Using Market Forces to Implement Sustainable Stormwater Management

EPA Grant Number: X3832207
Title: Using Market Forces to Implement Sustainable Stormwater Management
Investigators: Middaugh, Jim , Allen, Jeff , Shinn, Craig , Wahl, Mary
Current Investigators: Middaugh, Jim , Feighner, Gordon , Kliewer, Dave , Shinn, Craig , Vizzini, Dan , Wahl, Mary
Institution: City of Portland, OR , Portland State University , University of Oregon
Current Institution: City of Portland
EPA Project Officer: Hahn, Intaek
Project Period: May 1, 2005 through December 31, 2008
Project Amount: $288,000
RFA: Collaborative Science & Technology Network for Sustainability (2004) RFA Text |  Recipients Lists
Research Category: Sustainability , Nanotechnology , Pollution Prevention/Sustainable Development


Population growth, urbanization and inadequate infrastructure have impaired natural systems in Portland. Traditional responses (public infrastructure and regulation of private development) have proven inadequate to meet the accumulated demands of 150 years of urbanization, much less the new demands that will come with increased population during the next 35 years. Portland’s immediate response is to increase sanitary sewer and stormwater system capacity through the construction of large tunnels. The $1.4 billion investment will eliminate current deficiencies in system capacity and manage about 15 percent of the anticipated capacity required by new development planned through 2040. These investments will test the financial carrying capacity of Portland ratepayers and place increasing pressure on a fragile economic recovery in the city, region and state. To address community, economic and environmental concerns, Portland seeks to investigate the feasibility of preventative approaches that, when combined with good science and hard engineering, could result in measurable environmental and economic benefits. Central to this effort is the evaluation of non-traditional market-based solutions that could help manage future system demands as Portland’s central city grows between 2011 and 2040.


Four project objectives are:

  1. Determine the feasibility of applying a market-based stormwater managementystem in an established urban area with a constrained sanitary and stormwater collection system.
  2. If it is determined to be feasible, develop a model trading system that focuses on improved watershed conditions and stormwater management in a highly urbanized area.
  3. Demonstrate how the trading system works through pilot implementation.
  4. Report on, transfer technology and share information about lessons learned with others.


The project will evaluate the feasibility of using tradable credits to meet specific goals for impervious area coverage, stormwater discharges and pollutant loads in areas served by combined sanitary and storm sewers and stormwater sumps. The feasibility analysis will focus on current and future infrastructure requirements, the potential system benefits from private redevelopment and retrofit opportunities, the relationship of a credit trading system to the financial structure of the City’s sanitary and stormwater utilities, the likely levels of public acceptance and participation, and the costs of administering the credit trading system. Should the feasibility of the system indicate that it would not be successful, the project will be postponed or discontinued. What is known to date shows the project timing to be “ripe” and stakeholders are interested in finding options to increasing water quality in innovative ways.

The proposed project would determine an appropriate geographic scope, qualifying best management practice (BMP) options, establish ecosystem service values associated with BMPs, select and utilize an effective economic valuation model to confirm projected valuation of future stormwater flow control and stormwater quality. The project would conduct an assessment of the regulatory and policy implications of the program and evaluate economic and social equity issues that may arise from a trading system. The project would develop initial credit prices based on the cost of a publicly financed program to achieve required net reductions in impervious area, develop imperious area cost estimates by BMP by parcel, and determine and apply valuation options (e.g. geographic, surface types, etc.). System compliance, evaluation and a communications plan would follow. Finally, market-based tools would be developed, including proposed regulations and permit fees, a credit “bank,” incentives and awards.

If the proposed system is determined to be effective and feasible, an implementation strategy and monitoring program will be established. The implementation strategy will include selection of a geographic area for a model trading system, landowner outreach/education, creation of necessary regulations and fees, credit allocation and pilot implementation of a trading system. Data documenting change in imperious area, vegetation cover, water flow and water quality created by the model system will be tracked by the City and its partners. The City also will evaluate trading volumes and prices. This information will be shared with others, and the City will regularly report on project results.

Expected Results:

Portland’s proposed approach will determine the feasibility of using a credit trading system to create incentives for property owners to install small-scale, performance-based stormwater systems within Portland. If it is determined that a trading system is feasible, it would be coupled with a family of financial incentives to help individual landowners reduce effective impervious area, stormwater volumes and pollutants that flow into the City’s sanitary and stormwater system within urban core. And it would create employment opportunities for smaller, emerging businesses and enhance the community’s investment in sustainable infrastructure. This project builds on work previously completed (e.g. Shepherd Creek, Ohio), transfer tools and policies created, and improves watershed health by using market forces to efficiently and equitably allocate the costs and benefits.

Publications and Presentations:

Publications have been submitted on this project: View all 2 publications for this project

Supplemental Keywords:

watershed, combined sewer overflow, urban, TSS, public policy, stormwater trading, Pacific northwest, water quality,, RFA, Economic, Social, & Behavioral Science Research Program, Scientific Discipline, Sustainable Industry/Business, Sustainable Environment, Technology for Sustainable Environment, Environmental Engineering, Urban and Regional Planning, Market mechanisms, market-based mechanisms, urbanization, sustainable stormwater management, sustainable development, sustainable water use, decision making, ecological design, conservation, sustainable urban environment, water conservation, best management practices, allowance allocation, allowance market performance, market-force, marketable permits

Relevant Websites: Exit

Progress and Final Reports:

  • 2005 Progress Report
  • 2006
  • 2007 Progress Report
  • Final