Stormwater credit trading programs are an economic instrument used by municipal governments to encourage individual firms to implement measures to manage stormwater runoff on their properties. Property owners in urban areas are encouraged to build green infrastructure or green their existing infrastructure to create or generate credits. Green infrastructure projects include the installation of green roofs, rainwater harvesting systems such as rain barrels, and permeable pavement that allows rainwater to seep back into the ground.
There are various options for developing these credit trading programs. One option is to base the generation of credits on meeting a runoff retention standard, where a property owner can buy credits when they cannot meet the standard. Another approach is to generate allowances that are based on the maximum amount of runoff to be delivered to the sewer system allowed by each property, as calculated by the municipal utility or regulator. A property with runoff below its allowance generates credits that can be sold to property owners who exceed the desired runoff level. The opportunity to generate revenue encourages property owners to invest in green infrastructure that could qualify to generate credits.
Current or potential adaptation-relevant sector applications:
- coastal and riverine protection and management – coastal defences or flood protection barriers; river flood protection measures; and
- other built environment and infrastructure – urban development.
Additional insights:
- This is a mature instrument. Credits to reduce stormwater fees and allowance-based credit trading systems have existed in the United States since the 1990s.
Considerations for developing stormwater markets:
- Strong public institutions and private property rights that allow owners to bear the costs of implementing stormwater management are needed. Subsidy schemes can be employed to support owners with limited financial means.
- Public authorities should have technical knowledge of water management, economic instruments to establish allowances and trading systems, and data collection and analysis, in addition to monitoring and legal enforcement.
- Quantitative instruments should be employed to assess runoff levels to prioritize where economic investments should be made first. For instance, as it may be more expensive to introduce or enhance green infrastructure in urban areas with less permeable ground cover, investment in these locations may be given lower priority.
Adapted from the following sources:
Bassi, A., Cuéllar, A., Pallaske, G., & Wuennenberg, L. (2017). Stormwater markets: Concepts and applications. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/stormwater-markets-concepts-applications.pdf
Department of Energy and Environment. (n.d.). Stormwater Retention Credit Trading Program. Government of the District of Columbia. https://doee.dc.gov/src