Breaking Down Barriers: Priority Actions for Advancing Water Quality Trading

Water quality trading is a cost-effective way to meet clean water goals and deliver multiple benefits for people, fish, and wildlife. Yet, compared to other environmental markets (think: carbon offsets), interest and demand for water quality credit trading has been slow to catch on. A new report, “Breaking Down Barriers: Priority Actions for Advancing Water Quality Trading,” investigates what’s keeping water quality trading on the sidelines and proposes a detailed action agenda to help get water quality trading on the ground in more watersheds across the United States.

When designed well and combined with other approaches, water quality trading can increase flexibility and reduce cost for regulated entities trying to meet clean water permit requirements; spur watershed-scale coordination and investment in natural resource restoration; diversify revenue streams for agricultural producers; provide a vehicle for both public and private investments; and create new wildlife habitat or recreation opportunities for local communities.

The report is a product of the National Network on Water Quality Trading (“National Network”), a network of diverse organizations working to advance water quality trading in the United States.

The report’s action agenda is a multi-stakeholder plan to:

1. Simplify water quality trading program design and application.
2. Ensure state regulatory agencies have adequate capacity and resources to engage on water quality trading.
3. Clarify each administration’s and the U.S. EPA’s position on water quality trading.
4. Actively address real and perceived risks for buyers.
5. Identify and address risks of litigation.
6. Create guidance on trading for stormwater.
7. Build stakeholder relationships and trust.

The action agenda can help inform budgeting, grant-making, work-planning, and fundraising efforts for meeting clean water goals with water quality trading. And, it includes specific steps for  state regulatory agencies, U.S. EPA, credit buyers, and nonprofit or foundation partners to, for example, provide clarity around models that quantify credits, create templates that ease program design, offer realistic expectations around the time and expenses involved, and ensure grant-making programs are better designed to support trading program development, among other efforts.

“We think it should be faster and easier to build good, defensible programs that give permittees credit for investing in their watersheds, through trading and other types of market-based approaches. The suite of priority actions proposed in this report provide a path forward for breaking down the barriers that have kept water quality markets from advancing in the United States,” says Kristiana Teige Witherill, who facilitates the National Network on behalf of Willamette Partnership.

To inform the action agenda, the National Network conducted a four-part demand assessment to understand the barriers that keep credit buyers from pursuing new water quality trading programs or purchasing credits in existing markets. That analysis included:

• Over 50 stakeholder interviews on the barriers and opportunities that exist today.
• Review of lessons learned about demand drivers from other environmental markets in the United States.
• Examination of the timelines and decision-making processes associated with implementing water quality trading.
• Mapping the core predictors of demand for agricultural water quality credits and stormwater trading across the U.S.