Abstract
Water quality trading (WQT) programs aim to efficiently reduce pollution through market-based incentives. However, WQT performance is uneven; while several programs have found frequent use, many experience operational barriers and low trading activity. What factors are associated with WQT existence, prevalence, and operational stage? In this paper, we present and analyze the most complete database of WQT programs in the United States (147 programs/policies), detailing market designs, trading mechanisms, traded pollutants, and segmented geographies in 355 distinct markets. We use hurdle models (joint binary and count regressions) to evaluate markets in concert with demographic, political, and environmental covariates. We find that only one half of markets become operational, new market establishment has declined since 2013, and market existence and prevalence has nuanced relationships with local political ideology, urban infrastructure, waterway and waterbody extents, regulated environmental impacts, and historic waterway impairment. Our findings suggest opportunities for better projecting program need and targeting program funding.
Highlights
Recent years have seen a ground-swell of bipartisan support for market-based environmental policies, such as water quality trading (WQT; e.g., [1,2,3,4]) programs
WQT markets are distributed across the country (Figure 1) with a wide variety of geographic boundaries and extents
We found that relationships with hydrological variables are mixed and unclear; increased length of riverine networks has a positive relationship with WQT market existence, yet a negative relationship with all other outcomes, including a strongly negative impact on the odds of having an operational WQT market (31%)
Summary
Recent years have seen a ground-swell of bipartisan support for market-based environmental policies, such as water quality trading (WQT; e.g., [1,2,3,4]) programs. Much of this interest has been driven by the political appeal and technology forcing potential of WQT and other environmental markets [5]. Bennett et al [9] documented nearly 100 water quality trading programs, with many of them created with funding support from the US Environmental Protection. While the prevalence of WQT markets has grown, the scholarly literature on WQT has exploded over the last decade.
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