After decades of effort, the voluntary, collaborative approach to restoring the health and vitality of the Chesapeake Bay— the largest estuary in the United States—has not worked and, in fact, is failing. A diverse group of 57 senior scientists and policymakers have joined forces to save the Bay. This is our plan.

Nutrient Trading—Promise or Pitfall?

(Posted by Dawn Stoltzfus.)

With the watershed states (Maryland, Virginia, Pennsylvania, New York, W. Virginia and Delaware) and D.C. working to significantly reduce pollution to meet the Chesapeake Bay TMDL, nutrient trading is a hot topic. Some see trading as a way to reduce the challenging costs of Chesapeake Bay cleanup, and it looks good on paper—but there are serious scientific concerns about its practicality and water quality benefits, particularly with trades between nonpoint sources (like agriculture and stormwater runoff) and point sources (like wastewater treatment plants). Difficulty in accurately measuring trading’s effectiveness also seems like a big obstacle.

At a recent event focusing on Chesapeake Bay restoration accountability, organized by the Center for Progressive Reform, long-time bay advocate Joe Maroon presented a very interesting report, Emerging Issues in Nutrient Credit Trading in the Chesapeake Bay Watershed, that offers much food for thought—and cause for concern—when it comes to trading.

Readers, what are your thoughts? Is trading a tool that will help us finally get the Chesapeake Bay off the “dirty waters” list? Or could it just make things worse?

10 Responses to Nutrient Trading—Promise or Pitfall?

  1. Overall, I think nutrient trading offers numerous benefits for meeting the twin drivers of the Bay TMDL and enhanced stormwater management compliance. I want it to succeed. But most persons, regardless of their position on pollution trading, want to be sure that it is done in a manner that includes accountability, transparency, verifiability and achieves real pollution reductions. We are not there yet in the Bay region. Those on all sides of the trading debates should work together to support EPA and the Bay states in making needed changes and in insuring “reasonable assurance” and water quality protection as programs are expanded under the TMDL. My white paper attempts to lay out several of the strengths, weaknesses, challenges and program improvements that must be considered as the Bay region moves forward. I welcome others’ thoughts and comments.

  2. I think trading can be a powerful tool, if it embodies all the elements described by Joe above. Joe has done a great job putting all the cards on the table, and the time is now for advocates to step up and get engaged in shaping these programs.

  3. Electric utilities, corporate agriculture, municipal waste water treatment plants and dozens of other industries with pollution discharge permits spew millions of pounds of pollutants into the bay every year. The rational response would be, by law and regulation, to stop it. But instead we timidly offer to pay polluters to reduce their pollution. For example, we pay farmers to plant buffers and cover crops and fence animals out of streams. We give tax subsidies to other industries to install pollution reduction equipment.

    These measures are an implicit recognition of a right to pollute. Why do we engage in this irrational behavior? It may have something to do with the fact that decisions are made by elected officials who benefit from millions of dollars in campaign contributions from the polluters. Where is there convincing evidence that stricter controls on pollution will cause the elimination of jobs or other adverse impacts on the economy that won’t be offset by new jobs or the benefits of reduced pollution?

    Trading is another way of paying polluters to reduce pollution. The author and many respected environmental activists believe that trading will be essential to achieving TMDL goals. That is probably correct as long as we are unwilling to just say no to polluters. But, imagine how effective any trading regime will be when those who are in control of it ultimately are the same people who are unable to just say no.

  4. Bob, in the South River watershed, without an ounce of additional development, our waterway is already massively impaired. We have no industrial polluters, we don’t even have any wastewater outfalls. As you know, we’re working vigorously to get funding streams put in place that will allow stormwater and septic retrofits to occur. Short of immediate levies of several thousand dollars per home in the watershed, what would you propose is the appropriate regulatory solution?

    A sound trading program involves putting a regulatory firewall in place (i.e., “from henceforth, any new pollutant loads will be offset with net improvement credits.”) and working backward to grab the existing sources of pollution, many of which fall on the public at large to fix because the original polluter has long since passed on.

  5. The Clean Water Act was not set up to allow a market based approach and pollutant trading is not authorized under any provisions of the Act. Trading should be removed from the Bay TMDL and sources of pollutants should have to comply with their load and waste load allocations without profiting from the right to pollute our Bay.

    Instead of spending taxpayer dollars on an elaborate avoidance scheme for polluters that has not yet been proven to work, states should focus on regulating point sources and non-point sources (which states have the authority but not the political will to do) in a way that doesn’t sacrifice the health and environment of Chesapeake Bay communities. There is simply no getting around the fact that unchecked development is unsustainable, as is our current system of agriculture.

    As Bob points out, handing polluters money to stop stealing our public trust right to a clean Bay has proven to be a failure. Why would anyone continue to support such failed approaches? Politicians like trading because industry likes it and industry polluters like because it won’t force any changes in their irresponsible behavior – it will allow developers and point sources to find workarounds from our current, very successful point source regulatory programs, while allowing non point sources to pretend that they’re reducing pollution while profiting from their false claims. The current regulatory structure is the answer, even if it means that developers can’t develop in impaired waterways until there are plans and compliance schedules in place to meet water quality goals. And if there are holes in the current regulatory structure when it comes to non point sources, then the answer isn’t to widen those gaps with economic windfalls, but to close them with tighter regulation.

