Stormwater Markets: Concepts and applications

This report by the International Institute for Sustainable Development (IISD) examines the causes and impacts of urban stormwater runoff and evaluates various governance and financing mechanisms to manage it. The authors contrast traditional 'gray' engineered infrastructure with 'green' infrastructure (GI) and propose the development of stormwater markets—specifically through allowance trading and credits—to attract private investment and reduce the financial burden on public utilities.

• Urban stormwater runoff is primarily caused by the increase in impermeable surfaces like roads and sidewalks, which inhibit infiltration and lead to higher surface runoff volumes and peak flows. This is particularly problematic for older cities with combined sewage systems that may discharge mixed sewage and stormwater directly into water bodies during heavy rain.
• Stormwater infrastructure is divided into 'gray' (engineered elements like piped drainage) and 'green' (natural or man-made elements that restore ecological functions). Green infrastructure (GI) reduces runoff volume and pollution through infiltration and filtering, providing additional social and environmental benefits such as improved air quality and biodiversity.
• The 'first flush'—the initial phase of a stormwater event—is when the highest concentrations of pollutants, including heavy metals and toxic substances, are transported into water systems, posing significant challenges for wastewater treatment facilities.
• Public intervention is necessary to incentivize private investment in green infrastructure because the benefits are collective, creating a social dilemma where individual property owners lack the personal incentive to invest, leading to an investment gap.
• Stormwater markets can be established using quantity-based instruments where a cap on runoff is divided into allowances. Property owners who reduce runoff below their allowance can sell the excess in a market, while those exceeding their limit must purchase allowances, thereby stimulating the most economical investments first.
• Washington D.C. has implemented a Stormwater Retention Credit (SRC) trading program and the first Environmental Impact Bond (EIB). The EIB is a performance-based municipal bond where payments to investors depend on whether runoff reduction targets (e.g., > 41.3% for the highest tier) are met.
• Philadelphia's 'Green City, Clean Waters' program has fostered a Green Stormwater Infrastructure (GSI) industry with an annual turnover of at least USD 146.8 million, supporting over 430 jobs and generating USD 860,000 in tax revenues.
• In Lancaster, Pennsylvania, the implementation of green infrastructure is estimated to reduce average annual stormwater runoff by 1.05 billion gallons and yield over USD 120 million in savings from avoided gray infrastructure capital investment.
• Mississauga, Ontario, uses a GIS-based approach to determine impermeable area for a six-tier stormwater billing system, offering credits of up to 50% for properties that implement best practices in peak flow reduction, water quality, and runoff volume.
• Halifax Water is Canada's first regulated, integrated water, wastewater, and stormwater utility. It uses a parcel-based system to calculate fees based on precipitation and impermeable area, with a four-tier structure for residential homeowners.
• A watershed or sub-watershed approach to stormwater management is recommended to increase efficiency and attract more private investment, as it allows for economies of scale in monitoring and trading platforms that cover multiple urban areas.

APA

Bassi, A., Cuéllar, A., Pallaske, G., & Wuennenberg, L. (2017). Stormwater Markets: Concepts and applications. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/stormwater-markets-concepts-applications.pdf

Chicago

Bassi, Andrea, Andrés Cuéllar, Georg Pallaske, and Laurin Wuennenberg. Stormwater Markets: Concepts and applications. International Institute for Sustainable Development, 2017. https://www.iisd.org/system/files/publications/stormwater-markets-concepts-applications.pdf.

Wikipedia

{{cite report |last1=Bassi |first1=Andrea |last2=Cuéllar |first2=Andrés |last3=Pallaske |first3=Georg |last4=Wuennenberg |first4=Laurin |title=Stormwater Markets: Concepts and applications |publisher=International Institute for Sustainable Development |date=December 2017 |url=https://www.iisd.org/system/files/publications/stormwater-markets-concepts-applications.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{bassi2017stormwater, author = {Bassi, Andrea and Cuéllar, Andrés and Pallaske, Georg and Wuennenberg, Laurin}, title = {{Stormwater Markets: Concepts and applications}}, institution = {International Institute for Sustainable Development}, year = {2017}, month = dec, url = {https://www.iisd.org/system/files/publications/stormwater-markets-concepts-applications.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }