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Title: Nutrient Credit Trading--a Market-based Approach for Improving Water Quality

item Delgado, Jorge
item Shaffer, Marvin

Submitted to: Environmental Science and Policy
Publication Type: Peer Reviewed Journal
Publication Acceptance Date: 6/1/2009
Publication Date: 6/30/2009
Citation: Lal, H., Delgado, J.A., Gross, C., Mckinney, S., Cover, H., Shaffer, M.J., Hesketh, E. 2009. Nutrient Credit Trading--a Market-based Approach for Improving Water Quality. Environmenetal Science and Policy. (doi:10.1016/j.envsci.2009.05.003).

Interpretive Summary: Water quality trading is an innovative, market-driven approach for improving water quality in a watershed framework. With this approach, the public and private partners work together constructively to achieve important ecological objectives. It is a mechanism for public and private investors to strategically focus resources to produce the greatest public benefits at the lowest cost; thus, resulting in the greatest ecological returns for the investments in resource conservation. It provides incentive for those who have access to low cost pollution reduction options to reduce their nutrient loads beyond what is required of them. They can then sell their excess credits to others who are unable to make reductions because of higher costs. It greatly reduces the cost of improving water quality. To make the market-based approach to conservation a reality, we need functional and robust tools with high degree of transferability across the nation. Tools such as NTT by the USDA- NRCS and Nutrient.Net by the World Resources Institute are specific examples of such efforts. These tools can evaluate and quantify benefits of conservation practices on the overall environment quality at the click of few buttons.

Technical Abstract: Farmers are getting financial rewards for implementing conservation measures on their farms. Industrial wastewater treatment plants are buying credits generated from these measures to meet their NPDES permit regulatory requirements. This is referred to as “water quality trading.” The treatment plants find it less expensive to pay agricultural producers to implement conservation practices than to upgrade or install new technologies at their plants, the producers get rewarded for their efforts, and the environment benefits in multiple ways including water quality, wildlife habitat, and carbon sequestration. This paper reviews the approaches to water quality trading, its current status of implementation around the nation, and different tools, including the Nitrogen Trading Tool (NTT) being developed by the USDA/ NRCS in cooperation with USDA-ARS Soil Plant Nutrient Research Unit to facilitate this process.