Nitrogen and phosphorus run-off from agricultural operations are among the biggest polluters of waterways in the United States. In January 2003 the U.S. Environmental Protection Agency announced a new water quality trading policy. The policy calls for the use of economic incentives to meet water quality goals. It allows pollution sources, such as industrial and wastewater management facilities, to meet more stringent regulatory obligations by purchasing offsets or credits from facilities exceeding their mandated water quality standards or from non-regulated sources, like family-owned farms. For example, waste treatment plants could pay farmers within the same watershed to adopt conservation practices to reduce their nutrient run-off, thereby generating a credit for the treatment facility.
In making the announcement, EPA formally credited a WRI study—Fertile Ground: Nutrient trading’s potential to cost-effectively improve water quality. Coupled with an on-line trading resource called NutrientNet (http://www.nutrientnet.org/), WRI’s work on nutrient trading provides a blueprint for developing water quality trading programs.
An additional study by WRI in 2003, Awakening the Dead Zone: An investment for agriculture, water quality and climate change, further showed nutrient trading to be the most cost-effective solution to the “Dead Zone” in the Gulf of Mexico. The Dead Zone is a phenomenon where nutrient pollution, largely from agricultural operations, causes oxygen levels to drop below what is necessary to sustain most marine life. The study also found nutrient trading had significant environmental benefits for climate change.
