We have one fantastic example of environmental regulation that improved human health, reduced pollutant loads to the environment, and “let the market decide” the implementation to do so: cap-and-trade of sulfur dioxide to resolve the issue of acid rain. There is much debate as to the potential effectiveness of cap-and-trade for other air emissions, namely mercury and carbon dioxide, but it has never been implemented for water emissions.
That is about to change. Under the Clean Water Act, the EPA was tasked with first permitting various polluters to release maximum allowable amounts of pollution to the nation’s waterways. If that strategy does not lead to the receiving water returning to a certain status of beneficial uses (such as recreation and drinking water), then the EPA was tasked with establishing a total maximum daily load (TMDL) for the impaired water body, from point (pipes) and non-point (agricultural runoff) sources, and then forcing all stakeholders to come into compliance with this permissable load. Because non-point sources are much harder to regulate, the EPA hasn’t gotten very far on the latter task, and large watersheds that continue to have major water quality issues, such as the Chesapeake Bay and the mouth of the Mississippi River, reflect the lack of enforcement.
Well, the EPA and others are finally starting to sort out this TMDL business, and one innovative solution that will be launched as a pilot study is the trading of pollution credits between industrial facilities and farmers in the Ohio River basin, specifically in Indiana, Kentucky, and Ohio. This is very promising, as it provides incentives for farmers to “implement relatively low-cost land management techniques to reduce fertilizer- and manure-laden runoff. Those reductions would generate “credits” that farmers could then sell to industrial facilities for which comparably effective pollution reduction technologies would be considerably more expensive to install.” Farmers are generally very resistant to emissions regulations, because they feel the cost burden is unfair and oppressive. This technique, though, will provide financial incentives for them, and will spread the cost burden between industrial and agricultural sources alike.
The project could eventually include up to eight states in the Ohio River Basin, potentially creating credit markets for 46 power plants, thousands of wastewater treatment facilities and other industries, and about 230,000 farmers.
I just don’t see a downside. Let’s hope that in 2015, when the pilot testing is over, that we’ll have a viable strategy to clean up more of the nation’s water bodies!