Wisconsin's Water Quality Trading

Overview

Overview

Water quality trading (WQT) may be used by Wisconsin Pollutant Discharge Elimination System (WPDES) permit holders to demonstrate compliance with water quality-based effluent limitations (WQBELs). Generally, water quality trading involves a point source facing relatively high pollutant reduction costs compensating another party to achieve less costly pollutant reduction with the same or greater water quality benefit. In other words, water quality trading provides point sources with the flexibility to acquire pollutant reductions from other sources in the watershed to offset their point source load so that they will comply with their own permit requirements.

Guidance is available to assist participants in developing a successful trading strategy. Technical information as well as permitting information is available in the Guidance for Implementing Water Quality Trading in WPDES Permits [PDF].

Water Quality Trading Clearinghouse

Act 151 passed during the 2020 legislative session creating an additional approach for buying and selling water quality pollution credits through a central clearinghouse. Act 151 statutory language can be found online at: https://docs.legis.wisconsin.gov/2019/related/acts/151.

The law requires the Department of Administration (DOA) to contract with a third party to operate as the single water quality trading clearinghouse in Wisconsin for the purpose of buying and selling water quality pollution credits. The solicitation process took place throughout 2020 and 2021. DNR worked collaboratively with DOA to complete the following steps:

1. Request for Information – DOA released a series of questions intended to gain market perspectives and stakeholder input on critical information for the selection process. Responses were then used to draft a Request for Proposals. The Request for Information was released on 9/1/2020 and closed on 9/18/2020.
2. Request for Proposals (draft notice period) – A preliminary Request for Proposals was shared. Comments were accepted on the Request for Proposals document and were considered when finalizing the document. The draft Request for Proposals was released on 7/7/2021 and the public notice period ended on 8/4/2021.
3. Request for Proposals (final) – The final Request for Proposals instrument was shared for solicitation.
4. Successful Proposal – Wisconsin Clearinghouse LLC’s proposal was selected based on the scoring process completed by external stakeholders, DNR staff, DATCP staff and DOA staff.
5. The selection process was finalized on 3/20/2023 with DOA executing a contract with the clearinghouse pursuant to s. 16.9685, Wis. Stats.

Wisconsin’s centralized water quality trading clearinghouse is intended to offer WPDES permit holders a streamlined approach for acquiring water quality credits to comply with water quality-based effluent limits. Wisconsin Clearinghouse LLC, as the state’s contracted clearinghouse under s. 16.9685, Wis. Stats., offers a variety of services related to water quality trading. These include establishing pollution-reducing projects, verifying credit amounts with DNR, maintaining a bank of credits for sale, and selling credits under contract. Wisconsin Clearinghouse may offer other trading-related services as well. Parties interested in purchasing or selling credits should contact Wisconsin Clearinghouse at:

     Email: admin@wiclearinghouse.org

     Phone: 608-844-3691

     Website: WIClearinghouse.org

Note: the availability of a clearinghouse does not preclude the use of other means to acquire water quality credits.

Water quality trading vs. adaptive management

Although similar, water quality trading is not the same thing as adaptive management. Water quality trading can be used to comply with limits for a range of pollutants, whereas adaptive management focuses on compliance with phosphorus or total suspended solids WQBELs solely.

Phosphorus trading and adaptive management may appear similar because both options allow point sources to take credit for phosphorus reductions within the watershed. Because the practices used to generate phosphorus reductions may be the same, these compliance options are often confused with one another.

Adaptive management and water quality trading have different permit requirements, however, making them different from a permitting and timing standpoint.

• Adaptive management and trading have different end goals: Adaptive management focuses on achieving water quality criterion for phosphorus or total suspended solids in the surface water; trading focuses on offsetting phosphorus from a discharge to comply with a permit limit.
• Monitoring: Because adaptive management focuses on water quality improvements, in-stream monitoring is required under adaptive management; this is not required under trading.
• Timing: Practices used to generate reductions in a trading strategy must be established before the phosphorus limit takes affect; adaptive management is a watershed project that can be implemented throughout the permit term.
• Quantifying reductions needed: Trading requires trade ratios be used to quantify reductions used to offset a permit limit; the reductions needed for adaptive management are based on the receiving water, not the effluent, and trade ratios are not necessary in this calculation.
• Eligibility: Adaptive management and trading have different eligibility.

For more information about adaptive management, read the adaptive management handbook [PDF].

History

History

In Wisconsin, legislative action in 1997 created three pilot areas for water quality trading to occur. These pilot areas were the Red Cedar River Watershed, the Fox and Wolf River Basin and Rock River Basin. A successful phosphorus trading program was implemented in the Red Cedar River Watershed resulting from this opportunity. However, many facilities chose to comply with technology-based phosphorus limits at their facility, rather than utilizing trading, for economic reasons.

Now that facilities face more restrictive water quality-based effluent limits for phosphorus and other pollutants, water quality trading may be a more economically preferable compliance option than facility upgrades or other compliance options. Additional legislative action occurred in 2011 to expand water quality trading throughout the state, and to provide the backbone of the water quality trading program currently available. See s. 283.84, Wis. Stats., for more details on Wisconsin's regulatory framework for water quality trading.

There are several other active and historic trading projects that have occurred throughout the nation; mainly occurring in watersheds with U.S. EPA-approved Total Maximum Daily Loads (TMDLs).

Implementation

Implementing a trade

Water quality trading is not a governmentally mandated program or regulatory requirement, but rather a market-based tool that enables some facilities to meet regulatory requirements more cost-effectively. Learn more about tools for implementing water quality trading.

The following guidance document is available to help describe the regulatory and procedural requirements of water quality trading.

• Guidance for Implementing Water Quality Trading in WPDES Permits [PDF] was developed to inform interested parties about water quality trading with an emphasis on trading protocols and implementing trading into Wisconsin Pollutant Discharge Elimination System permits. This document also contains information pertaining to developing a water quality trade.

Once you have selected water quality trading as your preferred compliance option, submit the Notice of Intent [PDF] to your local DNR wastewater engineer, specialist or water quality trading coordinator and begin developing the water quality trading plan.

Forms

Several forms have been developed to streamline and organize record keeping and data submittals to the DNR regarding trading.

Note: If you are having problems opening forms, visit PDF Help.

Additional resources

Additional resources

• Map of project locations
• Water quality trading fact sheet [PDF]
• Statewide phosphorus multi-discharger variance
• Frequently asked questions about phosphorus regulations
• Tools for implementing adaptive management and water quality trading