As Maryland and other Chesapeake Bay states work to reduce pollution in our waterways, one potential strategy continues to stir debate, namely, a system that has been variously called pollution trading, water quality trading, nutrient credit trading or just plain “trading.” MCAC refers to this practice as pollution trading.

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Photo credit: Paul Clarke

Regardless of the name, here’s the concept: If Party A could reduce a pound of pollution for $100 but it would cost Party B $400, total costs to both parties will be reduced by allowing Party A to make greater reductions than the law requires, and sell the excess reduction as a “credit” to Party B.

Theoretically, this system reduces the same amount of pollution as requiring each party to reduce its own pollution, but at a lower cost to both parties (assuming the credit price reflects some savings to each). Therefore, the theory goes, this will help achieve water quality goals at a lower overall cost.

Proponents argue that this is a benefit because costs of pollution reduction between now and 2025 are high, government funding is scarce, and this market-driven efficiency might enable more pollution reductions. Opponents and skeptics worry it would set up a system vulnerable to abuse and lead to pollution “hot-spots,” where water quality standards are not being met. (You can find out more on MCAC’s pollution trading page.)

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Photo credit: Robert Lawton

Say, for example, that a county government is unable to meet its permit requirements to reduce pollution from wastewater treatment plants, stormwater runoff or other sources of pollution. That government could buy pollution credits, which might be sold by a farmer willing to implement practices to reduce extra pollution runoff from his or her farm. This scenario makes sense from an economic perspective, if the actions the farmer will take cost less than what the local government would have to pay to reduce the same amount of pollution by other means.

However, there are many more factors to consider besides dollars and cents. Who monitors or enforces the pollution trading? Can we ensure that projects reduce more pollution than is already legally required, resulting in a net reduction – so we aren’t just “moving pollution around?” How can we protect communities from receiving an unfair amount of pollution, even if it is “offset” by reductions elsewhere?

To help answer these questions, MCAC established a set of five principles on pollution trading designed to ensure transparency and accountability to any potential trading system.

During the 2017 General Assembly session, Governor Hogan’s Administration introduced legislation that proposed allowing up to $10 million of the Bay Restoration Fund to be diverted from wastewater treatment plant upgrades to help jump start a pollution trading system by allowing the Maryland Department of the Environment to buy credits from generators of the credits. MCAC and many other environmental organizations opposed this legislation, largely because there were no details about what the program would look like or how the funding would be spent.

The legislature appreciated these concerns and amended the bill to remove any reference to trading or credits, instead focusing on other innovative practices to reduce pollution. Furthermore, the amendments also restricted the funding to urban or suburban projects and will “sunset” the program after four years. (For more details, read the Bay Journal’s article on the amendments to the bill.) MCAC dropped our opposition and the amended bill passed the General Assembly with a near unanimous vote.

With the General Assembly adjourned, pollution trading is still a timely topic of discussion, as the state’s Water Quality Trading Advisory Committee reconvenes on May 1. The committee is expected to give a legislative update from the General Assembly session and discuss potential trading regulations.

Over the past year, MCAC has submitted public comments regarding the Maryland Department of Agriculture’s proposed trading regulations and the “Final Draft” of the Maryland Trading and Offset Policy Guidance Manual. We will continue to engage in policy discussions around pollution trading at every opportunity.

While a pollution trading system may offer potential to help achieve overall pollution reduction goals, we believe any such program must have proper safeguards to ensure transparency and accountability and to protect local water quality. Make sure to follow us on Facebook and Twitter as we continue to watchdog pollution trading in Maryland.

-Ridgway Hall, Chesapeake Legal Alliance Board