Clean Water Markets: A Policy Option for Georgia

September 15th, 2006 by Leave a Comment

By Kristin Rowles

Given a choice between two equivalent solutions to a problem, the rational choice is to select the least expensive option. Water quality trading, a hot topic around the nation, offers the regulated community this type of choice.

Traditional water quality regulations require wastewater dischargers to attain effluent standards on-site, usually by selecting from a narrow range of available technologies. Introducing a market-based water quality trading program expands the options available to the regulated community, including options that can achieve water quality standards – or surpass them – at a lower cost.

At a recent workshop in Perry, the Georgia Water Planning and Policy Center demonstrated how water quality trading could benefit Georgia . State lawmakers and others attending the workshop learned how market-based policies could be used to attain water quality goals in Georgia watersheds.

The Center’s research over the past five years into the possible use of water quality trading in Georgia watersheds provides a foundation from which effective water quality trading policies could be developed for this state.

Water quality trading programs are in place or in development in at least 70 watersheds in the nation. The concept is actively promoted across the nation by federal agencies including the Environmental Protection Agency and the Department of Agriculture.

The growing interest in using market-based policies for water quality stems, in part, from the success of Clean Air Act trading programs that have demonstrated that trading can be used to achieve environmental goals. Moreover, recent efforts to implement Total Maximum Daily Loads (TMDLs) are tightening water quality requirements and bringing the focus of water policy to the watershed scale. TMDLs set pollutant budgets that lay the foundation and create a regulatory incentive for water quality trading.

Water quality trading works by taking advantage of differences in treatment costs among pollution sources. The costs of pollution reduction are not uniform; each pollution source has different treatment costs. When water quality trading is an option, a discharger can choose between reducing its pollutant load and purchasing pollutant reduction credits from another source that has gone beyond its regulatory obligation and overcomplied with discharge standards.

For example, in Georgia , wastewater treatment plants could pay for pollutant reductions at upstream poultry farms to reduce watershed nutrient levels at a lower cost.

The primary benefits of water quality trading are lower costs and increased flexibility. Trading also accommodates new economic growth by allowing new plants to be sited in a watershed where TMDLs have capped pollutant levels. Without trading, the entry of a new wastewater discharge might be impossible. Trading accommodates an area’s growth while maintaining environmental quality.

Water quality trading is not water rights trading. Water quality trading focuses on the achievement of water quality goals, not the allocation of water withdrawal rights. Nor is water quality trading an alternative to regulation. It is not a stand-alone solution to water quality problems. Trading is used in conjunction with existing regulatory programs to improve flexibility, cost-effectiveness and results. This innovative approach offers the potential for substantial cost savings, provides flexibility, and it can provide supplemental environmental benefits.

Obviously, trading markets are affected by a broad range of economic, environmental, social and political factors. Implementation is complex, and the potential benefits can are realized when only trading is implemented under appropriate conditions. The Georgia Water Planning and Policy Center ’s research is helping to determine where those conditions exist in Georgia .

Water quality trading is not yet established in Georgia . In the coming years, however, new TMDLs will tighten water quality requirements and increase costs for wastewater dischargers in the state. More than half of the state’s rivers and streams that have been assessed only partially support or do not support water quality standards, and the costs of meeting those standards in Georgia will be high.

Any policy tool that can improve the cost effectiveness of water quality expenditures deserves serious consideration. As Georgia ’s Water Council works toward the development of its statewide water plan, water quality trading is a policy option that deserves to be included in the debate.

Kristin Rowles, a senior policy analyst with the Georgia Water Planning and Policy Center , wrote this commentary for the Georgia Public Policy Foundation.

The Georgia Public Policy Foundation is an independent think tank that proposes practical, market-oriented approaches to public policy to improve the lives of Georgians. Nothing written here is to be construed as necessarily reflecting the views of the Georgia Public Policy Foundation or as an attempt to aid or hinder the passage of any bill before the U.S. Congress or the Georgia Legislature.

© Georgia Public Policy Foundation (September 15, 2006). Permission to reprint in whole or in part is hereby granted, provided the author and her affiliations are cited.

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