Water quality trading in the Lake Winnipeg Basin: A multilevel architecture

Abstract

Excess nutrients or eutrophication are degrading freshwater bodies worldwide which is undermining human wellbeing. Some of the world's large lakes, such as Lake Victoria, Lake Tai and Lake Winnipeg, have become eutrophic due to excess nutrients from point and non-point sources. Novel approaches that can prevent excess nutrients from over fertilizing surface water bodies are required. Water quality trading (WQT) is a market mechanism that could cost-effectively provide a means to remediate eutrophication by reducing nutrient loads from point and non-point sources. This paper provides WQT design considerations to remediate water quality within large multi-jurisdictional basins by examining Lake Winnipeg which has become the most eutrophied large lake in the world due to excessive phosphorus loads. The multilevel architecture proposed is designed to simultaneously remediate water quality and encourage integrated water resource management. Inter-sub-basin trading allows for meeting a phosphorus load target for the lake while intra-sub-basin trading allows for meeting phosphorus load targets at the sub-basin outflows. The paper also provides regulatory frameworks (Boundary Waters Treaty, United States Clean Water Act, the Canadian Environmental Protection and the Canada Water Acts) and institutional support (International Joint Commission, United States Environmental Protection Agency and Environment Canada) required to manage an international WQT system within the Lake Winnipeg Basin. To reduce transaction costs a composite market with clearing house and exchange characteristics is likely best suited. By providing design considerations in the form of a multilevel WQT system, this paper makes a contribution towards WQT research within large multi-jurisdictional basins.