Nature of Activity: The World Resources Institute conducted a policy/ economic study of basin-wide trading for the Minnesota River. The study examined several scenarios for achieving nutrient reductions – limits on point source discharges; State subsidies for agricultural BMPs; a combination of point source limits and a point/point and point/nonpoint trading program; and a combination of point source limits, trading, and performance-based ("targeted") subsidies for agricultural BMPs. The final scenario proved to be the optimal one. The study’s author hypothesized the development of a sophisticated program to target funds for BMP implementation to the particular farms and practices that would produce the most cost-effective pollution reductions. Most State programs that provide subsidies for BMP implementation do so in a less targeted manner. Under the plan envisioned by WRI, farmers closest to streams, or with highly-erodible soils, or who have not undertaken conservation practices would be the first to receive the subsidies.

Environmental Problem: Eutrophication in the Minnesota River Basin.

Pollutant(s) / Pollution Type(s): Phosphorus

Trade Types: Point/point and point/nonpoint

Stage of Implementation: The study was completed in 1998. No trading program has been developed.

Relation to TMDL: A TMDL exists for the lower Minnesota River.

Number of Potential Participants: 212 point sources and a number of nonpoint sources.

Trading Ratios: 3:1

Estimated Cost Savings: The study projects that the cost of controlling phosphorus could be reduced from $18 / lb. for point source controls alone to $4-5 / lb. for the combination of subsidies for nonpoint source BMPs targeted to the most cost-effective locations and a trading program. Most of these savings relate to targeting the BMPs rather than to trading.

Available Written Information: The WRI report describing their study of the Minnesota River, as well as similar studies of the Saginaw Bay Watershed in Michigan and the Rock River Watershed in Wisconsin, is available from WRI.

Innovative Aspects: Rather than fund any BMP by any nonpoint source, the study revealed that "targeting" the BMPs to specific farms based on their ability to reduce loadings for the lowest cost would be much more cost-effective for the program as a whole.

Obstacles: It is typically difficult to target BMPs to the extent envisioned in the study.

Web Sites: Minnesota River Basin: http://www.epa.gov/surf2/ahr/30/

Contact: Paul Faeth, World Resources Institute. (202) 729-7688. Paul@wri.org