Understanding the role of trading in water quality management : based on U.S. experience

Abstract

This research demonstrates an overview of the performance of water quality trading programs currently implemented within the U.S. The role of trading in water quality management is identified through systematical comparisons of all possible aspects related to trading process, structure, and scale of existing water quality trading programs. The role of trading focuses on the output of achieving standard ambient water quality and on increasing the flexibility of water quality management to enhance effectiveness and accommodate economic growth. The trading encourages independent polluters to make pollution control decisions that best suit their own situations. The trading reduces overall operating costs and distributes equity on water pollution control abatements between point sources and nonpoint sources. The achievement of each program is mainly affected by various factors that include (a) the flexibility of trading rules and water pollution regulations, (b) the polluters' obligation and financial ability to meet regulatory requirements, and (c) the localized characteristics of water pollution problems and diversity of polluters in a watershed. Any water quality trading framework should promote the principle of simplicity, reliability and minimal costs.

(cont.) The recommended approaches for improving program implementation are to (a) shift towards a cap-and-trade system; (b) allow the execution of a multi-party permit; (c) establish a statewide trading policy; (d) set up a hybrid system (between tradable permit and tax/rebate system); and (e) test the practicality of a program on a smaller scale before actual implementation at a larger scale.