U.S. Geological Survey
Open-File Report 03-79
Version 1.0

Preliminary Preview for a Geographic and Monitoring Program Project: A Review of Point Source–Nonpoint Source Effluent Trading/Offset Systems in Watersheds

By Alexander Wood and Richard Bernknopf



Watershed-based trading and offset systems are being developed to improve policy-maker’s and regulator’s 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.

The motivation for investigating and reviewing the history of offsets and trading was inspired by a project in the preliminary stages being developed by U.S. Geological Survey Western Geographic Science Center and the Environmental Protection Agency Region IX. An offset feasibility study will be an integrated, map-based approach that incorporates environmental, economic, and statistical information to investigate the potential for using offsets to meet mercury Total Maximum Daily Loads in the Sacramento River watershed. A regional water-quality offset program is being studied that may help known point sources reduce mercury loading more cost effectively by the remediation of abandoned mines or other diffuse sources as opposed to more costly treatment at their own sites. An efficient offset program requires both a scientific basis and methods to translate that science into a regulatory decision framework.


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