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Water Quality Trading Frequently Asked Questions

The following are questions that are frequently asked about water quality trading. We have used the experience that we have gained through the water quality feasibility study in the Bear River Watershed to provide answers to these questions.

Who benefits from water quality trading?

  • Land owners may receive extra funding for the installation of BMPs or feedlot improvements.
  • Point sources, who can use reductions acheived by other sources in the watershed as an alternative to costly upgrades to thier facilities.
  • The public, who will enjoy the many benefits of improved water quality in thier lakes and rivers.

Under what conditions will water quality trading work?

  • Where there is a "driver" that motivates facilities to seek pollutant reductions, usually a Total Maximum Daily Load (TMDL) or a more stringent water quality-based requirement in an NPDES permit.
  • Where sources within the watershed have significantly different costs to control the pollutant of concern.
  • Where the necessary levels of pollutant reduction are not so large that all sources in the watershed must reduce as much as possible to acheive the total reduction needed - in this case there may not be enough surplus reductions to sell or purchase.
  • Where watershed stakeholders and the state regulatory agency are willing to try an innovative approach and engage in trading design and implementation issues.

What factors influence success in watershed scale trading markets?

  • The pollutant to be reduced and the physical characteristics of the watershed.
  • The cost of pollutant control for the individual dischargers.
  • The mechanisms used to facilitate trading.
  • The ability and willingness of stakeholders to participate in trading.

What data and knowledge about the watershed and pollutant sources are required for water quality trading?

A basin profile that includes the following:

  • Loading estimates for point sources and nonpoint sources in the watershed.
  • Estimates of "delivery ratios," or the ratio of the amount of a pollutant contributed by a prticular source to the amount of that same pollutant that reaches a "compliance point" at which it will be measured and where a trade will be evaluated.
  • Information on the costs of reducing pollutant discharge from point sources and nonpoint sources.