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August 17, 2003

In Brief:

“No swimming” signs popped up at some of Manitoba’s beaches this summer.
Excessive inputs of farm fertilizers promote the growth of harmful algae
Modelled after successful efforts to reduce air pollution, new market-based techniques in the United States are reducing this chemical load at a fraction of the cost of regulatory regimes.
They create financial incentives for dispersed groups like farmers to cut back on their emissions, and make general improvements in water quality possible because they cast a wider net than traditional mandates.

A Future of Safe Swimming

One of the Manitoba advantages we take for granted in the dog days of August is our natural abundance of lakes and rivers, places to take the family for a cool dip to beat the heat. But new fears for that resource surfaced this summer, as “No Swimming” signs flew up at some beaches. Toxic algae blooms were the culprit. Do we have a problem, and how do we solve it?

An accident precipitated the health advisory at Big Whiteshell Lake. A sewage lift station on the lake’s south shore had a mechanical failure and raw sewage spilled out near the public beach. Like most point-source pollution – the type where the cause of a decline in water quality can be definitively nailed – this is relatively easy to repair and at worst represents a temporary inconvenience.

But the recurring algae problems in our larger lakes are not so amenable to quick fixes. Despite steady and general improvements in our water quality, the result of common-sense regulation of discharges from “big” polluters, the nutrients that feed these blooms are not point-specific. Nitrogen and phosphorus, the main ingredients in fertilizers, inexorably flow from rain water running off hundreds of farms.

Hot weather supercharges the growth of Microcystis, the dreaded blue-green algae that produce deadly toxins. Even boiling the water doesn’t make it safe to drink. This phenomenon precipitated the warnings at Lake Winnipeg’s beaches, and is a chronic problem in Lake Manitoba, with the Portage Diversion boosting the input of chemicals from natural run-off. Because both lakes are shallow, rainfall and temperature levels are crucial elements in creating conditions unhealthy for animals.

A few crazies in the green movement aside, nobody proposes that we forbid farm chemicals. They are key factors in the productivity of our crop and livestock industries and recent technologies permit their sparest use.

But innovative public policy in other jurisdictions is devising mechanisms to reduce non-point-source pollution. Based on trading schemes that have been so successful in the reduction of air pollutants like sulphur dioxide, incentive systems that encourage cleaner water are working quite well. Michael DeAlessi of the Reason Public Policy Institute recently summarized the results.

The concept is fairly simple. Scientists determine the Total Maximum Daily Load of each target pollutant that a waterway can handle. Within these limits, point-source polluters like municipalities and forestry companies, who may face expensive upgrades to meet dumping targets, pay non-point-source polluters like farmers to employ Best Management Practices to reduce their contributions to the mix.

To quote DeAlessi, “In agriculture examples include the installation of buffer strips along stream beds, adequate fencing to keep livestock from directly soiling surface water, the placement of sheds over manure piles to minimize runoff, and the use of pest control techniques that are low in chemical intensity.” Applicable to any pollutant, the creation of a market mechanism with incentives to reduce environmental impacts is improving the health of watersheds wherever it’s been tried.

DeAlessi reviews the application of watershed trading to the Fox and Wolf River basins in Wisconsin, the source of Green Bay’s chronically poor water quality:

Nitrogen and phosphorus emissions in North Carolina were killing fish in the Tar-Pimlico Basin. Traditional regulatory methods would have cost between US$1,900 and $17,000 for each kilogram removed, but a trading regime achieved the desired targets at a cost that ranged from $147 to $262 per kg. A $1 million investment in trades by large polluters yielded nutrient reductions that would have cost them $7 million each in technology upgrades.

In Connecticut, municipal water treatment plants trade for the right to emit nitrogen into Long Island Sound. They are expected to achieve the needed reductions without spending $200 million in plant upgrades that otherwise would have been imposed on consumers.

The Fox-Wolf Watershed Alliance studied the potential of trading to reduce phosphorus from non-point sources. It estimated the plan would cost only $26 for each pound removed up to the official target of one microgram per litre, and $73 a pound for reductions below that limit, much less than the cost of imposed controls.

Market systems work well to reduce pollution loads of all kinds because they draw all stakeholders into the effort. They smooth out the point of no return, where the benefits of additional controls are not worth the cost. And they do it voluntarily.

Manitoba Conservation should consider the use of trading to minimize the release of pollutants into our lakes and rivers. It would mean less work for their colleagues at Manitoba Health, who could put away the “No Swimming” signs at our beaches.

Read - Removing Muck with Markets: A Case Study on Pollutant Trading for Cleaner Water (PDF).

A Future of Safe Swimming

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