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 focused on phosphorous reductions.

Who is working on Fox P Trade?

Fox P Trade was a three-year initiative led by the Great Lakes Commission in partnership with the USDA-Natural Resource Conservation Service (NRCS) and the Wisconsin Department of Natural Resources (Wisconsin DNR) to establish a water quality trading program in the Lower Fox River Watershed of Wisconsin.  Funding for Fox P Trade was provided by NRCS through the Great Lakes Restoration Initiative, which has identified the Lower Fox River/Green Bay as a priority watershed for targeted restoration efforts. The Fox-Wolf Watershed Alliance led efforts locally to promote Water Quality Trading in the Lower Fox River Watershed. At the completion of the Great Lake Commission’s work in September 2016, the Fox-Wolf Watershed alliance is now the lead organization.

Who is eligible to buy credits?

Any National Pollution Discharge Elimination System (NPDES) Permit holder in the Lower Fox River watershed is eligible to purchase credits. Conservation organizations, such as Land Conservancies, may also choose to purchase credits to incentivize stewardship.

Who is eligible to sell credits?

Non-Concentrated Animal Feeding Operation (CAFO) agricultural operations are eligible to generate and sell credits in most circumstances. NPDES permit holders may also be eligible to sell credits if they are below their current permit levels. A CAFO may only generate credits for pollutant reductions in “agricultural stormwater” not otherwise regulated by a WPDES permit and Nutrient Management Plan.


How does water quality trading improve the state of the watershed?

Fox P Trade employs a robust system of trade ratios to ensure that there is a net water quality benefit to the watershed. For every pound of credits traded, credit generators must reduce by at least two pounds the amount phosphorus discharged to waterways. The Freshwater Trust has created a video on how Water Quality Trading can improve a watershed.

Why is water quality trading important for the Lower Fox River watershed?

The Lower Fox River flows into lower Green Bay, both of which suffer from excessive sediment, nutrients, bacteria and heavy metal loads. Since 2012, the Lower Fox has been subject to a U.S. EPA-approved Total Maximum Daily Load (TMDL), which sets limits on the amount of Phosphorus (P) trading and Total Suspended Solids (TSS) that can be discharged into the Lower Fox River Watershed. Fox P Trade focuses primarily on P trading, hence the project name “Fox P Trade,”

Where can I find out more about water quality trading?

Building a Water Quality Trading Program: Options and Considerations is a good primary resource on Water Quality Trading published by the National Network on Water Quality Trading.

Extensive information on Water Quality Trading can be found at the World Resources Institute, the Electric Power Research Institute, and the United States Department of Agriculture Office of the Chief Economist and the United States Department of Agriculture Office of Environmental Markets

For information specific to Wisconsin refer to the Wisconsin Department of Natural Resources, and be sure to check out the resources in the Documents Library on this website.

What other water quality trading programs exist in the United States?
How do I get started with Water Quality Trading

Follow the links on this website to understand the steps you will need to take and contact the Fox Wolf Watershed Alliance.