Financing natural infrastructure solutions in the Mississippi River Basin
Five innovative ways to finance water quality and flood risk solutions
Communities along the Mississippi River face increasing flood risks and water quality challenges. Pollution from upstream cities, farms and industries threatens downstream communities’ health and well-being. Communities are further burdened by flood risks increased in part by over-engineering of the river, population expansion into flood zones, tile drainage and climate change.
Natural infrastructure is a highly effective solution, that has been difficult to finance
Strategic placement of natural infrastructure features such as wetlands, floodplain restoration and riparian buffers on just 1-5% of land in the upper river basin could reduce flood risk and downstream nitrogen pollution by 30% to 40%.
Despite natural infrastructure’s demonstrated economic, environmental and health benefits, financing these projects has been a challenge for states and municipalities, as many federal and state water quality regulations and funding programs were not designed to incentivize natural infrastructure solutions.
A new report from Environmental Defense Fund and Quantified Ventures — Generating revenue to finance natural infrastructure projects in the Mississippi River Basin — highlights five replicable ways to generate revenue that supports natural infrastructure project financing.
Five ways to finance natural infrastructure
1. Municipal-agricultural watershed partnerships
These collaborations between municipalities, farmers and watershed organizations promote cost-efficient upstream water quality and quantity solutions by using drinking water and wastewater fees to pay farmers for agricultural best management practices and edge of field natural infrastructure.
2. Stormwater utility funds
Stormwater utilities fees can be used as revenue to pay back loans for natural infrastructure investments by generating funds specific to stormwater management improvements such as green stormwater infrastructure.
3. Source water protection fees
These fees are surcharges to customers’ water bills that are used to protect source water quality and quantity. They can be used as a revenue stream to repay financing for natural infrastructure projects that contribute to source water protection.
4. Interim financing grant/loan mix
This financing mechanism turns the traditional use of grants for conservation work into revenue for loan repayment — allowing municipalities and their watershed partners to secure upfront investments for time-sensitive natural infrastructure opportunities while identifying additional sufficient grants to repay the loan.
5. Environmental markets
Outcomes from natural infrastructure projects that generate measurable, verifiable environmental improvements can be sold to an entity via environmental markets. The revenue generated from selling environmental outcomes can be used to repay financing for natural infrastructure projects.