Wisconsin's "phosphorus rule", which created the most stringent water quality standards for phosphorous in the country, imposes substantial compliance costs on point sources that discharge to waterbodies with poor ambient quality. As part of the rule, Wisconsin also implemented a water pollution offset trading program that allows affected point sources to comply at lower cost than through traditional treatment technology upgrades. In this paper, we estimate the pass-through of Wisconsin's

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... orus rule, providing the first empirical estimates of pass-through from a water pollution regulation. In our analysis, we examine how compliance with the rule affects real billing rates at sewer utilities in Wisconsin. We find that compliance with the phosphorous rule increases the average real sewer utility bill in our sample by 8-11%. As a second contribution, we examine the implementation of Wisconsin's water pollution offset trading program and how it differentially impacts pass-through in this setting. A descriptive analysis of the program suggests that point sources that comply with the phosphorus rule through water pollution offset trading, rather than treatment technology upgrade, save $17.5 million per year in aggregate. Importantly, the pass-through of the phosphorus rule reflects these cost savings. Empirical results show that real sewer utility rates increase by 14.6% for utilities that comply with the phosphorus rule with a treatment technology upgrade, while these same bills increase only 6.4% for utilities that comply with the rule through water pollution offset trading. Our results suggest that pass-through of the phosphorus rule is between 72% and 88% for affected sewer utilities.