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Water Quality Trading



In the spirit of cap and trade, the government has decided its misfounded belief that the free market can be used to solve environmental problems should be applied to water pollution. Water quality trading programs are now used by more than 20 states that allow companies to trade credits for nutrient pollution of waterways, largely from agriculture. You may not be surprised that this system is not actually working to improve water quality.

But after reviewing over 1,000 documents from pilot trading programs in Pennsylvania and Ohio, Food and Water Watch researchers came to the conclusion that the programs, though they sound reasonable on paper, operate very differently than predicted in the real world.

With little state oversight, private contractors have been permitted to run pollution trading markets that offer highly-regulated industrial polluters the chance to essentially swap places with farms, concentrated animal feeding operations (CAFOs) and feed lots whose runoff is not as tightly controlled under the Clean Water Act.

“The big, big problem that we see on the credit generating side is that agriculture operations never have to monitor, sample, never have to verify that they actually generated the pollution that underlies these credits,” said Food and Water Watch attorney Scott Edwards. “It’s all based on modeling. “

Although the researchers did not uncover any direct evidence of fraud, they described lax record-keeping that made any attempt to audit the programs difficult.

The programs also cross an important line in the Clean Water Act, operating in a way that environmentalists described as legally dubious, although a lawsuit challenging the emerging programs was dismissed in 2013 when a court ruled that it was premature to sue.

The Clean Water Act draws a sharp distinction between pollution that happens at a single point, like a pipe that spews chemicals into a river, and pollution that happens when rain waters flood over an area and pick up pollutants as the water flows across land. Pollution from specific point sources requires a permit, and individual people who get their water downstream from those points can sue if those permits are breached. Run-off pollution, on the other hand, is exempt from those rules, and managing that pollution is left to the discretion of state governments.

The pollution trading programs described in the Food and Water Watch report, Water Quality Trading: Polluting Public Waterways for Private Gain, allow industrial polluters like power plants to buy credits for their point source pollution, in exchange for preventing pollution from run-off. But tracking how credits move around is far more difficult than enforcing a permit with a clear limit, advocates warn.

In Pennsylvania, the researchers found, the private company running the state’s trading program issued pollution credits for moving over 15 million pounds of chicken manure out of the Chesapeake Bay watershed, allowing industrial polluters like coal-fired power plants to buy up the rights to dump an equal amount of nitrogen. But 90 percent of that chicken manure was shipped to a single hay farm, the documents showed — in the Ohio River Basin rather than the Chesapeake Bay watershed, but less than a mile from a creek that’s already considered “impaired,” or too heavily polluted, under the Clean Water Act.

But the trail doesn’t end there. That hay farm, the researchers found, acts as a manure broker, meaning that the chicken waste could be resold. And regulators weren’t checking to make sure that the manure didn’t wind right back up in the Chesapeake Bay watershed, the report said, labeling the end result “what can only be described as a shell game.”

Poor regulation plus a fundamentalist belief in the free market combined with agribusiness interest in polluting whenever possible is not a recipe for keeping water clean. That this program is actively undermining the Clean Water Act only makes this detrimental to the environment. And it should make all of you seriously doubt whether a cap and trade program can work on climate change-causing emissions. Capitalism is not the answer to our environmental problems.

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