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Pollution Trading for the Bay: Fresh Water vs. Fresh Money
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by Fred Tutman | 2011

On the eve of implementation of the long-awaited regulatory limits on Chesapeake Bay pollution (Total Maximum Daily Loads), environmentalists must question the prudence of an enormous threat to the integrity of our waterways: the pollution loading limits that promote swapping water quality gains for dollars and cents. I am referring to none other than pollution or nutrient trading and the so-called market-based approaches to controlling pollution being planned by states.

 

Pollution Trading for the Bay: Fresh Water vs. Fresh Money

 

 

By Fred TutmanOn the eve of implementation of the long-awaited regulatory limits on Chesapeake Bay pollution (Total Maximum Daily Loads), environmentalists must question the prudence of an enormous threat to the integrity of our waterways: the pollution loading limits that promote swapping water quality gains for dollars and cents. I am referring to none other than pollution or nutrient trading and the so-called market-based approaches to controlling pollution being planned by states.

 

 

It’s easier to count dollars than to track pollutants

 

Nutrient trading would allow regulated dischargers to buy pollution “credits” in order to delay or meet their Clean Water Act obligations. Credits would be sold by entities which have created speculative reductions that affect the “net” burden on the protected resource. Presently, there is almost no guidance from the Environmental Protection Agency (EPA) about what sort of trades would be considered inappropriate. For example, could traders swap credits for mitigation between different types of pollution, or among different jurisdictions or watersheds? It has largely been left up to the states and the polluters themselves to come up with their own approaches.

 

 

Polluting industries have no incentive to modernize

 

 Nutrient credit trading institutionalizes bad practices where the trade costs can ultimately be passed on to consumers and the pollution reductions never actually materialize. There really is no clear incentive to modernize polluting industries if the regulated community can just pay a fee to come into compliance with the laws. This approach substitutes empirical benchmarks of improved water quality for a Monopoly-like strategy of presumed environmental gains and hypothetical indicators.

 

Mandatory approaches to enforcing and regulating pollution have been an abysmal failure of willpower and governmental resources, as the health of the Bay continues to decline. Historically, the states have done a very poor job with bringing polluters to justice. It now appears that the powers that be have decided, instead, to offer an economic escape clause as an alternative to enforcement and compliance.

 

 

Creating “funny money” credits does not address pollution problems

 

 

Trading is a fiscal tool that, if improperly applied, could allow some of the Bay’s most egregious polluters to maintain the status quo or, worse, move the fiscal benefits derived from the sale of credits to communities and interests far from where the actual impacts occur. Compliance problems would be solved by shuffling papers and moving money (and pollution) around: Community A has dirty water, but we send some money to Community B to clean their waterway instead of Community A, which has the need. In some instances, middlemen (aggregators) even earn a fee for brokering such a transaction. Putting the incentives on dollars instead of on environmental results will only raise money—not reduce pollution.

 

 

This initiative appears to be about raising money

 

 

A study commissioned by the Keith Campbell Foundation for the Environment and The Maroon Group, a Richmond-based research firm, suggests that trading programs are fundamentally economic development tools, not tools for pollution reduction. Clearly, the proposed Bay trading programs lack the specific nexus to reduce pollution.

 

The EPA and the states must create safeguards and an enforcement structure to ensure that bad trades are not transacted, that traded credits are generated by genuine pollution reductions, and that trades are expeditiously retired so that the regulated community has some incentive to generate ongoing pollution reductions instead of just wrapping bad practices into their budgets and pricing strategies. None of these precautions are in place currently, and yet Bay-related nutrient trading moves forward!

 

The most sensible course is to forestall trading until these defects and flaws are addressed and resolved. The Bay states should not to barge ahead with an untried experiment but, rather, should create a true regulatory marketplace where trading is allowed, if at all, purely as a last resort and under very stringent terms, instead being the go-to option available to maintain the status quo.

 

This initiative appears to be about raising money, not about saving the environment. The Bay community must ensure that trading does not create consequences that impose unfair burdens on those who live and work close to a violating pollution source, while awarding economic advantages to those marketing credits elsewhere. We need justice and fairness for people and the environment more than we need fresh markets and fresh money.

 

Fred Tutman is a lifelong Marylander who serves as the Patuxent Riverkeeper. He also teaches environmental law and policy at the historic St. Mary’s College of Maryland. He authored The Chesapeake Watershed: A Sense of Place and a Call to Action.

 

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