This paper is published on the responsibility of the Secretary General of the OECD. The opinions expressed and the arguments employed herein do not necessarily reflect the official views of OECD countries. The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.

Agricultural nonpoint sources (NPS) figure prominently in the design of many water quality trading programs. In concept water quality trading programs can create incentives for agricultural operators to supply low cost pollutant reductions while still keeping land in agricultural production. In practice water quality trading programs in the United States have produced few trades involving agricultural NPS. Transactions costs are a critical, but poorly understood, feature of water quality trading programs. The objective of this study is to examine the transactions costs associated with expanding the use of NPS credits in a water quality trading program in Virginia (United States) to include credits generated from agricultural working lands best management practices (BMPs). Findings indicate that transactions costs for agricultural NPS trades in Virginia are currently relatively low, due to the activity being credited: simple land conversion. Based on best available evidence, transactions costs of creating credits using management and structural BMPs will be 2 to 16 times more costly on a per project basis than for land conversion credits. Compliance monitoring protocols are a significant driver of costs for

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