How viable are Cap-and-Trade mechanisms in addressing water quality issues in the Lower Fitzroy?

Water quality in the Great Barrier Reef Marine Park is continuing to be affected by land-based activities in adjacent catchments including the Fitzroy River. Principal impacts on water quality relevant to the Fitzroy are the quantities of sediments and nutrients attributed largely to nonpoint sources (agriculture) and to a lesser extent point sources (municipal and industrial discharge). A key issue of interest is the potential for market based instruments, particularly quantity control measures, to mitigate water quality impacts. These have been successfully introduced in the United States and other countries to address water quality issues. A review of quantity control programs relevant to water quality has been undertaken. Key alternative mechanisms include cap-and-trade programs, offset trading and bubble schemes. By drawing upon the design and characteristics of these existing policies that are comparable to characteristics of the Fitzroy, the potential for market based instruments to be applied in the Fitzroy region can be established. Results show that there is some potential to design applications of these mechanisms, but the lack of many point source emitters and some institutional structures, together with political economy issues, will make these difficult. However, if water quality emissions are to be reduced, these may be viable policy alternatives.