Introducing credits for water quality
Similar to the trade in carbon credits, a scheme in the United States based on an agreement between the Environmental Protection Agency (EPA) and the U.S. Department of Agriculture (USDA) allows for the trade in water quality credits. The policy was introduced in 2003, allowing for example industrial sources of pollution to buy credits from farmers that are improving water quality through measures of conservation on their farms. Some federal states such as Ohia and Virginia have recently implemented regulations that are aiming to encourage this market-based approach towards the improvement of water quality. [1]
Purchasing the right to pollute
Just as purchasing carbon credits means purchasing the 'right' to a certain amount of carbon emissions, the scheme of water quality credits means that industry can pay money to meet its requirements for example to discharge pollution into rivers. The approach is centred around the fact that some stakeholders - such as farmers - will promote conservation of these rivers through actions like planting riparian margins to filter their farms' run-off. In very basic terms this means that whenever water quality is improved, farmers are allowed to sell a certain amount of 'pollution rights' to others.
An economic approach to an environmental problem?
By making pollution costly, and putting a financial reward on acts of conservation, promoters of the trading scheme say environmental protection can be integrated with free market mechanisms. It is said that thereby conservation can be made (more) cost-effective. According to the USDA, "water quality credit trading is a market-based approach to lowering the costs of reducing pollution, and has the potential to engage more farmers and ranchers in water quality improvement efforts through the implementation of more conservation practices on agricultural lands." [2]
By enabling individuals or companies engaged with conservation to benefit from the measures that they put in place, the protection of the environment can thus be transferred from a rather altruistic move to something that can generate financial gains while putting a price on adverse behaviour.
Carrot and stick - not a silver bullet, but an idea with room for improvement
Whether such a market-based approach to conservation is indeed the best way to proceed will, at least in the case of water quality in the United States, have to be proven in time. Since it is a relatively new scheme, conclusions are yet difficult to make. One certainty, however, is that water quality, especially the quality of freshwater, is a pressing issue of global importance. It is the most valuable resource we have, as everyone needs access to clean drinking water. Many livelihoods and industries also depend on clean streams, rivers and lakes.
At the same time, water quality is often poor or worse, with many rivers polluted or on the verge of drying out. A cause of this is frequently pollution and overuse by agriculture and industry, which makes any attempt to protect these environments particularly vulnerable to economic interests. Therefore, a working scheme of economic incentive to improve water quality combined with a direct cost of pollution may be developed into an effective way of moving towards better processes of conservation. In the end, unfortunately, it is all about money.
Sources
[1] Abdalla et al., 2007, Water Quality Credit Trading and Agriculture: Recognizing the Challenges and Policy Issues Ahead, American Agricultural Economics Association.
[2] USDA, 2012, USDA Announces Funding for Water Quality Markets, Seeks Proposals for Projects, USDA Press Release
Hannah Mueller - Strive to expand your knowledge every day. Hannah is a young environmental professional based in New Zealand.
Join the Conversation