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An enthusiastic study on Water Quality Trading recommends using “cap and trade” to control phosphorus levels in the Lake Simcoe watershed.

Lake Simcoe needs a major reduction in phosphorus loadings, even as population and climate change increase. The Lake Simcoe Protection Plan commits the province to complete a Water Quality Trading Feasibility Study under subsection 75 (1.9) of the Ontario Water Resources Act (OWRA), within one year. The Ministry retained a team, led by XCG Consultants Ltd, to undertake the study, which is out for consultation until April 3.

Water quality trading uses economic instruments to reduce the cost of environmental improvements.  In essence, it is a form of cap and trade for water pollution.  In the Lake Simcoe watershed,  farmers can often reduce phosphorus discharges much less expensively than most sewage treatment plants can. The idea is to allow point sources, such as municipal sewage treatment plants, to offset their own phosphorus emissions by paying farmers (and perhaps others) to reduce theirs.
Water quality trading can provide an incentive for non-point source contributors (such as farmers) to reduce their phosphorus loadings. It can also reward farmers for the ecological services they provide. Critics argue that it can be costly to administer, that there may not be enough trading to make a difference, and that it is difficult to verify the results.

XCG concludes that a phosphorous trading program in the Lake Simcoe watershed is feasible, and could have a meaningful impact on the Lake. I expect to see the province adopt the concept, perhaps before the next election.

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