Water Quality Trading in Ontario

Water pollution is a pressing issue in many of Ontario’s watersheds. The traditional regulatory approach to controlling this pollution is, on its own, insufficient. Designed for the regulation of municipal and industrial polluters, it has not been applied to reducing more dispersed pollution, such as runoff from farms. The traditional regulatory approach is also inefficient, focussing on means rather than ends, and on individual polluters rather than on the cumulative pollution in a watershed.

In recent decades, provincial regulators and conservation authorities have begun seeking complementary approaches to reducing water pollution. An increasingly popular alternative is Water Quality Trading (WQT). In a typical WQT system, a regulator sets a water pollution limit for a watershed and allows polluters within that watershed to find the most efficient ways to reduce overall emissions. Those with higher pollution reduction costs can purchase pollution credits from those with lower pollution reduction costs. WQT creates financial incentives to reduce pollution and spurs innovative methods of doing so.

This paper, by Richard McNeil, explores the benefits of WQT. It examines the theory behind WQT, reviews common practices where trading has been introduced, and identifies principles for effective programs. Finally, it presents two Ontario case studies: the South Nation River watershed, where WQT has been a success, and the Lake Simcoe watershed, where WQT is currently being considered.

To read the full paper, click here.

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