A Trade Off For Clean Water

On February 6, 2019, the U.S. Environmental Protection Agency (EPA) issued its updated Water Quality Trading Policy (Updated Policy). The Updated Policy is an effort to respond to a growing environmental crisis — the over-enrichment of freshwater and coastal ecosystems with nutrients (nitrogen and phosphorus). Sources of nutrients include agriculture run-off, sewage treatment plants, and urban and suburban storm water. Reducing certain nutrients in water is one of the nation’s most challenging environmental issues.

At its most basic principle, “[w]ater quality trading … allows one source to meet its regulatory obligations by using pollutant reductions created by another source that has lower pollution control costs.” By way of example, under a trading program, a permitted facility facing higher pollution control costs may be able to meet its regulatory obligation by purchasing environmentally equivalent (or superior) pollution reductions from another source at lower cost. The Water Quality Trading Policy therefore provides an alternative to installing expensive technology to meet requirements of the federal Clean Water Act. Water quality trading is basically an economic trade between pollutant sources.

Turning back to the Updated Policy — EPA hopes the update will provide more flexibility to the regulated industry in complying with the Clean Water Act and ultimately result in improvements to water quality. The Updated Policy – the first in about fifteen years — promotes creativity and innovation to facilitate widespread implementation. While the wastewater industry welcomes these new creative based options, environmental groups remain cautious but optimistic. A new option for credit banking is generating the most concern since it could lead to regulated entities banking credits that could apply once to a significant single year discharge.

While the Updated Policy is big on creativity and less about regulatory requirements, the challenge will be to find the right balance to improve water quality.