Despite being touted as a less costly approach to curbing stormwater pollution, nutrient trading has yet to catch on among Chesapeake Bay localities. A recent report by the World Resources Institute and the Chesapeake Bay Foundation details the hurdles that are keeping the market-based approach from getting off the ground.
The report’s authors worked alongside officials in Maryland’s Montgomery and Queen Anne’s counties and in Virginia’s Arlington County for almost five years to help them establish a framework for trades. Each will need to reduce stormwater runoff to meet Bay pollution limits, and the two nonprofits had hoped to get the localities to demonstrate how trading could help satisfy some of those requirements at a lower cost.
In trading, sources that reduce their runoff or discharges of nutrient pollution below target levels can sell their surplus reductions or “credits” to other sources. Advocates believe such trades could provide a less expensive alternative for municipalities facing steep costs to make mandated reductions in nutrient pollution from stormwater runoff.
But, for all of the projected benefits of nutrient trading, each locality involved in this report was less than eager to pull the trigger on actual trades, for various reasons.
Stormwater is the fastest growing source of pollution in the watershed, according to the state-federal Bay Program. While it contributes just 17 percent of the Bay’s nutrient pollution, by some estimates, dealing with it constitutes 67 percent of states’ pollution management costs, the report notes.
Instead of forcing municipalities to shell out for curbing stormwater, trading lets them buy nutrient reduction credits from farms or wastewater treatment plants that have exceeded their own requirements, which could reduce costs by as much as 50 percent, the report states, “saving hundreds of millions of dollars per year while helping to restore the health of the Chesapeake Bay.”
But the researchers found that inspiring such trades isn’t as simple as proving that local governments could use them to save money.
“Our goals in the beginning were to actually have some trades in one or all of the three counties,” said Cy Jones, a senior fellow at WRI who has been studying trading at the international organization since 2006. The effort, underwritten by the Linden Trust for Conservation, fell short of that goal, but “while no trades were actually completed, all three counties made it clear that they are interested in pursuing nutrient trading for stormwater in the future.”
The Chesapeake Bay Program published the first guiding principles for nutrient trades in the region in 2001, recognizing the market-based approach as a tool to achieve improved water quality. Both the Bay Foundation and the WRI have backed trading, at least in concept. Other environmental groups view it with skepticism, though, fearing that it could lead to pollution hotspots, particularly in poorer communities. The national nonprofit Food & Water Watch, for example, considers trading a “pay-to-pollute scheme that undermines the Clean Water Act.”
Most trades in the region so far have been between “point sources” of pollution, such as wastewater treatment plants and factories. In Virginia, trading has allowed such facilities to exchange credits so they can stagger costly upgrades to their treatment systems while still meeting overall water quality targets in each river.
Though the general framework for trades has been around for years, the concept has not taken root as quickly as some advocates would like, particularly for trades between “point sources” and “nonpoint sources,” such as farms and urban or suburban communities, which produce polluted runoff that is more difficult to measure and control. In this scenario, a group of farmers could plant trees and shrubs along their streams to soak up nitrogen and phosphorous runoff and then sell those gains as credits to a city downstream that would otherwise have to pay much more to achieve the same reductions by retrofitting storm drains.
That’s the concept the researchers hoped would play out in Montgomery County, where they worked with farmers interested in generating such credits. But county officials said they would need the state to develop a better regulatory framework to make such trades a part of their compliance approach. More work is also needed to convince farmers that trades could be an additional source of revenue for them, the report states.
In Maryland, the report’s authors say, the problem is cities and counties are required to treat runoff from impervious surfaces, rather than meet specific nutrient reduction limits. That makes it difficult to quantify credits for trading.
“It needs to be laid out in a transparent, thoughtful way and, from our perspective, they haven’t done that yet,” Beth McGee, senior scientist for the Bay Foundation, said of Maryland’s regulatory framework for trading.
Virginia regulations leave the state poised for trades between urban and agricultural sectors, McGee said, but those are more likely to occur under the next phase of pollution reduction requirements “when they feel the pinch.”
Arlington County, for example, does plan to purchase credits to satisfy its stormwater reduction requirements in the future. But those credits won’t be needed until 2023, officials determined, and instead of buying them from farmers, the county intends to use credits generated by the better-than-required performance of its own wastewater treatment plant.
While trades might satisfy regulatory requirements, some advocates for nutrient trading worry that they’re simply shifting credit for reductions from one sector to another without achieving any new cutbacks in pollution.
Jeff Corbin, a former senior U.S. Environmental Protection Agency adviser on the Chesapeake Bay and now senior vice president for a company interested in building credit-generating projects in Virginia, said many of the trades being discussed now miss out on a key principle: that nutrient trading should generate additional reductions.
Allowing Arlington County, for example, to trade in on the excess capacity of its wastewater treatment plant, which already overperforms on removing nutrients, won’t result in a net reduction for that watershed, Corbin pointed out.
In the more rural Queen Anne’s County, local officials considered buying credits that it would need by 2025 from farmers. The county considered going through a third-party “aggregator,” a company or person who invests in pollution-reducing projects and then sells credits for the gains realized. But in the end, county officials decided that would be too expensive and entail too much upfront commitment. So instead, they opted to try issuing a request for proposals for a small amount of credits the county could buy directly.
For all of the trouble getting started, McGee said she still considered trading for stormwater “a viable tool.”
“I think it’s doable, but it’s certainly not a silver bullet – and we never said it was,” she said.
Jones and McGee said they think the current political environment — particularly a threatened cutback in federal Bay restoration funds — could set the stage for more pro-trading policies at the state level.
“It’s market-based. It’s a concept that provides flexibility,” McGee said. “I think, politically, there should be continued support.”