A Warning about Water Quality Trading in the Chesapeake

This Memorial Day weekend, boaters, swimmers, fishers and others will flock to the Chesapeake Bay to mark the traditional, if not quite calendrically accurate, beginning of summer.  They'll bring their wallets with them, of course, thus supporting businesses and and jobs up and down the Bay. After a day in, on or near the water, many of them will tuck into a meal of crabcakes, made from blue crabs harvested in the Bay.

Recreation and commerce are two of the most important uses of the Bay, and certainly the best known. But another use, less advertised and far less understood, is as a dumping ground for pollution. Some of that pollution comes from rainwater runoff from roads and other hard surfaces, carrying motor oil and other substances into the Bay. Some comes from overfertilized lawns. And a significant chunk, including 44 percent of the Bay's load of nitrogen and phosphorous, the most worrisome pollutants, comes from agriculture. That includes concentrated animal feeding operations (CAFOs) in the region, as well as largely unregulated crop farms whose fertilizer runs off into Bay tributaries.

Despite the huge importance to the region of a healthy Bay, the simple truth is that human activity is endangering it. Already, the Bay experiences "dead zones," as a result. The stop-start, but mostly stopped, effort to clean up the Bay over the last quarter century has accomplished little, and EPA leadership -- at least until 2009 -- was conspicuously absent.

But the Obama Administration has taken a lead role in the effort to clean up the Bay, recently issuing a Total Maximum Daily Load (TMDL) for the Bay, essentially a pollution diet for the six states and the District of Columiba -- the jurisdcitions with land that drains into it. In order to meet those requirements, the states are contemplating creating a water quality trading regime, essentially a market to buy and sell permits to pollute. The idea is that because some polluters have an easier time cutting emissions than others, a trading regime will reduce pollution by incentivizing sellers of credits to maximize their pollution savings -- at a profit.

The idea is particularly popular with fans of "market-based approaches" to environmental regulation. Ironically, it's the same concept that conservatives so vilified when it was proposed as a way to go after climate-change-inducing carbon emissions. But now, faced with the prospect of meaningful pollution limits that will actually be enforced, conservatives are back on board the trading train.

In a briefing paper, issued Friday, May 25, CPR's Rena Steinzor, Nick Vidargas, Shana Jones, and Yee Huang warn of many possible pitfalls awaiting a water quality trading regime. In particular, they note that such an approach has been tried elsewhere and failed, in many cases because unregulated polluters have had no incentive to participate. The paper says that a trading regime could work only if the following issues are successfully addressed:

• Broad participation in the program, including from "nonpoint" pollution sources;
• Genuine accountability, so that credit trades actually translate into pollution reductions, not simply paper savings;
• Resources from the states sufficient to operate an accountable trading regime in all its complexity;
• Rules that avoid pollution hot spots;
• A continuation of traditional regulatory controls that would create an incentive for participation in the program;
• Transparency from EPA and the Bay states, so that compliance can be monitored by all.

Accountability: Water Quality Trading in the Chesapeake Bay makes an additional point: The standard for success with a trading regime cannot be political or ideological. It is not a success if Democrats and Republicans agree on a regime and enact it. It's a success if, and only if, it makes real progress cleaning up the Bay. If it doesn't work, it should go, say the authors of the report. 

Read the report , or read more about CPR's Chesapeake Bay work.