Watershed-based trading and offset systems are being developed to improve policy-makers and regulators ability to assess nonpoint source impacts in watersheds and to evaluate the efficacy of using market-incentive programs for preserving environmental quality. An overview of the history of successful and failed trading programs throughout the United States suggests that certain political, economic, and scientific conditions within a temporal and spatial setting help meet water quality standards. The current lack of spontaneous trading among dischargers does not mean that a marketable permit trading system is an inherently inefficient regulatory approach. Rather, its infrequent use is the result of institutional and informational barriers. Improving and refining the earth science information and technologies may help determine whether trading is a suitable policy for improving water quality. However, it is debatable whether or not environmental information is the limiting factor. This paper reviews additional factors affecting the potential for instituting a trading policy.
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