Nutrient trading is premised on the fact that the cost to reduce water pollution differs between pollution sources. Under a nutrient trading program, an entity that is able to economically reduce its annual pollutant discharges below the allocated level can sell their "surplus" reductions (called "credits") to other sources facing higher pollution reduction costs.
If done well, it's a win-win - the necessary pollution reductions are achieved in a cost-effective manner and the credit seller is provided additional revenue.
"Offsets" are credits that are purchased by a source to compensate for a new pollution load it is generating - an expanding wastewater treatment plant's increased load to accommodate additional growth or a new development's runoff - to ensure, at a minimum, "no net increase" in pollution. This process is necessary to maintain the overall pollution load cap.
The concept of nutrient trading is not new to the Chesapeake watershed. In fact, over the last several years, Pennsylvania, Virginia, Maryland, and West Virginia have all issued regulations or guidance that allow nutrient trading.
And, all of the states are relying, to some extent, on trading programs to achieve and maintain the overall pollution cap established by the Chesapeake Bay Total Maximum Daily Load.
But probably no other aspect of the TMDL has drawn as much controversy and criticism.
Some critics of nutrient trading argue that trading allows a source to "pay to pollute" rather than cleaning up its own pollution. Others have expressed concern about local water quality protection, transparency and accountability, or the uncertainty of pollution reductions garnered via credits, particularly those involving nonpoint sources.
The Chesapeake Bay Foundation shares this skepticism. (See "Ready to trade: PA approves policy to exchange nutrients," February 2007).
But while we all must remain vigilant in the development of any trading program, one that is properly designed and implemented offers both a way to achieve the Bay's pollution limits in a cost-effective and environmentally beneficial manner, and maintain the pollution cap, once achieved.
Case in point: Local governments holding urban stormwater permits will likely be one of the main beneficiaries of a nutrient trading program. The high cost of achieving stormwater pollution reductions is one of the greatest challenges of implementing the Bay TMDL.
Local governments have the potential to save millions of dollars if they can trade for at least a portion of their reduction requirements. For example, they could more economically purchase credits from agricultural sources that have surplus reductions in lieu of spending millions on stormwater retrofits.
Another case in point: There is no doubt that the region's population will continue to grow. With that growth comes additional pollution from new development and sewer/septic loads. Trading programs provide a system to offset these new - and inevitable - pollution loads.
The alternative to this "no net increase" approach would be for the EPA and Bay jurisdictions to accommodate the additional loads from growth in the TMDL allocations. That is, they would bank, or set aside, a portion of the allocations to accommodate predicted loads from future growth.
This would mean requiring additional pollution reductions from existing sources. With the level of concern expressed by states and local governments about achieving the existing allocations, the notion of reducing these loads even further, so as to provide room for anticipated future loads, seems untenable and unfair.
The key to successful nutrient trading in the Chesapeake region is to have the necessary safeguards in place to ensure reductions are real and verifiable. These safeguards include:
Ensuring the protection of local water quality;
Verifying and monitoring of credit-generating practices by independent third parties;
Using legal mechanisms (e.g., contracts) to ensure the achievement of the necessary reductions, including provisions that allow for citizen enforcement; and
Ensuring transparency and accountability through public access to information on proposed trades and the opportunity to provide input.
The design and implementation of exemplary nutrient trading programs will, without question, pose challenges. But such programs are critical to restoring the Chesapeake Bay and its tributaries in the least possible time, at the least possible cost.
It is time for all to step forward and work together to design and implement effective trading programs, thereby helping to ensure the restoration of clean water to the region.