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Monday, May 10, 2021: Water Quality Credit Markets

We left off yesterday by talking about how low-tech process-based restoration of riverscapes could help solve the problem of agricultural runoff that causes the dead zone in the Gulf of Mexico.

OK, but this is where it gets interesting! Farmers could actually monetize wetlands by turning them into nutrient farms! Instead of growing crops, farmers could grow wetlands and make money doing it! Let me explain.

Under the Clean Water Act, any facility that discharges pollutants into U.S. waters needs a type of permit called a National Pollutant Discharge Elimination System (NPDES) permit. Permit holders must meet a certain water cleanliness standard that is set by the state and approved by the federal government. Facilities that hold permits include municipal wastewater, stormwater, and reclamation treatment plants, Concentrated Animal Feeding Operations, and public water supply treatment plants. The NPDES permit is good for five years and then the facility needs to reapply. Every few years, the standards are updated, and are in fact due for an update in the next six to nine months. So a facility that meets current standards will likely find itself needing to meet higher standards when its current permit expires. And it might not have the capacity to meet the new standard. What’s it going to do? The facility might pay a lot of money to upgrade its system. Or, it might purchase water quality credits.

You know about carbon credits, right? A carbon credit is a permit that allows the company that holds it to emit a certain amount of carbon dioxide or other greenhouse gases. The carbon credit is one half of a "cap-and-trade" program. The companies that have extra carbon credits sell them to the companies that don’t have enough carbon credits. Water quality credits operate along the same principle.

It’s already legal in the State of Illinois to sell water quality credits and it would help our state reach our water quality goals. The EPA is actively encouraging states to set up water quality credit markets. Water quality credit markets have already been successfully set up in other states.

So here’s what would happen (full disclosure; I’m not entirely clear on exactly how this will work). Farmers would convert a certain number of acres near the edge of the levee into wetlands. And then they would “farm” clean water, air, and soil. The water would get measured as it entered the wetlands, and it would get measured again as it went back into the river. The air and soil would also get measured. And because we already know that wetlands clean nutrients out of the water, we know that the farmers will produce water quality credits, which they can then sell to a facility that needs to buy water quality credits in order to meet the new NPDES permitting standards! Another possibility is that facilities that discharge water could lease the acres of wetlands from the farmer.

And get this: farmers will be able to earn $400 per acre per year from selling water credits, compared to the $100 or $200 per acre per year that they earn through conventional farming. Farmers could even go on a vacation!

Of course it does cost some money to convert farmland into wetlands, but low-tech process based restoration is designed to be cheap and scalable. And the state and federal government already have a variety of programs set up to help farmers reduce the amount of agricultural runoff, so there are systems in place to offer technical support, loans, and grants. Or the costs could get built into a lease to a water reclamation district, for example.

So that's it! That's the grand plan! The state would benefit environmentally, ecologically, and economically, and beavers who absolutely cannot be accommodated where they are causing a nuisance could be relocated to these new wetlands.

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