What is Water Quality Trading?

Water quality trading is an innovative, market-based approach whereby credits are earned for reducing pollution that can be sold or traded. Water quality trading is based on the premise that sources in a watershed can face very different costs to control the same pollutant. It allows facilities facing higher pollution control costs to meet their regulatory obligations by

  • purchasing equivalent or larger pollution reductions from another source; or
  • taking action to protect or restore riparian areas, wetlands, floodplains and aquatic habitat to reduce the impact of pollutants.

In Wisconsin, credits for TSS/sediment, nutrients or other non-toxic pollutants can be sold or traded so long as the total pollution being released does not exceed legal limits (e.g., set by the state). In this way, the same water quality improvement is achieved (regulatory obligations are met) at lower overall cost. See Wisconsin DNR Water Quality Trading Guidance (August 2013). In the case of the Lower Fox P Trade project, the trading will focus on phosphorous reductions.