exist to evaluate pollutant reduction costs throughout a basin although the establishment of TMDLs requires a basin-wide water quality investigation. While TMDLs imply a collective basin-wide responsibility for water quality, an operational basin-wide approach for cost-effectively paying for pollution reduction is yet lacking. Individual dischargers and stakeholders may understand their own particular effluent limitations and pollution abatement costs, but comparing those costs to other basin discharger costs is very difficult. An unfortunate outcome of this lack of information is that some dischargers may spend considerably more for the same pollutant reduction than another discharger in the same basin. Receiving water nutrient, temperature, biochemical oxygen demand (BOD) and other types of pollutant parameter trading opportunities may exist.
Watershed-based trading, or effluent trading as it is also called, provides an incentive for dischargers and other stakeholders to effectively communicate pollution reduction costs, and hence opportunities for water quality improvement, in the form of tradable water quality credits. Those dischargers that can most cost effectively reduce pollutants in their point or non-point discharges are able to generate tradable credits that can generate revenue. Other dischargers, less cost-effectively able to reduce their pollutant discharges, can purchase these credits and in effect gain the same pollution reduction at less cost than "going it alone".
In its most developed form, effluent trading would generate a marketplace bringing together basin dischargers and other stakeholders where water quality credits could be exchanged.
Most Recent Status Report of the LBRETDP (PDF file)
Chapters 5 through 8 describe several types of trading: point/point source and intra-plant trading, pretreatment trading, point/NPS source trading, and non-point/NPS source trading, respectively. These four chapters also address issues specific to each type in detail and are designed so they can be referenced individually. Regardless of your specific interest, a quick study of Chapters 5 through 8 will enhance your understanding of the concepts and issues presented in the framework.