Trading to Achieve Compliance Cost Effectively

by Brent Fewell; Charles Logue; David Primozich; G. Tracy Mehan; Mark Kieser; T. J. Mascia

May 1, 2015
Water quality trading capitalizes on economies of scale and pollution control-cost differentials among and between various pollution sources. Trading allows one source to meet its regulatory obligations using pollutant reductions, created more efficiently or cost-effectively by another regulated or unregulated source. In this way, trading creates incentives to improve water quality. Through trading, water quality standards remain the same, but efficiency is increased, costs decreased, and, under the right conditions, environmental benefits are multiplied -- at least for point-to-nonpoint trading. Increasingly, municipalities are exploring the application of trading principles to meet the challenges of stormwater management and compliance. Trading may be particularly useful in incentivizing green infrastructure retrofits on private property, such as rain gardens and green roofs. To the extent that trading accelerates adaptation of green infrastructure practices, the quality of urban and suburban life will be enhanced through heat island mitigation, energy savings, and aesthetics.

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