While the Obama administration is touting Virginia's pollution trading program as an "innovative market-based approach" to cleaning up the Chesapeake Bay, Maryland's trading effort remains stuck in limbo after years of study and debate.
Federal officials called it a model for other states struggling with the high costs of cleaning up polluted waterways.
"Virginia's nutrient trading program is a strong example of how to create economic opportunity and new income for rural America, while protecting and improving local waterways and the Chesapeake Bay," said McCarthy.
Under it, the state is working to reduce phosphorus pollution fouling the bay by having private investors pay farmers to reduce soil erosion and runoff of fertilizer from their fields.
Those reductions, gained through planting streamside trees and other voluntary conservation measures, are "banked," then sold to public or private developers who need to compensate for their construction impacts on waterways.
The state's transportation department, facing federal requirements to reduce storm-water pollution from its road-building projects, has been able to save $1 million so far through trading, officials say.
Buying banked pollution "credits" from farmers and other landowners has cost about half what the state would have had to spend on building storm-water detention ponds and underground filters at construction sites that would curtail polluted runoff from the projects.
Maryland has been working since 2008 to set up its own nutrient pollution trading program - but has yet to register a single transaction.
That's upsetting to proponents, who contend it's a far more cost-effective way to clean up the bay. Supporters say that curbing fertilizer runoff and soil eroson on farmland is far less expensive - by orders of magnitude in many cases - than trying to reduce polluted runoff from city and suburban streets and parking lots.
"Every day we wait is a day we dig a hole for ourselves in the state of Maryland," said George Kelly, director of Environmental Banc & Exchange in Owings Mills. His company restores and protects degraded ecosystems to offset or mitigate impacts caused by road building, development, mining or oil and gas exploration. "We claim we're progressive but we're way behind."
Farmers can get paid by companies such as Kelly's by enacting voluntary conservation measures on their land over and above what's required of them by state or federal environmental laws and regulations.
By lowering costs of reducing nutrient pollution, proponents of trading suggest the practice could alleviate some of the backlash against the bay cleanup, particularly the controversy over storm-water management fees that fee critics have dubbed the "rain tax."
Some environmentalists, however, oppose pollution trading, arguing it is inequitable to let polluters buy their way out of restoring the degradation they cause, and that privatizing environmental cleanup is ripe for fraud.
"It's just a recipe for disaster," said Scott Edwards, of Food & Water Watch, a Washington-based environmental group. Reviews of trading programs in other states found they "allowed polluters to avoid compliance with the law while paying farmers for pollution reductions that are never properly verified," according to the group.
Food & Water Watch went to court in an unsuccessful bid to block the use of pollution trading in cleaning up the bay. Even so, Edwards contends such trading programs are generally flawed by a lack of transparency - an inability for the public or even regulators to verify that farmers are really making the pollution reductions that are being bought and sold as "credits."
The O'Malley administration has pledged to use nutrient trading to offset the pollution caused by future growth and development. Officials also have looked at allowing trades to reduce the state's projected $15 billion cost of achieving bay pollution reduction goals set by EPA.
Maryland has been given $750,000 in federal funds since 2008 to set up its own marketplace for buying and selling nutrient pollution credits. The state Department of Agriculture developed an online trading website, where pollution "credits" can be registered and offered for sale to willing buyers. The website has won national recognition, and officials say they have worked on addressing concerns about accountability and verifying credits.
To date, according to state agriculture officials, more than 200 farms - or about 2 percent of the state's farm acreage - has been evaluated for eligibility to sell nutrient credits.
Although about 60 percent of Maryland farms evaluated so far could meet the requirements to engage in trading, state officials say, only two have ever registered any pollution credits for sale, and no trades have taken place.
Kelly said his firm had a deal lined up under Maryland's program, but could not complete it because agencies had no regulations to guide them.
"We're pretty much on the cusp," said Susan Payne, coordinator of ecosystem markets for the Maryland Department of Agriculture.
Her department has drawn up regulations spelling out how trades are to occur, but to make the marketplace for pollution credits work the state's environmental regulators need to set rules spelling out the circumstances in which such pollution trades can be used to offset environmental impacts.
Objections from environmentalists have effectively blocked trading in Maryland, as state environmental officials have been unwilling to go forward unless they can achieve consensus on how to proceed. A workgroup met for six months last year and agreed on three-fourths of the issues raised, but could not come together on the remainder, including lingering concerns about being able to verify pollution reductions.
"I think we got awfully close," said David Costello, deputy secretary of hte Maryland Department of the Environment. "I anticipate - at least I hope - that the state will continue to move forward, because I think if we do it right it will help us do what Virginia is touting. It will reduce the cost of restoring the bay."
Asked when the state may dip its toe into pollution trading, he said, "So much has been done, so if the new administration wants to continue to move forward, possibly next year."