Water quality trading: A conceptual framework for incorporating ancillary benefits

Abstract

Water quality trading (WQT) has been proposed as a mechanism for improving surface water quality goals in an economically and socially responsible manner. However, to date, successful markets for WQT have been slow to develop with many interested parties pointing to the need for aggressive regulatory enforcement of standards as a key requirement in the trading process. As regulations in the United States and many other countries typically apply to impaired waterways, the inherent problem with this as the only driver for trades is that little to no value is prescribed to raising water quality to above minimum standards. Because numerous studies have shown the economic value of improved ecosystem services and our own work with public surveys that demonstrated the importance of water quality, we hypothesize that an informed public (as well as aquatic ecosystem managers) will place additional value on water quality conditions that exceed minimum values. We present a framework for incorporating this concept into the WQT process that already includes essential elements such as trading ratios, uncertainty, and evaluation. We demonstrate the framework approach using a Streeter-Phelps dissolved oxygen (DO) model to address a recognized DO problem in the Jordan River in Utah, USA. It is recognized that this work represents the initial discussion of the process and that adaptive management of the complex processes will be needed in order to maximize the sustainable of water resources. The authors acknowledge the Division of Water Quality from the Utah Department of Environmental Quality for processing and providing inflow quantity and quality data from the original discharge monthly reports of the treatment facilities for Salt Lake County. Such data are provided as part of the University of Utah's Project Number 835866-01 funded by the U.S. Environmental Protection Agency (EPA). This work has not been formally reviewed by EPA. The views expressed in this document are solely those of the authors and do not necessarily reflect those of the Agency. EPA does not endorse any products or commercial services mentioned in this publication.