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China’s freshwater lakes are at risk. Despite years of rehabilitation efforts, four-fifths of the nation’s major lakes are deemed polluted and nearly 60 percent also suffer from eutrophication problems. One of those lakes is Chao Lake in Anhui Province. Due to excessive nutrient (nitrogen and phosphorus) enrichment, harmful algae blooms frequently occur in the lake, rendering water quality unsuitable for human consumption and other uses.

Various studies suggested the agriculture sector is a major contributor to Chao Lake’s water quality degradation. However, past remediation efforts are mostly focused on urban point source control, while little attention has been paid to the agriculture sector. Meanwhile, unlike industries or urban wastewater, agriculture nonpoint sources have largely escaped from direct regulation and can’t be simply addressed by command-and-control schemes.

Globally, agricultural discharges can generally be reduced at lower cost than discharges from municipal or industrial point sources. Water quality trading programs that allow point-to-nonpoint trades may leverage point-source regulatory requirements to generate reductions from unregulated nonpoint sources, and improve environmental quality in a cost-effective manner. It could become part of a new, more cost-effective and efficient strategy for improving the water quality of the Chao Lake.

WRI aims to advance market-based mechanisms, such as water quality trading, and help Chinese decision makers reduce nutrient pollution in a more cost-effective way.

Specifically, WRI:

  • determines the feasibility of a nutrient trading program between point and nonpoint sources in the Chao Lake basin.

  • identifies institutional, policy, and capacity challenges.

  • develops recommendations to bridge these gaps to cultivate the water quality trading market while enhancing pollution control in the Chao Lake basin.

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