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Water Quality Trading Assessment Handbook
4. Market Infrastructure
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Water Quality Trading Assessment Handbook - Chapter 4: Market Infrastructure (PDF) (25 pp, 227K)
All viable markets, whether trading water pollutant reductions or widgets, must efficiently create benefits for the participants. Markets are social constructs facilitating interactions among parties interested in exchanging goods or services. Research indicates that successful markets evolve to reduce costs associated with:
- identifying others willing to purchase or supply goods or services;
- comparing the goods or services offered by other parties;
- negotiating the terms of an exchange of goods and services; and
- enforcing the terms of the exchange.
This chapter considers the infrastructure necessary to enable trading and describes the essential functions of a WQT market:
- Assuring compliance with the Clean Water Act and relevant state and local requirements;
- Defining and executing the trading process;
- Defining marketable reductions;
- Ensuring water quality equivalence of trades and avoiding hotspots;
- Communicating among buyers and sellers;
- Tracking trades;
- Managing risk among parties to trades; and
- Providing information to the public and other stakeholders.
Three current or planned trading programs are described in detail to illustrate the different ways that trading markets can provide for these essential functions.