An Exploratory Accounting Approach for Balancing Environmental Impacts of Point and Diffuse Sources in Nitrogen Trading

Abstract Nutrient trading between point and diffuse sources of nutrients offers an integrated watershed nutrient management approach to achieve nutrient reduction goals that benefit both the terrestrial and aquatic ecosystems. This market-based approach requires quantification of the environmental impacts of nutrients derived from different sources. This environmental impact depends on the forms, concentrations, loads, transport, and processing of nutrients within waterways. However, the impacts of source-specific nutrient characteristics in different point and diffuse nutrient sources have not been accounted for in nutrient trading schemes. Here, we explored an accounting method for nitrogen trading that accounts for different aquatic environmental impacts of point and diffuse sources. This environmental impact quantification is based on model fittings of a published dataset on algal photosynthetic responses to the key nitrogen form, i.e., total dissolved nitrogen rather than total nitrogen, from three sources: point source discharge from tertiary-treated sewage and aquaculture ponds, and diffuse watershed erosion runoff. We explored a method for decomposing trading ratios into environmental equivalency, delivery ratio, and uncertainty component for different sources, and considering the co-benefits of watershed mitigation. Our results demonstrate that prioritizing diffuse nitrogen sources with a greater aquatic environmental impact and co-benefits can significantly reduce the watershed mitigation requirements for offsetting the environmental impacts of point-source nitrogen loads. This study presents an exploratory accounting approach for nitrogen trading that incorporates the differential environmental impacts of point and diffuse nutrient sources on aquatic ecosystems. Alternative approaches to equating environmental impacts across sources with different nutrient characteristics also warrant further investigation.