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Lack of Water Quality Credit Markets

The EPA is actively encouraging states to set up water quality credit markets. Water quality credit markets have already been successfully set up in other states.

Under the Clean Water Act, any facility that discharges pollutants into U.S. waters needs a type of permit called a National Pollutant Discharge Elimination System (NPDES) permit. Permit holders must meet a certain water cleanliness standard that is set by the state and approved by the federal government. Facilities that hold permits include municipal wastewater, stormwater, and reclamation treatment plants, Concentrated Animal Feeding Operations, and public water supply treatment plants. The NPDES permit is good for five years and then the facility needs to reapply. Every few years, the standards are updated, and are in fact due for an update in the next six to nine months. So a facility that meets current standards will likely find itself needing to meet higher standards when its current permit expires. And it might not have the capacity to meet the new standard. What’s it going to do? The facility might pay a lot of money to upgrade its system. Or, it might purchase water quality credits. Or it might look to buy water quality credits. 

Water quality credits operate along the same principle as carbon trading. A carbon credit is a permit that allows the company that holds it to emit a certain amount of carbon dioxide or other greenhouse gases. The carbon credit is one half of a "cap-and-trade" program. The companies that have extra carbon credits sell them to the companies that don’t have enough carbon credits.​
There is even the possibility that landowners could convert land currently used for row cropping into "nutrient farms." Landowners could convert a certain number of acres near the edge of the levee into wetlands. And then they would “farm” clean water, air, and soil. The water would get measured as it entered the wetlands, and it would get measured again as it went back into the river. The air and soil would also get measured. And because it is already proven that wetlands clean nutrients out of the water, farmers will produce water quality credits, which they can then sell to a facility that needs to buy water quality credits in order to meet NPDES permitting standards. Farmers could earn up to $400 per acre per year from selling water credits, compared to the $100 or $200 per acre per year that they earn through conventional farming.
Find Out More About Water Quality Trading
Elements of Water Quality Trading
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