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Water: Water Quality Trading

Water Quality Trading - Water Quality Trading Toolkit for Permit Writers


1. What is water quality trading?
Water quality trading is a voluntary option that regulated point sources can use to meet their NPDES permit limits. Trading can accelerate water quality improvement and reduce compliance costs. Through water quality trading, facilities that face higher pollutant control costs to meet their regulatory obligations can purchase pollutant reduction credits from other sources that can generate these reductions at lower cost, thus achieving the same or better overall water quality improvement. In most cases, trading takes place on a watershed level under a pollutant cap (the total pollutant load that can be assimilated by a waterbody without exceeding water quality standards) developed through the Total Maximum Daily Load process or a similar type of water quality analysis that produces information on pollutant loadings and resulting water quality conditions. Water quality trading is focused on nitrogen and phosphorus though other pollutants may be considered for trading on a case-by-case basis.

2. What is the purpose of the Water Quality Trading Toolkit for Permit Writers?
The Water Quality Trading Toolkit for Permit Writers provides National Pollutant Discharge Elimination System (NPDES) permitting authorities with the tools they need to incorporate trading provisions into permits. The Toolkit also serves as the United States Environmental Protection Agency’s (EPA) first “how-to” manual on designing and implementing trading programs consistent with EPA’s 2003 National Water Quality Trading Policy and will be valuable to all stakeholders. The Toolkit will aid in improving the quality of and providing national consistency among trading programs.

3. What is covered by the Toolkit?
The Toolkit discusses in detail the fundamental concepts of designing and implementing trading programs, which include the relevant geographic scope, effluent limitations, and other factors involved in defining a credit. The Toolkit also includes five basic trading scenarios that walk the permit writers through the components of a permit where trading provisions can be incorporated. The scenarios feature hypothetical examples and sample permit language. Real-world examples are presented throughout the Toolkit and detailed case studies of existing trading programs are featured in the appendices.

4. Why is EPA issuing the Toolkit?
EPA is issuing this Toolkit to support implementation of water quality trading. In January 2003, EPA released its National Water Quality Trading Policy, which laid out a framework for trading under the Clean Water Act. EPA followed the Trading Policy with the 2004 Water Quality Trading Assessment Handbook, which provides guidance on how to determine whether trading is environmentally viable and financially attractive in a watershed. The Water Quality Trading Toolkit for Permit Writers builds upon these two documents and provides more detail regarding design and implementation issues.

Also, during the May 2006 Second National Water Quality Trading Conference, co-sponsored by EPA and USDA-NRCS, stakeholders expressed the need for more guidance on how to design and implement trading programs. The Toolkit is responsive to this need by expanding on EPA’s Trading Policy and providing real-life examples.

5. Who is affected by the Toolkit?
Trading is a voluntary program and therefore only those entities interested in designing and implementing trading programs are affected. These entities may include NPDES permit writers and permitting authorities, regulated point sources, the agricultural community and other nonpoint sources, and other watershed stakeholders.

6. How can I obtain more information?
The Toolkit is a web-based document and is accessible through the following link: http://www.epa.gov/waterqualitytrading/WQTToolkit.html

For general information about water quality trading visit EPA’s water quality trading website at: http://www.epa.gov/waterqualitytrading. For more on trading in your region, contact your EPA regional trading coordinator. Contact information is available on the web at: http://www.epa.gov/waterqualitytrading/contacts.html.

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