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Hogan Administration Proposes Pollution Credit Trading for Chesapeake Bay

    Wall Street-style trading is a cornerstone of the American economy, with people trading stocks and bonds and cash for all types of services.

But should trading also be a tool we use to manage the natural world?  

Maryland Governor Larry Hogan’s administration recently joined a growing number of states that are trying to move toward pollution credit trading as a system to reduce pollution in the Chesapeake Bay and other waterways.  

In such a system, a Maryland power plant or municipality that wanted to dump more pollution into a river could do so only if it sent money through a broker to someone else – like a farmer in Pennsylvania  -- who would agree to reduce pollution, for example by fencing his cows out of a stream.

Hogan’s secretary of the environment, Ben Grumbles, argues that such trades could accelerate and reduce the multi-billion dollar cost of the Chesapeake Bay cleanup. The idea is that pollution trading -- which is already underway in Pennsylvania and Virginia -- can direct a stream of cash to practices that can reduce pollution more efficiently, and provide an incentive to polluters like farmers who are currently exempt from pollution limits.

“The beauty and promise of water quality trading is bringing more parties into the arena to discuss solutions and come up with more cost-effective ways to reduce excess nitrogen, phosphorus and sediment – real threats to the Chesapeake Bay,” Grumbles said.

Governor Hogan’s administration plans to issue a pollution trading proposal document in the spring. The administration will public comment before it issues rules for the new program.

The farm lobby loves the idea , because it would mean money flowing from urban areas to farmers. But some environmentalists are concerned that the system --  which originally came from Republicans hostile to government regulation --would hurt urban waterways and undermine the enforceability of the federal Clean Water Act, which relies on strict limits and has been effective in reducing pollution.

Trading between monitored pollution sources – like the smokestacks of coal-fired power plants – worked to reduce Acid Rain in the 1990s and now appears to be helping to curb carbon dioxide air pollution.

However, now the Hogan Administration is proposing trades between monitored and unmonintored pollution sources, such as farms. Critics say that means it would be nearly impossible to verify if pollution is actually being reduced.

Pennsylvania has been increasingly relying on pollution trading – but its system has been criticized by EPA and others for its lack of transparency and accountability. And Pennsylvania is far behind in its pollution reduction goals, especially from farms.

“There is not a market-based pollution control system in place in this country – in this world – that isn’t just rife with fraud, manipulation and mismanagement,” said Scott Edwards, Co-Director of the Food and Water Justice Program at Food & Water Watch.  “Water pollution trading will be the same.”

Josh Galperin, Director of the Environmental Protection Clinic at Yale Law School, described pollution credit trading as a form of “desperate environmentalism.” By that, he means a type of industry-friendly compromise increasingly adopted in recent years because of a conservative backlash against the strong and effective environmental laws of the 1970s.

Galperin said that for Maryland to make trading work with farms, the state would have to impose additional regulations, which may be unpalatable to farmers. The state would have to get more involved in inspecting farms, to see if the pollution reduction projects funded by trading are really in place -- with the records of their inspections open to the public. Most farm pollution control records are secret today, by state law. which would have to change if the state wanted a transparent system.

The state government would also have to start performing intensive monitoring of waterways near farms, to see if pollution is actually going down, Galperin said.  This would require a change in direction, because Maryland in 2014 cut by 60 percent its water quality monitoring stations in the farm-intensive lower Eastern Shore.

“I think it’s a bad idea to have trades between a monitored and an unmonitored source, or a series of unmonitored sources,” Galperin said.  “If there is not monitoring, then there shouldn’t be trading, because the government cannot keep track of whether the policy is working or not."

Tom Pelton, a national award-winning environmental journalist, has hosted "The Environment in Focus" since 2007. He also works as director of communications for the Environmental Integrity Project, a non-profit organization dedicated to holding polluters and governments accountable to protect public health. From 1997 until 2008, he was a journalist for The Baltimore Sun, where he was twice named one of the best environmental reporters in America by the Society of Environmental Journalists.