Water Quality Trading in Integrated Hydrologic Framework

The U.S. Environmental Protection Agency (EPA) has been pressing for this type of approach since the promulgation of its Water Quality Trading Policy in 2003, the intent of which is “to encourage voluntary trading programs that facilitate implementation of Total Maximum Daily Loads (TMDLs), reduce the costs of compliance with Clean Water Act regulations, establish incentives for voluntary reductions, and promote watershed-based initiatives (U.S. EPA, 2008).” To our knowledge, ABSTRACT: This paper accomplishes three objectives. First, a novel hydrologic modeling approach is used to estimate (i) nonpoint source (NPS) loadings at the field level (rather than at the watershed or sub-watershed levels), and (ii) delivery ratios at the sub-watershed level (rather than being arbitrarily chosen). Second, our study area includes two receptor points (rather than the typical case of a single receptor point), therefore enabling us to demonstrate how multiple receptor points can be incorporated into a water quality trading (WQT) framework. Third, we develop a basin profile that can be used by regulators to identify specific trades, whether point-to-point, point-to-nonpoint, or nonpoint-to-nonpoint. The profile is operational, i.e., it is easily updatable with time-sensitive environmental and economic data, and can be generalized to any watershed. We then demonstrate how the profile can be used to assess potential trading opportunities. As a result, the paper provides an example of adaptive management of water quality in a large, predominantly agricultural river basin. KEY TERMS: water quality trading; delivered loads; abatement costs