Environment
9:30 am
Mon March 24, 2014

Market-Based Water Pollution Trading Begins in Ohio River Basin

Three energy companies are the first participants in a new program to trade water pollution credits in the Ohio River Basin.

Water quality trading is similar to market-based approaches like cap and trade. The idea is that large industries that release nutrient pollution into the Ohio River can buy credits, which are generated by other pollution sources. So if at some point a plant has to reduce nutrient pollution—like nitrogen and phosphorus—an industrial source could potentially pay money to avoid making drastic reductions, while a farmer downstream is paid to reduce the amount of nutrients he releases.

The first credit trading in the nation happened earlier this month in Cincinnati. Three electric utilities bought credits generated by agricultural operations, and then retired the credits. Environmental Protection Agency Deputy Administrator Bob Perciasepe says this was just a trial run, but he sees potential for water quality trading.

“You can have, in this case, agricultural reductions, but they have to be verifiable, there has to be transparency in the market and that has to lead to the credibility that these are real reductions,” he says.

Water quality trading has been controversial in the past. Critics—including the now head of EPA’s Assistant Administrator for Water Nancy Stoner, in her previous job at the Natural Resources Defense Council—have said it’s just a way of passing pollution around.

Perciasepe disagrees, and says there have to be overall pollution goals met regardless of where the reduction is.

“It’s just a matter of where you’re going to make the reductions and what’s the cost-effective way to do it,” he says. “You’re not going to come out flat. You’re going to have to get the reductions that need to be made to meet the water quality goals.”

Perciasepe says water quality trading could reduce pollution on a regional level—and help reduce the amount of nutrients that are sent down the Ohio River to the Gulf of Mexico, for example. But he says it may be less effective reducing pollution on a regional level.