Rhetoric and Reality of Water Quality Trading and the Potential for Market-like Reform1

Stephenson, Kurt and Leonard Shabman, 2011. Rhetoric and Reality of Water Quality Trading and the Potential for Market-Like Reform. Journal of the American Water Resources Association (JAWRA) 47(1):15-28. DOI: 10.1111/j.1752-1688.2010.00492.x Abstract: Many public interest groups, government agencies, and professional economists argue that current approaches to water quality trading are a cost-effective, politically practical innovation for achieving water quality standards, in part by addressing one of the most difficult water quality improvement challenges – limiting the discharge from nonpoint sources. A critical analysis shows that these claims for current water quality trading programs are often unrealized. This rhetoric, without adherence to principles of market-like reform, can undermine the support of regulated parties for meaningful water quality policy reform, contribute to missed opportunities to implement cost-effective programs, and postpone successfully meeting the challenge of limiting nonpoint source discharges. A better understanding and application of market-like principles can result in an improved design of trading as well as general water quality management programs.