Exploring market-based environmental policy for groundwater management and ecosystem protection for the Great Lakes region: Lessons learned

The Great Lakes–St. Lawrence River Basin Water Resources Compact (the Compact) was created to protect future water supplies and aquatic ecosystems in the Great Lakes. The Compact requires the eight Great Lakes state to regulate, among other things, large withdrawals of groundwater and surface water so that they do not negatively affect stream flows and ecosystems within the Great Lakes Basin. Thus, the Compact raises the possibility of increased restrictions on groundwater withdrawals in many locations throughout the Great Lakes region. However, restricting withdrawals is likely to encounter opposition from water users when such restrictions are viewed as an infringement on existing water use rights and/or as negatively impacting local economic development. Such conflicts could hinder effective implementation of state and regional water policy. This paper explores the application of a market-based environmental management tool called “Conservation Credit Offsets Trading (CCOT)” that could facilitate allocation of groundwater withdrawals, and develops a framework for guiding the implementation of CCOT within the context of a groundwater permitting system. Using a watershed in southwestern Michigan, this study demonstrates how bio-physical information and input from various local stakeholders were combined to aid groundwater policy designed to achieve the objective of no net (adverse) impact on stream ecosystems. By allowing flexibility through trading of conservation credit offsets, this groundwater policy tool appears to be more politically acceptable than traditional, less flexible, regulations. The results and discussion provide useful lessons learned with relevance to other areas in the Great Lakes Basin.