Pollution Trading: Making Crime a Commodity

A scheme promoted by industrial interests will help destroy, not save the Chesapeake Bay

Pollution trading is being promoted by industry and industry-funded nonprofits alike as a solution to managing offending pollutants in our waterways. Nowhere is this a bigger problem than in the Chesapeake Bay, which is literally dying from agricultural run off from the powerful poultry industry there.

Despite being better known for killing cap-and-trade legislation to address greenhouse gas emissions, industry in general has long been a big supporter of such market-based approaches to pollution control because it's simply easier than actually cleaning up their operations and reducing pollution. Take, for example, back in 2005, when George W. Bush's EPA finalized a market-based approach to allow for the non-control of mercury emissions from coal-fired power plants. In truth, the trading of mercury pollution wasn't EPA's idea at all; it came from a law/lobbyist firm in DC called Latham and Watkins who was retained by many of the coal-fired power plant companies to promote their interests in DC. When Bush came into office, a senior L&W lobbyist, Jeffrey Holmstead, wheeled his office chair over to EPA headquarters to sit at his new desk as the Assistant Administrator for Air.

Holmstead worked for EPA in title only--the fact is he never stopped working for his industry clients. Along with his chair, Holmstead brought over to EPA a briefcase stuffed with his legal memos about how to deregulate the coal industry and relax pollution controls. At the top of his wish list was a plan to implement a "cap and trade" scam for the tons of mercury billowing out of his clients' smokestacks. His underhanded efforts resulted in one of the most blatantly illegal EPA rules, known cynically as the Clean Air Mercury Rule (CAMR), ever promulgated by the Agency.

Back then, the environmental community rose up and unanimously condemned the free market approach to pollution non-control. Many went to court. Among their primary arguments against trading was that the section of the Clean Air Act that regulated mercury simply did not allow for the wheeling and dealing of pollutants. They also argued that trading would create "hotspots" of pollution. Eventually, in 2008, the court did what it had to do and found Holmstead's CAMR to be illegal and the environmental community stood and cheered as one.

As the saying goes, that was then, this is now. Today, the coal-fired energy sector, through its trade group, the Electric Power Research Institute (EPRI), and much of the environmental community seemingly stand together to embrace market approaches and financial incentives to pollute our public trust waterways.

The federal government is playing cheerleader for pollution trading as well. In August of 2011 the United States Department of Agriculture handed EPRI, an organization with revenues in 2010 of over 387 million dollars, one million dollars to jumpstart a nutrient water trading program in the Ohio River Basin. Why EPRI? Because EPRI's power plants emit levels of nitrogen that are destroying the Ohio River watershed, even down to the Gulf of Mexico. Faced with increasing pressure to reduce these devastating nitrogen levels, industry has figured out that a nutrient trading charade will allow them to keep pumping out nitrogen at current, or even greater levels, while pretending to be doing something good for water quality in the Ohio Basin.

Despite being better known for killing cap-and-trade legislation to address greenhouse gas emissions, industry in general has long been a big supporter of such market-based approaches to pollution control because it's simply easier than actually cleaning up their operations and reducing pollution.

In the Ohio scheme, EPRI's members buy their nitrogen pollution credits from Ohio Valley agriculture operations that swear on a stack of self-serving self-certifications submitted to state ag agencies that they've reduced their own nitrogen discharges. Of course, with no monitoring system in place, none of the reductions are ever really verified. It's a whole new kind of farmers market for the 21st century - green apples, summer squash and sham nutrient credits.

In the Chesapeake, USDA didn't have EPRI to jumpstart a nutrient trading program because nitrogen-spewing power plants just aren't as prevalent in the Bay watershed as they are in the Ohio Valley, so last year the EPA played along and placed a trading component into the Bay Total Maximum Daily Load. Then USDA announced that it was spending up to 10 million dollars to promote trading in the Bay watershed. And this time some of the biggest proponents of trading in the Bay aren't industry, but many of the same environmentalists who decried the trading of mercury just a few years ago.

That shift to market approaches to water pollution can only mean bad news for the Bay and watersheds across the country. Putting the illegality aside, there is simply no support for the position that nutrient trading will clean up the Bay. Water pollution trading is built on the misguided premise that polluters have the right to destroy our public waterways and we need to create an equally false market incentive to get them to stop turning a crime into a commodity. It's been used elsewhere and never been shown to be effective anywhere. It allows unverified claims of nutrient reductions from nonpoint sources of pollution and it's fraught with the potential for purposeful industry mismanagement in the point source sector. Keep trading as a part of the Bay clean up plan, and there is little doubt that the Bay will continue its not-so-slow decline into extinction.

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