Water Pollution Control Policy: Addressing Non-Point Source Pollution

By Adib J. Rahman
2014, Vol. 6 No. 03 | pg. 1/3 |

Non-point source (NPS) pollution occurs when pollutants from many different and often difficult to track sources have a negative impact on air or water quality. Even though this type of pollution accounts for a substantial amount of water pollution in Canada, the problem has not been addressed as vigorously as point-source emissions (pollution from a single identifiable source). Traditional approaches such as emission standards are problematic because NPS emissions are difficult to control due to non-concentrated diffusion. They are also difficult to monitor because of weather-related issues. At present, Canadian provinces are responding to the increased awareness of the environmental damages from NPS and public pressure to ensure the safety of drinking water (Field, Olewiler, p.271). This pressure is in response to recent cases of water contamination such as the E. Coli contamination in Walkerton, Ontario in 2000 where half of the town’s residents had acute illness and seven died. However, problems still persist among many other parts of Canada regarding water-quality standards.

Unfortunately, command-and-control (CAC) policies such as technology-based effluent standards (TBS) provide more questions than answers. This is because TBS are not cost effective when MACs differ and so the equimarginal principle is violated and abatement costs are not equalized across emitters In this paper, I provide literature-based empirical evidence of the international experience with tradable water pollution permits (case studies from the US and Australia) and propose the implementation of tradable permits as a policy instrument in the context of NPS pollutants. The practical examples are presented according to different individual substances or parameters that have been the subject of trading systems (salinity and nutrient pollution) in the US and Australia. The existing institutional and regulatory settings of these countries, which are quite similar to Canada in governmental structure, are considered and lessons are drawn from these selected examples.

Example of non-point source pollution
An example of non-point source pollution (NPS): soil and fertilizer runoff after a rain storm will eventually enter the water supply.

1. Theoretical Background and Rationale

NPS emissions account for a substantial amount of water pollution in Canada and a uniform national program cannot address such diverse non-point sources as agricultural runoff, urban street runoff, and activities related to land clearance and building construction, as they significantly differ in marginal abatement costs (MACs) and marginal damages (MDs) across each rural/urban area (Field, Olewiler, p.271). While in many cases the regulatory command-and-control approach has led to the reduction in water pollution, only recently has there been a growing move from command-and-control to various economic incentive (EI) instruments (Kraemer et al. 2004). This is partly due to the fact that the cheapest and easiest-to-achieve point source reductions have occurred via regulatory command-and-control instruments, leading to an escalation of costs to meet tougher water quality standards. Moreover, NPS source pollution is not easily controlled by regulation (Kraemer et al. 2004).

The instrument of tradable permits is one of several EI instruments used in water management and pollution control. For point sources of pollution, a simple market works as follows. Each source is provided with a permit defining the level of emissions it may discharge, where aggregate allowable emissions for the watershed are determined by the policy maker based on some policy goal. A market is then created by letting firms redistribute emissions levels among themselves by buying or selling “allowances,” which are essentially authorizations to increase emissions (Ribaudo et al. 1999). For example, if firm A purchases an allowance from firm B, then firm A can increase its emissions by the amount specified by the allowance and firm B must decrease its emissions by the same level (Ribaudo et al. 1999).

Firms with initial emission levels greater than their initial permit holdings will have to either purchase more allowances or reduce emissions, depending on the relative cost of each method. Firms with higher marginal costs (MCs) of emissions reduction will purchase allowances from firms with a lower MC of emissions reduction. This sort of trading scheme makes it beneficial for firms with lower pollution control costs to reduce emissions by more than firms with higher control costs, reducing pollution control costs for the watershed as a whole.

Point-source allowance markets have been used for a number of years with varying degrees of success. (Ribaudo et al. 1999) Most successful has been the market for SO2 emissions allowances, which has significantly reduced firms’ compliance costs for meeting air quality regulations (USGAO, 1997). Based on this success of trading for air pollution control, developed countries such as the US began experimenting with water quality trading, including point source to point source trading, point source to NPS trading, and NPS to NPS trading (ADB 2011).

In the case of NPS pollutants, a market could be designed in which point sources would have the option of purchasing allowances from non-point sources to meet their emissions reductions requirements. Trading between point sources and non-point sources is possible when the pollutants are common to both sources (e.g., nitrogen and phosphorus), or when the effects of pollutants on expected damages can be used to determine appropriate trading ratios between different types of pollutants (Ribaudo et al. 1999). Costs of reducing agricultural NPS loads in a watershed may be less than reducing point-source loads, especially where point-source discharges are already being constrained by the National Pollution Discharge Elimination System (NPDES) permits of the Clean Water Act (Ribaudo et al. 1999).

