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Case Study Research on Offsets for Water Quality Management

This case study research highlights specific policy and program mechanisms for achieving reduced nutrient and contaminant loading and maximum co-benefits through offsets by examining six programs from Canada, the United States and New Zealand. 

Offset programs allow regulated dischargers that do not meet pollutant discharge limits to offset their excess loads against greater pollution reductions made elsewhere in the same watershed. Since sources in a watershed can face very different costs to control the same pollutant, offsets can enable cost-effective water quality improvements. 

In Manitoba, there are currently over 200 wastewater treatment facilities that discharge phosphorus and contribute to the nutrient overloading and eutrophication of Lake Winnipeg. Upgrades to these facilities are resource intensive, and the option of offsetting discharges against nonpoint sources in this agricultural region may provide higher nutrient reductions, create ancillary ecological benefits and nurture successful relationships between various stakeholders. 

The report discusses lessons for offsetting program design and implementation based on a review of the following programs:

  • Lake Simcoe Phosphorus Offsetting Program (Ontario, Canada)
  • South Nation Conservation water quality trading program (Ontario, Canada)
  • The Lake Taupō nitrogen trading program (Waikato, New Zealand)
  • Clean Water Services’ Tualatin River Program (Oregon, USA)
  • Erie P Market (Western Lake Erie Basin, USA)
  • Electric Power Research Institute Ohio River Basin Trading Project (Ohio, USA)

The programs demonstrate some range in parameters such as watershed size, pollutant types and stage of implementation. Most programs have been developed as a compliance option for point source discharges through partnering with nonpoint sources. Our analysis focuses on synthesizing common design and implementation elements, institutional setup, credit characteristics, transaction costs, verification procedures, and other protocols and mechanisms.