Water Quality Trading in the Chesapeake Bay

Abstract

In May 2009, President Obama issued an Executive Order on Chesapeake Bay Protection and Restoration, declaring the Bay a national treasure and signaling that EPA will play a strong role in leading Bay cleanup. The order marked a dramatic departure, offering the promise of federal leadership on Bay cleanup. The following year, EPA issued a Chesapeake Total Maximum Daily Load (TMDL), a pollution budget for Bay states. Faced with a federal commitment, the states have begun work on complying with the TMDL. One Bay-wide approach under consideration is a market-based initiative, water quality trading, that would allow polluters to trade pollution credits. In this white paper, CPR's Chesapeake Bay experts warn that such an approach has largely failed elsewhere, and that the success or failure of a Bay trading regime rests on whether Bay states can meet a number of several threshold criteria, including: Broad participation in the program, including from "nonpoint" pollution sources; Genuine accountability, so that credit trades actual translate into pollution reductions, not simply paper savings; Resources from the states sufficient to operate an accountable trading regime in all its complexity; Rules that avoid pollution hot spots; A continuation of traditional regulatory controls that would create an incentive for participation in the program; Transparency from EPA and the Bay states, so that compliance can be monitored by all.

Keywords: Water Quality Trading, Nutrient Trading, Clean Water Act, TMDL, Chesapeake Bay