6.2.2. Effluent Trading (point-point)

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Effluent trading dates to the early 1980s, when the State of Wisconsin created a State-wide program to give sources such as wastewater treatment plants and pulp and paper mills added flexibility to meet state water quality standards through the trading of effluent rights. The first and only application of this authority is on the heavily-industrialized lower Fox River.

Analysis showed that the potential from trading was significant: $7 million annually or roughly one-half of anticipated compliance costs for BOD (biochemical oxygen demand) regulations. O'Neil (1983). The program that was implemented allows trading between point sources of rights to discharge wastes that increase BOD. Sources that control more than required under their discharge permit may sell those incremental right to sources that control less than is required. Strict conditions are imposed on would-be buyers of rights: trading of rights is allowed only if the buyer is a new facility, is increasing production, or is unable to meet required discharge limits despite optimal operation of its treatment facilities. Traded rights must have a life of at least one year, but may not run past the expiration date of the seller's discharge permit, at most a five year period. Since effluent discharge limits may change with each permit renewal, there can be no guarantee that rights that were traded in during one permit period would be available during subsequent permit periods.

The State initiated BOD trading programs on two rivers: a 35-mile stretch of the Fox River and 500 miles of the Wisconsin River. For administrative reasons, the Fox River was divided into three segments, the Wisconsin River 5 segments. The Fox River program includes 21 parties: five mills and two towns in each of the three administrative segments. Twenty-six parties are included in the Wisconsin River program. To date, trading under these programs has been disappointing, involving a single trade on the Fox River between a municipal wastewater plant and a paper mill. One reason for the limited activity is that dischargers developed a variety of compliance alternatives not contemplated when the regulations were drafted. Second, there were and remain questions about the vulnerability of the program to legal challenge, since the Clean Water Act does not explicitly authorize trading and the standards set by the State do not conform fully to the national policy of uniformity established in the CWA. Finally, as noted above, the State imposed severe restrictions on the ability of sources to trade.

Currently, the EPA is investigating the feasibility of extending point-point trading to San Francisco Bay, where copper discharges would be traded, and Tampa Bay, where nitrogen and suspended solids would be traded.

See EPA "Effluent Trading in Watersheds Policy Statement"

6.2.2. Effluent Trading (point-point)

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