Canada: Water Quality Trading Ebbs Away Again

Last Updated: August 4 2010
Article by Dianne Saxe

Ever since the Newt Gingrich "Common Sense Revolution", much ink has been spent on the alleged superiority of economic instruments over "command and control".   In theory, government cannot efficiently or effectively tell people what to do; instead, government should give people an economic incentive to do the right thing, allowing them to use their own ingenuity to find the best way to do it.  In theory, this achieves the same result at far less overall cost.

A well-known economic instrument is cap and trade, which was used with spectacular success to reduce smog-causing emissions from major industries in the U.S. Command and control, in contrast, sums up the vast majority of other environmental regulations which simply order organizations to reduce emissions, or else.

The current Ontario government has rolled out so many green initiatives that there is a real weariness about more regulation.  They spent years investigating whether an old-fashioned pollution problem, too much phosphorous in Lake Simcoe, can be solved with an economic instrument: water quality trading under the Lake Simcoe Protection Plan. Now, though, they have retreated to command-control instead.

In water quality trading, major municipal and industrial dischargers of phosphorous would be required to reduce those discharges, but would be able to "purchase" some of those reductions from other dischargers who have lower costs.1 Farmers, for example, are major sources of phosphorus.  However, since they are often short on capital and have not been closely regulated, they may have cheaper opportunities to reduce their phosphorus emissions than, for example, a municipal wastewater treatment plant.2

Everyone wins if farmers reduce phosphorus at the expense of sewage treatment plants: farmers make money;  sewage treatment plants save money; and the Lake wins as phosphorous loads drop.  Two feasibility studies, in 2000 and 2009, both concluded that water quality trading in Lake Simcoe would be better, both economically and environmentally.3

It was therefore disappointing to see that Ontario has reverted to command and control to slash the phosphorus going into Lake Simcoe, and has sent the water quality trading idea back for further study.4,5

Still, it is good to see more action being taken to cut phosphorus. The Phosphorous Reduction Strategy in the Lake Simcoe Protection Plan6, soon to be published on the Ministry website, proposes measures to get part way to  the Plan's dissolved oxygen target of 7 milligrams per litre (mg/L)7. This target requires slashing phosphorus loadings in Lake Simcoe to approximately 44 Tonnes per year (T/yr) from the current 72 T/yr.8 (annual phosphorus load going into the lake was about 32 T/yr during the 1800s.)

The Strategy depends on new technology, infrastructure and management practices to mitigate phosphorus from major sources. Sewage treatment plants (STPs), which contribute only 7% of the total, will have to cut further, notwithstanding growing populations. Far more phosphorus, 31%, comes from urban runoff, which will have to be much better controlled, in both new and existing development. Farmers, the source of 25% of the phosphorus, will continue to be coaxed into voluntary measures with incentives and education. Septic systems near the lake will be more frequently inspected. And even with all of these steps, the Strategy predicts 14 T/year too much of phosphorus. Eventually, perhaps, we will see water quality trading introduced to try to bridge this gap.9


1. Water Quality Trading in the Lake Simcoe Watershed: Feasibility Study. Ministry of the Environment. February 2010. Available at

2. Water Quality Trading in the Lake Simcoe Watershed: Feasibility Study. Ministry of the Environment. February 2010. Available at


4. Feasibility Study for Water Quality Trading in the Lake Simcoe Watershed. Environmental Registry. Available at

5. Lake Simcoe's Proposed Phosphorus Reduction Strategy and Amendments to the Lake Simcoe Protection Plan. Environmental Registry. Available at

6. Restoring the Health of Lake Simcoe. Ministry of Environment. News Room, Available at

7. Lake Simcoe's Proposed Phosphorus Reduction Strategy and Amendments to the Lake Simcoe Protection Plan. Environmental Registry, At

8. Restoring the Health of Lake Simcoe. Ministry of Environment. News Room, Available at

9. Lake Simcoe's Proposed Phosphorus Reduction Strategy and Amendments to the Lake Simcoe Protection Plan. Environmental Registry. Available at

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Dianne Saxe
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