Point/non-point trading is most feasible when both point and non-point sources contribute significantly to total pollutant loads (Bartfeld, 1993). If the NPS contributions are very large in relation to the point-source contributions, then the point sources will be unable to purchase enough NPS allowances to make much difference in water quality (Ribaudo et al. 1999). On the other hand, if point sources are very large in relation to the NPSs, savings from trading may not justify the administrative expense of a trading program (Ribaudo et al. 1999).

In general, experience with tradable discharge permits for water pollution control has been limited and primarily comes from countries with advanced economies such as the US and Australia. However, trading can be part of the answer to achieve better water quality (Faerth, 2000) as reflected in the positive results reported to date. The European Union (EU), which in some ways resembles a federation, provides another example. On occasion, the EU makes use of “bubbles”1; for instance, in the implementation of the Montreal Protocol on substances that deplete the ozone layer (Kraemer et al. 2004). Since Canada is a federal state and a developed country, it could emulate these countries that have a similar system of government and economic condition.

Water pollution permits can contain long lists of substances and parameters that have to be observed (Kraemer et al. 2004). Consequently, the trading systems for water pollution are in relation to individual substances and parameters (salt and nutrients). I present examples according to these different individual substances. The practical examples are based in the US and Australia – two main regions that have extensively applied this type of economic instrument for water pollution control. Information on these cases is based on two earlier reviews of the water-based tradable permits by Kraemer and Banholzer (1999) and Kraemer et al. (2002).

Suggested Reading from Inquiries Journal

This paper explores the role that ecosystems can have in the decision making framework for urban air pollution mitigation in Toronto, Ontario, Canada. The focus is on management planning of green roof implementation to mitigate the effects of urban air pollution. The importance of Toronto's impact on surrounding ecosystems, conservation... MORE»
 Overpopulation is often seen as the cause of China’s environmental problems. Those who support this theory argue that China cannot cope with the recent rapid growth in distributing resources to its population. This coupled with recent estimates about the continued growth of the nation create alarming forecasts for the resilience and sustainability of China’s environment. Robert Solow characterizes sustainability as “an injunction... MORE»
Access to water has been a major factor in international relations for many centuries, particularly in the Middle East and North Africa1, a region that can regularly run out of adequate water resources.2 After the emergence of nation-states in the region, many states created their own differing hydro-policies, creating an uneasy situation characterised by a lack of cooperation and a struggle for freshwater resources. Consequently, the conflict over... MORE»
In 1992 during his famed Southern Trip, Deng Xiaoping, the paramount leader of the Communist Party of China, proclaimed that "To Get Rich Is Glorious[1]." This slogan ignited the economic revolution in China. It is through this very notion of economic productivity and the search for wealth that China also adopted another motto &... MORE»
Submit to Inquiries Journal, Get a Decision in 10-Days

Inquiries Journal provides undergraduate and graduate students around the world a platform for the wide dissemination of academic work over a range of core disciplines.

Representing the work of students from hundreds of institutions around the globe, Inquiries Journal's large database of academic articles is completely free. Learn more | Blog | Submit

Follow IJ

Latest in Economics

2020, Vol. 12 No. 09
Recent work with the Economic Complexity Index (ECI) has shown that a country’s productive structure constrains its level of economic growth and income inequality. Building on previous research that identified an increasing gap between Latin... Read Article »
2018, Vol. 10 No. 10
The value proposition in the commercial setting is the functional relationship of quality and price. It is held to be a utility maximizing function of the relationship between buyer and seller. Its proponents assert that translation of the value... Read Article »
2018, Vol. 10 No. 03
Devastated by an economic collapse at the end of the 20th century, Japan’s economy entered a decade long period of stagnation. Now, Japan has found stable leadership, but attempts at new economic growth have fallen through. A combination of... Read Article »
2014, Vol. 6 No. 10
In July 2012, Spain's unemployment rate was above 20%, its stock market was at its lowest point in a decade, and the government was borrowing at a rate of 7.6%. With domestic demand depleted and no sign of recovery in sight, President Mariano Rajoy... Read Article »
2017, Vol. 9 No. 10
During the periods of the Agrarian Revolt and the 1920s, farmers were unhappy with the economic conditions in which they found themselves. Both periods witnessed the ascent of political movements that endeavored to aid farmers in their economic... Read Article »
2017, Vol. 7 No. 2
Published by Clocks and Clouds
In 2009, Brazil was in the path to become a superpower. Immune to the economic crises of 2008, the country's economy benefitted from the commodity boom, achieving a growth rate of 7.5 per cent in 2010, when Rousseff was elected. A few years later... Read Article »
2012, Vol. 2 No. 1
Published by Clocks and Clouds
The research completed aimed to show that the idea of fair trade, using the example of goals for the chocolate industry of the Ivory Coast, can be described as an example of the economic ideal which Karl Marx imagined. By comparing specific topics... Read Article »

What are you looking for?


The Career Value of the Humanities & Liberal Arts
Presentation Tips 101 (Video)
What is the Secret to Success?