Today, the U.S. EPA, in partnership with the USDA, reaffirmed its commitment to water quality trading. Link to the full press release here. Such market-based approaches, properly bounded by regulatory oversight and requirements, are absolutely essential to helping us fix big environmental problems without crippling our local economies. The pull quotes from the heads of EPA, Gina McCarthy, and USDA, Tom Vilsack,
“New water quality trading markets hold incredible potential to benefit rural America by providing new income opportunities and enhancing conservation of water and wildlife habitat,” Agriculture Secretary Tom Vilsack said. “Additionally, these efforts will strengthen businesses across the nation by providing a new pathway to comply with regulatory requirements.”
“EPA is committed to finding collaborative solutions that protect and restore our nation’s waterways and the health of the communities that depend on them,” said EPA Administrator Gina McCarthy. “We’re excited about partnering with USDA to expand support for water quality trading, which shows that environmental improvements can mean a better bottom line for farmers and ranchers.”
Water quality trading provides a cost-effective approach for regulated entities to comply with EPA Clean Water Act requirements, including water quality-based effluent limits in National Pollutant Discharge Elimination System permits. Trading would allow regulated entities to purchase and use pollutant reduction credits generated by other sources in a watershed. Cost savings and other economic incentives are key motivators for parties engaged in trading. Water quality trading can also provide additional environmental and economic benefits, such as air quality improvements, enhanced wildlife habitat, carbon capture and storage, and new income and employment opportunities for rural America.
Kudos to EPA and USDA for helping to establish the correct incentives that will produce real and lasting sustainability. I’ve blogged previously on the importance of these emerging markets here and here.
[Update: On December 13, 2013, a federal judge tossed out a lawsuit by an environmental group challenging EPA’s water quality trading approach.
A victory for common sense regulation and another regulatory tool to fixing the Chesapeake Bay, Gulf of Mexico and other water bodies impaired by nutrients. Linking to the decision here, ENV_DEFENSE-#665659-v1-FWW_Opinion_on_MTD]
[Update: linking to an Oct 2013 resolution by NAHB on trading NAHB Trading Resolution adopted Oct 2013]
[Featured Image Photo credit to Rich Niewiroski, Jr.; Wikimedia Commons]
Water quality trading certainly does have tremendous potential to lower the cost of improving water quality, and we had good success in Virginia when we adopted a version of it. But there is also a serious danger of abuse. Specifically, if it is not set up to reward results (as opposed to just promises), it can turn into just another farm subsidy.
There are lots of low-cost opportunities to reduce nutrient runoff from farms, and in many cases these measures will be more cost-effective than the technology that is needed to reduce nutrients flowing from wastewater treatment plants. But the nutrient flows from WWTPs are easy to measure at the outfall pipe; in contrast, it is very difficult to know whether farmers are delivering on the environmental improvements that they promise.
The result can be that consumers pay a new tax on their water/sewer bills, the money gets transferred to farmers, but no actual water quality improvement ever takes place. Something similar happened with EPA’s Renewable Fuels Standards, and we are all paying the price. I certainly hope that the agency has learned from that experience, but the presence at this event of Sec’y of Agriculture (and incurable rent-seeker) Tom Vilsack makes me think that this is just another greenwashing of a welfare-for-the-wealthy program. I hope I am wrong.
Brian, good cautionary tale and principles. As you may know, there is an encouraging effort afoot, supported by USDA, EPA, the states, NGOs and industries to bring greater rigor, transparency, third party verification and validation to water quality trading, to protect against the potential abuses you mention. Although potential for abuse exists in all markets, with sufficient regulatory oversight, the potential for making significant improvements in water quality far exceed the potential for those risks.
The only other alternative to achieve water quality standards is to amend the Clean Water Act and provide EPA the authority to regulate all nonpoint source discharges, including all farmers. If we can’t make innovative approaches like water quality trading work (which I’m confident we can), then that may be the next big step.