Federal Cap on Water Pollution Is Chesapeake Bay’s Road to Remedy

Nutrient trading in some states is similar to the carbon cap and trade Congress failed to pass to address global warming pollution

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When Dawn Stoltzfus looks at the Chesapeake Bay, she sees a body of water on life support. “It’s barely hanging on,” Stoltzfus, a spokeswoman from the Maryland Department of the Environment, told SolveClimate News.

The Chesapeake Bay is the country’s largest estuary, with a watershed that’s home to 17 million people. Despite decades of cleanup efforts, the estuary remains plagued by invasive species, harmful algal blooms and loss of wetland habitat.

Excessive nutrients pose the biggest challenge to water quality, and for the first time, the Environmental Protection Agency is setting mandatory limits on Bay-wide nutrient loads.

The final numbers—called Total Maximum Daily Loads—will be released later in December and are supported by executive orders from May and September 2010, when President Obama called for better restoration of the Bay’s ecosystem health.

In draft targets released in September, the EPA aimed to reduce the Bay’s nitrogen and phosphorous by 25% from current levels, with all reduction measures in place by 2025.

If that sounds like the federal government is putting a cap on the water pollution flowing into the Chesapeake, that’s because that’s exactly what it is. Further, in order to meet and possibly go beyond those pollution limits, several states in the watershed have initiated nutrient trading programs.

The basic concept is the same as the carbon trading Congress has failed to pass to address global warming pollution. Businesses that would produce too much nutrient pollution can buy nutrient credits from other businesses that operate under the allocated limits.

Chuck Fox, senior advisor to the EPA Administrator, said this work on daily load limits in the Chesapeake is the most aggressive and most complicated done in EPA history.

“We want to bring a new level of leadership and write a new course of history for the Chesapeake Bay,” he said.

Failure to Comply Will Have Consequences

Each year, millions of pounds of nitrogen and phosphorous are washed into the bay. These nutrients, which originate from wastewater treatment plants, fertilizer runoff and air pollution, can induce algal blooms that remove oxygen from the water and block sunlight from reaching underwater plants.

All marine habitats need nutrients to survive, said Richard Batiuk, Associate Director for Science at EPA’s Chesapeake Bay Program Office. But the nutrient load has gotten so excessive it’s like “we’ve poured on cheeseburgers and fries.” The Bay needs to be put on a diet, he said.

Past clean-up efforts relied on voluntary nutrient reduction goals. If a state didn’t meet its goal, there was no price to pay except for some bad press, Batiuk said.

The upcoming Daily Loads will apply to six watershed states – New York, Pennsylvania, Delaware, Maryland, Virginia, West Virginia, and the District of Columbia – and hold them responsible for their nutrient output. States that don’t comply will face consequences, such as stricter Daily Loads in the future and decreased EPA funding for state programs. In addition, states must commit to two-year milestones that clearly demonstrate progress.

Each state is free to come up with its own method of nutrient reduction. The process began this summer, when the EPA calculated preliminary figures for Total Maximum Daily Loads. Each state then wrote strategy reports on how they would meet those limits: examples include upgrading wastewater treatment plants or planting cover crops to reduce soil erosion. The strategies will be updated once the EPA publishes final Daily Load figures later this month.

This flexibility allows each state to use the strategies that are best for them, said Batiuk. For example, New York, which has a very strong local-based government system, is working to clean up local streams and rivers that feed into the Chesapeake. Delaware, with its poultry farming industry, is turning manure into landscape fertilizer to be sold across the eastern seaboard.

Nutrient Credit Trading in Three States

Maryland, Pennsylvania and Virginia operate nutrient trading programs. Maryland’s began in 2008, and it was aimed at point-sources of pollution such as wastewater treatment plants. After two years, the program yielded only a single credit trade. That’s because the point-sources were reluctant to sell off their right to pollute.

Any wastewater plant that sells nutrient credits is effectively driving development to its competitors, said John Rhoderick, Administrator of Resource Conservation Operations in Maryland’s Department of Agriculture. Once a treatment plant reaches the maximum Daily Load, there’s no way to expand service to new customers.

To encourage trading, earlier this month Maryland expanded the trading program to include non-point sources of pollution — such as agricultural runoff. State experts have begun to assess individual farms to estimate the nutrient output. If the farm has nutrient credits to spare, farmers can sell them and generate revenue.

“Right now we have a lot of interest from people we’ve run these assessments on,” Rhoderick said, but no one has jumped into trading yet. Market signals aren’t clear enough. The credits haven’t been priced, because the prices will depend on how many farmers opt into the program. The expectation is that farmers who find ways to reduce nutrient output will be able to sell their credits to wastewater treatment plants seeking to expand, and generate added income.

Rhoderick points out that the nutrient credit trading program is different from carbon cap and trade programs that people are familiar with in one important respect. Under Maryland’s current program, polluters can’t begin trading until they have met their nutrient limits. They can’t keep polluting and buy their way into compliance. They must first comply, before trading their way into possible expansion.

Still Rhoderick expects there will be plenty of buyers. The trick will be to get sellers into the market, and that’s what the expanded trading program aims to do. By 2015, Rhoderick is hoping to see 10% of Maryland’s farmers trading nutrient credits.

Pennsylvania’s nutrient credit system also had a slow start. Now six years old, it didn’t see its first trade until 2007. Since then, there have been nine completed trades with another six pending. In total, the state has traded 92,000 nitrogen credits and 200 phosphorous credits (each credit is equal to a pound of nutrient).

Looking into the future, experts are looking at ways to combine nutrient trading with carbon cap and trade. Some conservation practices such as planting trees sequester carbon in addition to absorbing nutrients; a recent University of Maryland study modeled how both practices might be combined yielding dual benefits to landowners.

Batiuk hopes that Chesapeake Bay will set an example for the nation. If the collaborative efforts work here, he said, then this gives hope for bigger projects like restoring the Gulf of Mexico, whose watershed drains a much larger area but which shares many of the same problems as the Chesapeake.

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