Sen. Robert Cowles on Tuesday (Feb. 26) began circulating a legislative proposal to create what he described as a market-based framework to remove greater amounts of pollution from state waterways.

The “Pollution Prevention Partnership – Wisconsin’s Trading Marketplace,” would authorize the state Department of Natural Resources to allow a permit holder to marginally increase a pollutant discharge if they purchase credits from a statewide clearinghouse or other third-party brokers certified by the DNR.

The clearinghouse would act as a statewide broker and credit bank and be responsible for the management of buying and selling water pollution credits and maintaining a registry of credits from all third-party operators in the state.

Cowles said the bill would incentivize more water quality trades and eliminate the need for point sources to seek out nonpoint partners, minimize risk in transactions, and provide a certification process for nutrient reduction credits.

“We know that improving water quality in Wisconsin will need an all-encompassing approach to create a sizable impact,” Cowles said in a news release announcing the proposal. “Water quality trading is not a new idea, but the inflexibility of the current process along with troubles facilitating direct trades between point and nonpoint sources has left Wisconsin with only a couple of handfuls of trades. Developing a robust marketplace through a third-party clearinghouse would provide the framework necessary to make water quality trading a success.”

The news release explains:

The water quality trades allow nonpoint-sources, such as dairy farms, to create a reduction in total pollutants entering a waterbody, quantified as credits, to provide relief to a point source, such as a municipal wastewater treatment plant or cheese factory, on their pollution reduction requirements as part of their Wastewater Pollution Discharge Elimination System Permit (WPDES). The pollution reduction is in exchange for a payment to a nonpoint source, which are typically not required to employ nutrient management practices, to produce a greater pollution reduction within a hydrologic area.

LRB-1244 authorizes a WPDES permit holder to purchase credits from a statewide clearinghouse or other third-party broker, certified by the Department of Natural Resources (DNR) to meet the nutrient reductions required under their permit. The clearinghouse would be required to contract with the Department of Administration (DOA), in consultation with the DNR. Credits are produced through practices employed by nonpoint sources, predominantly on unregulated agricultural lands, and developed through technology tables and modeling reviewed and approved by the DNR. The production and purchase of credits must result in an improvement in water quality of a minimum ratio of 1.2 to 1, but certain practices would require higher ratios, trades must exchange the same pollutant or the same water quality standard, and trades would occur within the same hydrologic area.

The bill’s Assembly co-sponsor is state Rep. Joel Kitchens, R-Sturgeon Bay, who said the measure would reduce the amount of contaminants in Wisconsin’s water.

“While our current pollutant trading program is well-intentioned, we have found that a lack of a third-party system is slowing everything down to the point of ineffectiveness and, as a result, we are not getting the desired outcomes,” Kitchens said.

Interest groups were quick to react with news releases of their own.

Amber Meyer Smith, Clean Wisconsin’s vice president of government relations, said she was encouraged to see a proposal that could reduce phosphorus pollution of waterways.

“Through this bill, Senator Cowles has taken a serious look at new solutions that could create more cooperation between all the sources of phosphorus pollution to work together to tackle this critical issue,” Smith’s statement said. “Wisconsinites deserve access to clean, safe water, and this bill is another step in the right direction toward a clean water future. We look forward to continuing to discuss the details of the proposal with the authors and working on all of the bipartisan solutions to achieve clean water for Wisconsin.”

“This type of trading system is something that dairy farmers have been interested in for some time,” said John Holevoet, the Dairy Business Association’s director of government affairs, said dairy farmers have been interested in this type of trading system for some time.

“This new credit system would be a great way to encourage farmers to implement new conservation practices,” Holevoet said. “We’re hopeful this new bill will garner broad support. Clean water is something we all want. This new clearinghouse is exciting because it would allow for partnerships between rural and urban stakeholders to improve water quality for everyone.”

Wisconsin Manufacturers & Commerce (WMC) Director of Environmental and Energy Policy Lane Ruhland said the bill removes barriers to a sustainable technology market for farmers.

“It is possible to improve our water quality and our economy at the same time. To do so, we need an approach that leverages the private sector’s technological solutions, while rejecting a heavy-handed regulatory approach that drives businesses out of the state, Ruhland said. “This bill is a great example of an ‘outside the box’ approach that allows the private sector to do what it does best: find cost-effective solutions.”

The deadline for lawmakers to sign on as co-sponsors is Friday, March 8.