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(Posted by Bill Dennison)
Nutrient trading is the buying and selling of nutrient reduction credits that have a monetary value for the reduction of either nitrogen or phosphorus loading to the waterways. The concept of nutrient trading is to unleash free market forces for nutrient reduction strategies, similar to the approach used with carbon trading to address global warming.
Nutrient trading is a relatively new concept in ecosystem restoration that has been initiated for the Chesapeake Bay. Using the new Google analysis tool (‘ngrams’), nutrient trading only appears in the literature around 1990, but has increased rapidly, with a doubling of citations roughly every three years. There is excitement about nutrient trading as a new approach, and this excitement is evident in the various policy statements explaining nutrient trading. Along with this excitement, there is considerable skepticism also evident, and the issue is often emotive.
The Senior Bay Scientists and Policymakers group has reviewed the status of nutrient trading as applied to Chesapeake Bay restoration. We found that there are a variety of different definitions for nutrient trading being used by the U.S. Environmental Protection Agency and state agencies, and that there is a lack of data and case studies to support or refute assertions about nutrient trading. The fact that nutrient trading is complicated, emotive and data poor makes this approach one that deserves close scrutiny and scientific rigor. Within the Senior Bay Scientists and Policymakers group, our nutrient trading report is a carefully crafted consensus between fairly intense and polarized viewpoints and it took quite a bit of effort to strike this balance.
The nutrient trading report by the Senior Bay Scientists and Policymakers answers the question “Is nutrient trading a good thing for Chesapeake Bay?” with a qualified “Yes it could be, but there are major concerns,” listing ten caveats and recommendations for implementing nutrient trading. A strong case is made for exercising caution in developing a nutrient trading program, recognizing that a nutrient trading system on this scale is unprecedented.
The ten caveats and recommendations for nutrient trading articulated in the report are the following:
- Nutrient trading is a relatively new and untested technique for pollutant reductions in waterbodies that makes assumptions regarding short- and long-term effects.
- All efforts should be made to improve and then preserve local water quality.
- Independent, rigorous, and transparent verification is essential.
- A policy of net improvement credit is needed to account for uncertainties in non-point sources reductions and runoff variability.
- Nutrient trading should not be used to maintain discharges at technology levels below industry standards.
- Nutrient trading may create environmental justice issues by moving problems to disadvantaged areas.
- Trading could benefit large organizations and corporations without protecting the interests of local waterways and grassroots entities.
- The total impacts of nutrient trades need to be measured and adequate compensation provided.
- Credited practices and the models used to calculate the amounts of credits awarded need to be standardized.
- Growth allocations should be based on demonstrated pollution reductions in other sectors, not on speculative, proposed reductions in those sectors.
It is evident from these ten caveats/recommendations that there are many ways to do nutrient trading badly, and fewer ways to get it right. We feel that there is only one shot at getting it right and developing market integrity is key. The scientifically rigorous verification by independent entities will be essential for the ongoing integrity of a nutrient trading program.
We have produced this nutrient trading report to encourage an active, robust discussion about the issue. We welcome your comments and viewpoints and would very much like to hear what you have to say about nutrient trading.