Frequently Asked Questions
Market-Based Approach is an initiative in environmental managment to cost-effectively protect and improve the environment by allowing polluters to trade emission permits or reduction credits. The usual approach is for the environmental authority to set a limit (cap) on the total amount of pollutant discharged into the environment. That total amount will be transformed into permits and then allocates to individual polluters. These permits are allowed to trade on the market and polluters can meet the mandated limit by installing wastewater treatment practice or by purchasing permits. Usually in the practice of water quality trading, reduction credit is used instead of permit. A reduction credit represents a unit of pollution reduced below the allowed level.[Back to top] [Back to top]
In general, sources of water pollution can be classified into two types: point source (PS) and non-point source (NPS). Point sources include those that discharge into receiving water through specific and identifiable conveyances such as pipes, ditches, and outfalls. Usually, municipal and industrial waste discharges fall into this category. In contrast, non-point sources are pollution sources that enter into receptors through flow paths that are unidentifiable or difficult to monitor.
As a major contributors to non-point pollution, agricultural practices cause soil erosion and run-off from farming and discharge such pollutants as sediment, nutrients (nitrogen and phosphorous), and pesticides. Compared to point sources, non-point sources are more difficult to manage through a regulatory process. Thus, although point sources have been heavily regulated in the US for over 25 years, only recently have NPS contributors begun to be regulated.[Back to top]
Nutrient, chiefly nitrogen, phosphorus, and potassium, fertilizes soil to promote plant growth. However, if soild are overfertilized, run-offs from farming fields by rainwater, melting snow, or irrigating water will transport the residuals of nutrients into receiving water body. The problem is nitrogen and phosphorus accrerate the algal production, which causes many water quality problems such as depleting dissolved oxygen in water neccessary for aquatic life.
Loading is a measure of the rate at which a pollutant like nitrogen or phosphorus, entering the receiving body. It is expressed in the amount of pollutant per unit of land area per unit of time. Examples of loading unit: pounds/ acre/ year; kilogram/ hectare/ yearCredit is to reflect the amount of loading below the mandated discharge limit. For point source, a credit is generated when a unit of loading is reduced below the limit. For example, an industrial plant can have 1000 credits if its loading is 1000 lbs below the limit. Howevever, for nonpoint source, the trading ratio "1:N" will give one credit for N units of loading below the baseline, which is the current discharge. The trading ratio reflects the uncertainty in nonpoint source reduction of pollution due to weather and other factors. In NutrientNet.EDU the trading ratio is 1:2. [Back to top]
There is no prerequisite knowledge other than a basic understanding on the water quality trading. Students can read the pdf file A Guide to Market-Based Approaches to Water Quality for a background on water quality problems and the environmental approaches[Back to top]
The page Getting Started will tell you the procedure for which a participant should follow before they can really involve trading.[Back to top]
If you are assigned as a point source, then you should find ways to get into compliance at least cost. Instead of installing water treatment equipment, they may find buying credits a better solution to save money. If assigned as a non-point source, you should find ways to have as much profits as possible. The tools that a participant can use in finding the best solution include buying and / or selling credits on the market in addition to alternative technology choices for reducing pollutant discharge.[Back to top]
Three market activities are available in NutrientNet: placing an offer (to sell/buy), bargaining, and accepting offers. You may find more information about these activities in NutrienNet on the page Trading Process[Back to top]