Water Quality Credit Trading:
Taking on the Challenge

Summary of Closing Remarks by Bruce I. Knight, Chief
Natural Resources Conservation Service, at Second National Water Quality Trade Conference

Pittsburgh, PA
May 25, 2006


What else do we need to do to help make trading happen? We don’t have all the answers, but that shouldn’t stop us from moving forward. In its new Strategic Plan, NRCS has focused on traditional goals and venture goals. We want to be on the cutting edge—and that means embracing market-based approaches to conservation, like water quality credit trading.

At this conference, we’ve discussed a number of challenging issues that we need to address as we seek to enable and encourage water quality credit trading. These include:

Transparency—to have willing buyers and willing sellers, people have to know what they’re buying, know what the price is, know that they can count on the product. What conservation practice backs the water quality credit? How will you know that it is delivering what has been promised?

Commonality—part of transparency is commonality, a common language. EPA says BMPs; we talk about practice standards. We also need common definitions and common standards. It will be an evolutionary process. The marketplace will demand greater unity—and more communication.

Confidence—what can we do to assure confidence in the system—for both buyers and sellers? We want everyone to understand that water quality objectives will be met. We must never lose track of the ultimate objective—cleaner water in that watershed.

Simplicity—it’s difficult to achieve, but critical. As far as NRCS is concerned, we’ve said we want to allow landowners to sell credits for practices that we’ve cost-shared—that’s part of simple. We need to streamline trading programs—actually, our entire conservation programs—trading, cost-share and compliance.

Aggregators—what help do aggregators need to begin to pull together buyers and sellers? These are the people who will ultimately take individual action to sell or broker deals for another party. Farmers have asked me who aggregators are. I said, if you sell your grain at an elevator or your cattle at an auction barn, you’re using an aggregator to move your product to market. Aggregators are key for us as we move forward.

The last thing we need to consider is the time value of conservation. We know about the time value of money. My dream is that trading will speed up the time value of conservation. As a son of the Great Plains, I know that I have only four to five months to get conservation on the ground—and then there’s a hard winter. Trading can help meet that tight schedule.

We’ve learned a lot in the last three days from each other. And we have more to learn.

I want to conclude with the same quotation from Theodore Roosevelt that you heard earlier from Merlyn Carlson:

“The nation behaves well if it treats the natural resources as assets which it must turn over to the next generation increased, and not impaired in value.”

Trading has the potential to fulfill that dream to treat natural resources as assets with value. Valuing resources gives us greater incentive to conserve them, because as Ricardo Bayon pointed out “What is not valued is overused.”