Background

As states move ahead in their implementation of Total Maximum Daily Loads (TMDLs) and other water quality improvement measures, there is a heightened need for cost-effective means of improving water quality. Watershed-based trading is a potentially cost-effective and efficient approach to achieving and maintaining water quality goals and providing net water quality benefits through pollutant load reductions.

What is trading?

Trading is a stakeholder-oriented approach whose focus is on water quality within a given watershed. This approach can allow stakeholders to examine and include all sources of pollution in a watershed at once.

There are several approaches to trading, but they all share a number of characteristics. These include:

• Clean Water Act restrictions apply, including consistency with water quality standards and application of anti-backsliding provisions
• Point sources must meet applicable technology based requirements, and trades are developed within a TMDL or other equivalent analytical and management framework
• Trading areas generally coincide with watershed boundaries and are of a manageable size, and careful consideration is given to the types of pollutants considered for trading
• Trading programs have classically been applied in situations where nutrients are the pollutants of concern

Trading allows for and often encourages non-traditional partnerships from a number of sectors of the community, including utilities, agriculture and industry, although trading can be limited to a single sector as well. Trading programs are generally established at the state level, but local governments and stakeholders are the key players.

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