Water Pollution

Pollutant trading has been touted within and outside the Environmental Protection Agency (EPA) as an economical supplement to traditional water pollution regulation. Under this approach, dischargers of pollution help determine how their collective discharges--everything from effluent from sewage treatment plans to runoff from construction sites--can be cut to preapproved levels in a cost-effective way. While EPA is beginning to address some of the barriers to pollutant trading, several questions must be resolved before this technique is used widely. Pollution trading to control water pollution has thus far been confined to four projects nationwide. This limited activity is largely due to uncertainties surrounding its use, including how best to administer, monitor, and enforce trades. EPA could play a valuable role in this regard by helping institute demonstration projects to test alternative trading approaches. The agency could then share lessons learned from these projects in the form of specific, detailed guidance to others. Congress could help overcome reservations about trading's legal status by passing legislation to explicitly authorize trading under the Clean Water Act.

GAO found that: (1) pollutant trading has been confined to four localized efforts to address water pollution; (2) three projects provide for trading between point and nonpoint sources, and the fourth project permits trading only between point sources; (3) in the one trade so far, a point source installed sewers to control nonpoint-source pollution and received a discharge credit; (4) impediments to wider use of pollutant trading include its ambiguous legal status under the Clean Water Act and complexities surrounding a workable trading systems; (5) institutional structures, adequate data, and enforcement mechanisms are needed to establish wider use of pollutant trading; and (6) EPA has begun to address barriers to trading and is considering drafting guidelines to encourage pollutant trading.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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