Environmental Trading Network

Technology-based effluent limitations alone are not capable of achieving and maintaining water quality standards across the Great Lakes. Despite significant reductions in the discharges of pollutants under existing regulations, there are many areas in the Great Lakes region which are threatened by cultural eutrophication. These include Green Bay and the Fox River in Wisconsin, the Kalamazoo and Saginaw River basins in Michigan and the Bay of Quinte in Canada. Market-based environmental programs such as water quality trading have the potential to optimize the cost of reducing nutrient loadings while accommodating population growth and economic development. Water quality trading programs raise fundamental policy issues such as equity, banking, baselines, accountability and equivalence. If these issues can be resolved, trading may prove to be a vital instrument for facilitating community-based watershed management plans, the implementation of TMDLs required under Section 303(d) of the CWA, and voluntary nonpoint source reductions.

A number of states in the Great Lakes region and across the country have conducted studies and demonstration projects to evaluate the potential environmental and economic benefits of market-based environmental programs, such as water quality trading. These include the point/nonpoint trading program for the Green Bay Remedial Action Plan (Northeast Wisconsin Waters For Tomorrow, 1994), the Dillon Bubble (Kashmaniam et. al., 1986) and Cherry Creek (Apogee Research, Inc., 1992) projects in Colorado , the Tar-Pamlico River Basin program in North Carolina (Hall and Howett, 1994) and the recent Rahr Malting Company trade in the Minnesota River. A number of studies have also been conducted to evaluate the potential for point/point source trading (Industrial Economics, 1993). These include the Fox River program in Wisconsin and a study to evaluate the economic feasibility of trading between steel mills on the Monongahela River in West Virginia. The Illinois Environmental Protection Agency conducted a feasibility study of market-based approaches for reducing pollution and concluded that pretreatment trading offers one of the more promising areas for development (IEPA, 1995). Although a number of states are developing water trading programs there has been no organization or clearinghouse to exchange information.

The Environmental Trading Network (ENVTN) was established to provide a forum to discuss, and coordinate the exchange of, information pertaining to the development and implementation of market-based environmental programs such as water quality trading across the region. The ENVTN will maximize the regional impact of the Kalamazoo River Water Quality Trading Demonstration Project (Kalamazoo Project), a point/nonpoint source phosphorus trading pilot project. The ENVTN will be used to share information and lessons learned from the Kalamazoo Project and other existing and emerging trading programs across the country.  Information obtained through the ENVTN may be incorporated into the design and technical elements of the Kalamazoo Project. The ENVTN will provide a forum to identify and discuss alternatives for key policy and program issues related to the development of a transferable statewide trading program. These issues will include: open vs closed trading strategies, voluntary vs mandatory programs, integration with National Pollutant Discharge Elimination System (NPDES) permits and total maximum daily loads (TMDLs). Nutrient trading market design components will include: banking, credit life, currency, baselines and trading ratios.

The regional benefits from the ENVTN include: establishing regional partnerships to promote market-based programs, encourage voluntary agricultural and urban nonpoint source programs, increase public awareness and to generate information to facilitate watershed management initiatives. The ENVTN will also provide information which may be used by other states and USEPA to evaluate policy issues, strategies, institutional infrastructures and designs for water quality trading programs. Market-based programs have the potential to facilitate implementation of the federal Clean Water Act, improve or maintain water quality while accommodating growth, and may be used to regulate development and land use planning.

The regional impacts will be strengthened by networking with environmental groups, the United States Environmental Protection Agency (EPA), and other Great Lake states. This will be accomplished through conferences, periodic conference calls and providing an opportunity to provide input and comment on the final project report. Efforts will also be made by the Michigan Department of Environmental Quality to tie this project to other Great Lake initiatives. 

Environmental Trading Network Website