Policy Brief

Removing Muck with Markets

A Case Study on Pollutant Trading for Cleaner Water


Regulatory restrictions on nutrient and suspended solid pollution have improved water quality in most U.S. watersheds. But many watersheds still suffer from poor water quality. A good example is Wisconsin’s Fox- Wolf River Basin where poor water quality remains a problem, especially due to phosphorus loading. Most of the gains in water quality have come from point-source reductions, which have now reached the stage of diminished returns and increased costs. Nevertheless, reducing point-source loads continues to be the target for stricter regulation. Market mechanisms to allow trading underneath a cap for both point and nonpoint sources offer a promising avenue to further and more practical improvements in water quality in the nation’s watersheds. The Fox- Wolf River Basin provides a good case study.