Application of market mechanisms and incentives to reduce stormwater runoff

Increased stormwater flows are a direct result of urbanization and the consequent increase in the proportion of land area under impervious surface. Due to its contribution to abnormally high stream flows and its role as a carrier of pollutants that degrade water quality, excess stormwater runoff has negative impacts on both terrestrial and aquatic ecosystems. In response to the increased magnitude and frequency of stormwater runoff events, municipalities and local governments seek cost-effective strategies to manage the risks associated with these stormwater flows. The goal of a proposed interdisciplinary approach involves providing incentives for the construction of small-scale best management practices throughout a small urban watershed, leading to a cost-effective means to control stormwater runoff, and partially restoring a more natural hydrologic regime to a watershed area. Market mechanisms and other incentives have been suggested as plausible approaches to the reduction of stormwater runoff. Development and implementation of market mechanisms and incentives to reduce stormwater runoff, however, involves interdisciplinary considerations and issues. This paper develops an interdisciplinary view of the stormwater runoff issue, beginning with a brief description of stormwater runoff management from a hydrologic perspective. We then present a background on types of market instruments and their related incentives as possible approaches to reducing the risks associated with both the magnitude and frequency of recurrence for excess stormwater runoff flows. This is followed by an analysis of how the federal Clean Water Act and state water laws have dealt with stormwater issues. These perspectives and methods are synthesized to develop several stormwater management scenarios that include stormwater user fees, stormwater runoff charges, allowance markets, and voluntary offset programs. Each of these programs would likely incorporate stormwater best management practices at the watershed level, yet in different ways, and we discuss the opportunities and limitations borne out of our analysis of the legal, economic, and hydrologic considerations.