- The Washington Times - Saturday, January 25, 2003

Cheers to the Environmental Protection Agency (EPA) for giving potential polluters a chance to trade pints of clean water for pints of even cleaner water through its recently announced Water Quality Trading Policy.
This innovative policy permits pollution to be better controlled by the setting up of a market mechanism in which reductions in pollutants receive a value and can be traded. "It allows one source to meet its regulatory obligations by using pollutant reductions created by another source that has lower pollution control costs," according to G. Tracy Mehan, assistant administrator for water in the EPA.
Part of the problem is that, unlike point sources of pollution, such as water-treatment facilities, non-point sources, such as small farms, are essentially unregulated when it comes to water pollution. That is despite the fact that they can discharge tons of nutrients (primarily nitrogen and phosphorous) and sediments.
However, by regulating their pollutants, such as by planting a stand of grasses that soak up nutrients or using non-till farming practices, farmers create a surplus of pollution-control credits, which can then be traded or sold to others. Pollution-control credits are also created by those dischargers already far exceeding existent pollution-control standards.
And that's one of the caveats, that existent EPA water-quality standards be met. Another is that all parties trading discharge credits be in the same watershed. Moreover, such trades cannot be used to delay the implementation of basic water standards.
The trading policy has two great advantages flexibility and local control. Once the basic parameters are in place, volunteering entities whether developers, municipalities or even specially designed trusts can enter agreements for any of the regulated pollutants. And, since the trades are within the same watershed, so are the benefits instead of abstract delight from atomic reductions, participants will be able to see (or even better, see through) the result.
This system already has been used to great effect in several trials around the country, particularly on Long Island Sound and in North Carolina's Tar-Pamlico Basin. In the latter case, recently examined by the Regulatory Studies Program at George Mason University's Mercatus Center, instead of spending $7 million on technical upgrades to reduce pollutants, the state is achieving the same results by spending $1 million on reducing non-point pollutants.
That's not too surprising, given the flexibility and efficiency allowed by the arrangement. Similar water-trading policies were studied by the Clinton administration, which estimated that the resulting nationwide cost savings would range between $658 million and $7 billion. It's not clear why the policy wasn't implemented then, but it's delighted environmentalists and conservationists. For instance, in a recently released scorecard on the Bush administration's environmental policy, the Political Economy Research Center gave the policy an A+.
Innovative as the policy is, the true action will have to come from the grass-roots. The water-trading policy is certainly something that states and local governments should take a clear-eyed look at.

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