ASSESSING THE FEASIBILITY OF NUTRIENT-RELATED WATER QUALITY TRADING IN TENNESSEE

Continuous efforts have been made to restore and maintain water quality in the United States (U.S.) since the enactment of the “Clean Water Act” (CWA) in 1972. However, water quality impairment is still a prominent issue. Many water bodies in Tennessee remain impaired and unable to support their intended uses. Water Quality Trading (WQT) has been promoted as a flexible mechanism to reduce water quality impairment at lower cost. However, the results of trading programs, to date, are not encouraging. Given the inherent geographic restrictions of WQT programs, the spatial locations of impairments and of potential buyers and sellers of credits are keys to program success. Furthermore, trading is viable only if there is an economic incentive for buyers and sellers. This thesis identifies spatially feasible areas for nutrient-related WQT markets in Tennessee. This analysis updates and extends the stepwise screening technique used by Roberts et al. (2008). Fifty-nine potential “Market Zones” for nitrogen, forty-five zones for phosphorus and forty-eight zones for oxygen are identified.

The thesis also analyzes the cost of nutrient credit supply by agricultural non-point sources (NPS). Best management practices (BMPs) and land use (for BMP implementation) are selected based on their cost effectiveness using optimization technique. Abatement cost curves for NPS are derived for each Market Zone. Continuous no tillage is found to be the most cost-effective BMP for both nitrogen and phosphorus reduction. Marginal costs of nitrogen reduction range from $3.53 to $1643.42 per pound of nitrogen. Similarly, marginal costs of phosphorus reduction range from $10.07 to $6,694.68 per pound of phosphorus.