Economic solutions have been a solid tool for achieving environmental goals. Perhaps the most famous is the idea of power plants trading pollution credits, but there’s one for water that could benefit your farm.

USDA and EPA recently announced they are working together to support the development of water quality trading markets. These markets are expected to provide farmers and ranchers with new income opportunities, in addition to enhancing water quality and conservation.

In such a trading market, regulated entities or permitted emitters (electric utilities, wastewater treatment plants and industrial plants) could buy and use pollutant reduction credits generated by other sources (crop and livestock farmers) in a watershed. Participation in a water quality trading market is voluntary.


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The markets would provide a financial incentive to farmers and producers to reduce nitrogen and phosphorus pollutants beyond what is required by any law or other reduction target, which may be part of a watershed plan or total maximum daily load, says Ellen Gilinsky, EPA senior policy adviser.

“Any industries that have a permit that includes limits for a pollutant, such as nitrogen, phosphorus or even temperature, are potential buyers if the credits they can buy are cheaper than installing new technology to meet those limits,” Gilinsky says. If, for example, a wastewater treatment plant needs to reduce nitrogen to 200 pounds per year, but can only get to 100 pounds per year with existing technology, it could buy 100 pounds of nitrogen reduction credits from a producer who has implemented and verified best management practices, or BMPs, that reduce nitrogen input into the watershed by 100 pounds.