  6. Another interesting piece on cap and trade:

    At about the same time, the Environmental Defense Fund (EDF) had begun to question its own approach to cleaning up pollution, summed up in its unofficial motto: “Sue the bastards.” During the early years of command-and-control environmental regulation, EDF had also noticed something fundamental about human nature, which is that people hate being told what to do. So a few iconoclasts in the group had started to flirt with marketplace solutions: give people a chance to turn a profit by being smarter than the next person, they reasoned, and they would achieve things that no command-and-control bureaucrat would ever suggest.

    Read more:

    Sound familiar?

  7. The claimed success of the acid rain trading program as proof that such approaches will translate well to water pollutant trading doesn’t work for several reasons. First, EDF’s pro-market position aside, there are those in the environmental community that see the reductions in SO2 emission in the US as not so much related to trading, but instead other factors like lower transportation costs of low sulfur, low SO2 emitting coal deposits in the US. Even EPA was forced to downgrade its estimate of the efficacy of the ARP given this consideration. Second, air pollutants, like SO2, and water pollutants, like sediment, act very different in the environment – you can’t get much of a more apples-to-oranges comparison. Third, virtually the entire US environmental community recognized that trading of even air pollutants is often illegal, inappropriate and environmentally devastating when it joined to fight off Bush’s attempt to introduce a trading program for mercury emissions from coal-fired power plants a few years back. And, lastly, the 40% reduction in US SO2 emissions since the 1990’s under the trading approach doesn’t come anywhere near the at least 70% reductions of SO2 achieved in the European Union under a straight-ahead regulatory approach, with no opportunity for polluters to profit off of poisoning our shared, natural resources. There is simply no support for the notion that trading is the answer to the Bay’s woes and there are many, many indications that it will make for an even more polluted waterway in the years to come. Food and Water Watch will soon be issuing a report on the issue of water pollutant trading, including many of the factors cited above – stay tuned.

  8. I would challenge that Trading didn’t help to quickly alleviate acid rain problems; these problems are not solved, but things are demonstrably better and it happened quickly with the agreement between stakeholders instead of a lengthy and costly court battle while we lost our eastern forests, soils, and the critters that are dependent on functioning ecosystems. And Erik is correct with regard to the situation in Europe.

    With regard to Trading, while I agree that the current state plan is deficient in many respects, not the least being MDA administering the non-point source program, there are ways to design a successful program. And there are in fact successful examples around the country.

    Also, it is mistaken to say we would be paying people to pollute. Polluters would be paying others to offset their (polluters) pollution and participate in “net improvement” to improve conditions within stream segments local enough to avoid hot spots and environmental injustice.

    Furthermore, CREP and other programs that “pay farmers” is just recognizong three important facts. 1. Growing clean water and other “co-benefits” (e.g. wildlife habitat) is just another crop along with food and fiber that society needs to survive. Without paying for these ecosystem services through CREP and other farm bill conservation programs things would be much worse. Mechanisms for payments for ecosystem services like Trading is simply an attempt to place these other societal needs on a level economic playing field with intensive crop production. If people truly demand clean water, a marketplace has great potential IF DONE CORRECTLY to allow society an economic mechanism to value all the “crops” needed for survival. There will never be enough public dollars to get this done, we need an economic model like a Trading marketplace. 2. Agriculture is exempt under the CWA. The voluntary system hasn’t worked, and I’m not sure how Trading IF DONE CORRECTLY could make things worse. CAFO’s offer some ability to reign in certain bad operations through regulation, but individual farmers and tenent operations will never be regulated; if enviros try to dictate these individual rights driven by current economic decisionmaking (even through the state authority to do so)only through lawsuits and regs they will lose in court, and we risk Congress furher weakening the CWA, EPA’s authority, and other laws. Things go downhill from there. 3. Trading, and the design of a successful marketplace, can only be achieved if diverse stakeholders want to work toward a solution that works for all. Payment for measured outcomes can be very efficient and can have many good side benefits such as involving people outside of agencies and NGO’s in the creation and stewrdship of credit generating practices. DONE CORRECTLY this public/private partnership has potential to alter the political economy.

    In terms of point source trading, the current NPDES permitting is adequate to ensure success. With regard to non-point sources, in general ag itself is not the problem. The problem is intensive ag and bad land management, and this is an economic problem that a marketplace has potential to help solve. Simply dismissing Trading as “rewarding polluters” or “paying them to stop polluting” misses many points, not the least of which is a mis-understanding of economic reality. Simply staying with pushing regulations and lawsuits without offering to creatively tackle the underlying economic imbalance is a waste of time and money, and the past twenty five years and billions wasted prove this. Its time to try a new approach; the status quo hasn’t worked in the past and doing the same thing and expecting a different outcome is crazy.