Gambling on a Wall Street approach to managing nature

Ever since President Ronald Reagan declared that “government is not the solution to our problems, government is our problem,” Republican policymakers have been working to privatize America’s public services.

The idea is that the magic of the free market is needed to improve the world around us because our elected government is inefficient and inherently suspect. So instead, we’ve seen the growth of private prisons, highways and bridges, and even municipal water systems owned by corporations.

Now, here in Maryland, we are witnessing the logical flowering of that idea: Employing a Wall Street approach to managing nature.

Gov. Larry Hogan’s administration is scheduled to release regulations this week that would encourage pollution trading as a central strategy to cleaning up the Chesapeake Bay.

What is pollution trading? It works like this: If a sewage plant or other facility wants to pollute more than would normally be permitted, it would be allowed to do so by sending money, through the purchase of pollution “credits” on the open market, to another facility that is polluting less.

In theory, pollution trading could provide more bang for the buck in bay cleanup. For example, if Baltimore would have to spend $10 million to rip up blacktop and replace it with grass and trees to reduce a small amount of nitrogen runoff pollution, it might be more efficient for the bay cleanup if the city instead shipped $5 million up to Carroll County to plant trees along streams on farms, which would absorb more nitrogen pollution.

The problem is, under this scheme, residents of lower-income urban neighborhoods would lose out on any greening and water quality improvements, while rural landowners would enjoy taxpayer-funded enhancements to their private properties.

Such concerns about environmental injustice and local pollution “hot spots” caused by pollution trading were often theoretical — until last week. A new report by the nonprofit Environmental Integrity Project (EIP) documented how a pollution trading system already underway in Virginia is damaging the health of the Shenandoah River.

In its report, “Sewage and Wastewater Treatment Plants in the Chesapeake Bay Watershed,” EIP examined the records of 487 wastewater treatment plants across the region. The organization found that the trading program in Virginia has allowed sewage plants to discharge more nitrogen and phosphorus than their permits allow into local waters already choked with algae blooms caused by these pollutants. For example, pollution trading allowed the Strasburg Sewage Treatment Plant to release 2,942 pounds of phosphorus last year, more than three times its permitted limit, into the North Fork of the Shenandoah, which already has excessive levels of phosphorus from farm runoff. Virginia’s trading system also allowed the Front Royal Wastewater Treatment Plant to dump 9,146 pounds of phosphorus into the Shenandoah in 2016, more than twice its permitted limit.

“Nitrogen and phosphorus are the two primary pollutants that are being dumped,” said Mark Frondorf, the Shenandoah Riverkeeper. “And they are being dumped because, quite honestly, it’s cheaper, better, faster and easier for wastewater treatment plants to buy credits on the credit exchange than to actually upgrade their facilities.”

So, who exactly is selling the pollution credits that these Shenandoah Valley sewage plants are buying, to allow them to dump more pollution? And where are they located? That information is a secret under Virginia’s pollution trading system. Public records simply say that the “Virginia Nutrient Credit Exchange Association” sold the credits, but that’s a conglomeration of 73 owners of 105 wastewater treatment plants scattered across the state. The records do not specify which plants are allegedly reducing pollution to make up for the pollution increases on the Shenandoah. That makes accountability for polluters impossible.

You don’t have to be a believer in big government to understand that we need government to enforce the federal Clean Water Act, by imposing fines on individual plants that violate pollution limits in their individual permits. In fairness, government bureaucracy can be slow and unresponsive, and we should be open to ideas from the private sector. But we also need to be careful we don’t lose the Chesapeake Bay in the smoke and mirrors of pollution trading.

As Reagan also said: “Trust, but verify.”

Tom Pelton (tpelton@environmentalintegrity.org) is director of communications at the Environmental Integrity Project and host of the public radio program “The Environment in Focus” on WYPR 88.1 in Baltimore.

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