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dam-l Market-Based Water Quality Management/LS
WASHINGTON, DC, May 24, 2000 - A new report released today by the World
Resources Institute (WRI) concludes that market-based approaches to water
quality management, including nutrient trading, can provide greater
improvements in water quality at much lower cost than traditional
regulatory approaches alone.
"As a more flexible form of regulation, nutrient trading can provide a wide
range of benefits to industry, communities, and even farmers," said Paul
Faeth, author of Fertile Ground: Nutrient Trading's Potential to
Cost-Effectively Improve Water Quality.
Despite the success of the Clean Water Act in reducing water pollution
through tighter regulations on industrial and municipal "point" sources of
pollution, there are still about 3,400 waterways in the US that are
impaired by nutrients, primarily nitrogen and phosphorus. Excess nutrients
are largely the result of "nonpoint-source" run-off from agricultural
fertilizer and animal waste. Such runoff can cause algal blooms that die
and leave too little oxygen in the water for fish and other species to
survive.
The "mahogany tide" now invading the lower Chesapeake Bay and its
tributaries, is an example of this sort of problem. The current bloom is
the largest in twenty years and has caused at least two major fish kills.
Faeth contends that further water quality improvements depend on developing
low-cost, innovative approaches that can effectively cut pollution from
agricultural sources, as well as making regulatory requirements more
economically feasible for point source dischargers.
The WRI report documents case studies in three watersheds of the Upper
Midwest: the Saginaw Bay in Michigan, the Rock River in Wisconsin, and the
Minnesota River Valley. The study compares the cost-effectiveness and
environmental performance of four different approaches to reduce levels of
phosphorus in the study sites:
· standard regulations on point sources,
· conservation subsidies for agricultural "best management practices",
· nutrient trading to meet a regulatory requirement for point sources, and
· nutrient trading combined with performance-based agricultural subsidies.
The study found that policies utilizing market-based approaches, such as
trading, were much more cost-effective in meeting regulatory limits for
nutrients in the waterways studied than conventional regulatory approaches.
Nutrient trading, when combined with agricultural subsidies that are tied
to reductions in nutrient runoff and subsequent improvements in water
quality, provided the greatest overall cost savings. According to Faeth,
"policy approaches using nutrient trading are dramatically less expensive
than those using conventional point-source performance requirements,
amounting to savings of up to 82 percent in the Michigan study."
Trading makes it profitable for sources with low treatment costs to reduce
their own effluents beyond legal requirements, generate a credit from the
surplus reductions, and sell these credits to dischargers with higher
treatment costs. This flexibility produces a less expensive outcome overall
while achieving-and often going beyond-the mandated environmental target.
With the option of trading to meet regulatory requirements, dischargers
like municipal sewage and industrial waste treatment plants can choose to
upgrade their facilities with technology designed to meet new requirements,
or to share in the cost of an upgrade of another facility that will exceed
regulated reductions. Thus, it generates a reduction credit for the first
facility -- a point-point trade.
Alternatively, a treatment facility might opt to pay farmers within the
same watershed to adopt conservation practices to reduce their fertilizer
runoff, thereby generating a credit for the treatment facility -- a
point-nonpoint trade. In both cases, each facility and the farmer save
money, while the new requirement is effectively met.
Trading has been successfully applied to achieve cost-effective reductions
in other areas of environmental concern, including lead, sulfur dioxide,
and other air emissions. In addition, trading is the leading option
proposed to address the build-up of greenhouse gas emissions that could
cause climate change.
"Conventional regulatory approaches to water quality management can work,
but they can be very expensive, and often don't target the biggest sources
of pollution" said Faeth, "Our report shows that trading could save a lot
of money in the watersheds we studied. With 3,400 waterways impaired by
nutrients in the U.S., we're going to need a cost-effective solution to
this problem."
Faeth also noted that great potential may exist for the use of nutrient
trading in large watersheds as well, such as the Mississippi River Basin
and the Chesapeake Bay. WRI is currently undertaking new research on the
potential for nutrient trading to address the "dead zone" in Gulf of
Mexico, caused by nutrient pollution from the Mississippi River. The
Institute will soon launch a new Website designed to facilitate on-line
trades among industry, communities, and farmers in six U.S. watersheds.
Contact: Adlai Amor, Media Director
Email: <aamor@wri.org> *Tel: (+1-202) 729 7707
The World Resources Institute (WRI) is a Washington, DC-based center for
research that provides objective information and practical proposals for
change to foster environmentally sound and sustainable development. WRI
works with institutions in more than 50 countries to bring the insights of
scientific research, economic analyses and practical experience to
political, business and nongovernmental organizations around the world. For
more information, visit WRI's website at: http://www.wri.org/wri
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Lori Pottinger, Director, Southern Africa Program,
and Editor, World Rivers Review
International Rivers Network
1847 Berkeley Way, Berkeley, California 94703, USA
Tel. (510) 848 1155 Fax (510) 848 1008
http://www.irn.org
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