Water Quality Trading Could Significantly Reduce Chesapeake Bay Cleanup Costs

According to the study, nutrient credit trading—allowing polluters to purchase reductions from other sources to help meet pollution reduction goals—could result in a 20 to 80 percent decrease in cleanup costs, depending on implementation.

Urban stormwater systems, sewage treatment plants, farms and other pollution sources near the Bay are required to reduce their nitrogen and phosphorus pollution in accordance with the federal Chesapeake Bay Total Maximum Daily Load (the watershed pollution allowance).

The study, which was sponsored by the Chesapeake Bay Commission, estimates that nutrient credit trading could cut as much as $1 billion a year from the costs required to upgrade sewage treatment plants and control stormwater pollution. Millions more could be saved by allowing communities and developers to pay farmers to plant trees or create wetlands to offset pollution caused by growth and new development.

“Our goal was to investigate the potential cost savings that could be achieved when considering different nutrient trading scenarios applied to the watershed as a whole,” said George Van Houtven, Ph.D., senior economist at RTI and lead author of the study. “Nutrient credit trading could deliver significant cost savings, which increase as more nutrient sources are allowed to participate in the program.”

The study projected that nutrient credit trading could reduce projected costs for upgrading sewage plants by between 20 and 50 percent. Communities required to control their stormwater pollution might see as much as an 80 percent cost reduction if they are instead allowed to pay farmers to adopt conservation practices that would capture nutrients before they can reach waterways.

The researchers caution that actual savings would vary among individual river basins and states based on cleanup options and availability of trading.

“The emphasis on potential savings is important for interpreting the results of this study,” Van Houtven said. “The estimates from our analysis represent the cost savings that could be achieved from trading under best-case conditions.”

The potential savings are particularly high when including urban sources, due primarily to the relatively high cost of controlling nutrients from urban stormwater runoff. The study also found that including many sources of nutrient trading has a greater impact on potential cost savings than does expanding the geographic scope of trading.

To account for uncertainties in conservation practices and to protect local water quality, the study factored in several limitations to the nutrient credit trading process. These include requiring that farm conservation practices generate two pounds of nutrient credits for each single pound of credits needed from other sources, limiting the total volume of trades between segments of the Bay watershed, and increasing the cost of farm conservation measures to include the expense of monitoring and verifying performance.

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