Can Water Quality Trading Fix the Agricultural Nonpoint Source Problem?

Abstract

Policy analysts and government agencies promote a particular form of what they term water quality trading as a means to address the most vexing obstacle to meeting water quality standards: reducing nutrient pollutants from agricultural nonpoint sources. However, agricultural nonpoint sources’ participation in water quality trading programs will only make limited contributions to lowering overall pollutant loads. We argue that economists need to more clearly articulate the limitations of current and proposed water quality trading programs as a water quality management strategy. A new generation of market-like incentive policies will be necessary to make significant progress in reducing agricultural nonpoint source loads.