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March 11th, 2014

Caught Between a Watershed and a Marketplace

By Fred Tutman, Patuxent Riverkeeper

For the life of me I cannot understand why anybody serious about reducing or stopping the degradation of our nation’s waters would consider that trading pollution is a realistic way to do so. So far, the only regulated interests that have expressed interest in trading pollution on my local river are those that cannot meet their current pollution caps, and so they would like to simply pay more money to keep on polluting. While some refer to it as cap-and-trade, we’d be more accurate calling it trade-and-pay.

In a variation of the same approach, there are a few such interests that have managed to acquire surplus capacity to discharge into a waterway and so they hope to get paid to sell their surplus capacity to somebody else who can use it. For the years I have been sounding the alarm about the evils of trading, at least some environmentalists have argued that it is pointless to oppose this because the “train has already left the station.” But, isn’t the point to reduce pollution, not make sure everybody pollutes up to their regulated limits?

Even if the math and the concept of market incentives like trading somehow make sense to you in the context of conservation, then how about moral problems? How does it square with basic fairness that somebody can pollute in one place and then compensate for it elsewhere with cash? The answer is that it is outrageous, and deferring pollution onto others is a recipe for fundamental injustice. Consequently, those with the most attractive “marketplaces” will get the very best environmental quality money can buy. Everyone else will get only trades as the gap between environmental haves and have-nots will just get wider.

And who is most likely to bear the brunt of unabated pollution where money changes hands among the parties and where the community that hosts a bad trade gets more blight, more toxins, and less fairness? The answer is, those places and communities that generally have nothing to trade because they are already environmentally sub-par.

Communities of color, people who are poor, and those with less political might are the losers. But the more people talk to me about pollution trading while I raise good faith questions and concerns, the more I am told that it is pointless to oppose what is increasingly obvious as a deeply flawed policy initiative motivated by the desire to generate money, along with not-so-plausible and very illusory claims for cleaner water. It is nothing short of incredible.

If we pay or reward polluters in order to win their compliance, or more accurately allow them to enter into private financial contracts with those who have credits to sell, we are in effect providing a public subsidy for pollution. By shifting business incentives away from legal compliance and recalibrating the system to serve private economic gain instead, we are of course creating fresh “marketplaces” for pollution instead of new horizons for preservation. The better the marketplace (at least in theory), the better for business, and the worse for somebody else’s local environment.

We all know that water is a public trust resource shared by all. So how does one trade something not truly owned by them? When you confer a lawful and fungible monetary interest in clean water, aren’t you in effect privatizing it? Pollution trading creates a private property interest in water. By doing the wrong thing for the right reason we risk creating incentives for a more polluted world as a result.  

Along with my overall objections also comes the utter skepticism that a regulatory system that has already proven itself to be so ineffective at standing up to vested interests can now shift gears and instead of regulating permits, it can verify trades instead. Besides, most people trying understand how trading works for the first time can barely understand it. By contrast, pollution caps and fines are rather easy to understand. Pollution trades give even the proponents migraines just trying to make sense of it.  

So not only does the current set of proposed trading schemes present unverifiable scenarios where the pollution reductions are all but smoke and mirrors, but as a matter of fact, water quality pollution trading has proven itself to be rather unworkable on the national and international stage wherever it has been attempted. Nobody has yet produced an example of where such trades have worked successfully for water quality improvements. Carbon credits and rainforest credits, along with other similar schemes that favor these “market approaches,” all seem to have in common that at least some of the money generated finds its way into investment funds and other opportunities for environmental groups or deal brokers to pay themselves or fund their activities. There is a self-interest factor imbedded within the trading initiatives that is deeply disturbing. Sadly, they have also blinded some to the flaws of pollution trading.  

So, I am completely incredulous that the same wayward establishment, the busted bureaucracy, can administer, monitor and regulate a fair, sound, or a well-run trading system likely to result in actual gains for the environment or justice for all. Why would any business interest do so, if it can raise private equity through credit speculation instead of through punitive fines and strict regulation? Indeed, why would it do so if most of the polluting industries would rather count money than reduce pollution?

Look, trading is not really very complicated. It allocates wealth. Trades have beneficiaries through the sale of credits. Others will be defacto losers because they face trades and will never see credits. When it comes to the choice to trade or not to trade, there are ideological differences at stake for which no practical reconciliation or middle ground is possible. Either you think you live in a watershed or you live in a marketplace. And if this train has truly left the station then it is plain to me that it left the poor and minorities, America’s most environmentally underserved groups, standing on the platform.

3 Comments on Caught Between a Watershed and a Marketplace

  1. Kevin Beyer says:

    Thanks for, once again, thinking and writing in a logical and sound manner about a topic all to often glossed over. I have often shook my head sideways when the ‘cap and trade’ line is mentioned. You have expressed what was going through my mind. Please continue to post messages about this and other threats to Maryland and the globe.
    Kevin Beyer

  2. K. Glick says:


    If the policy of treating water credits is harmful to our nation’s waterways, why is the EPA so gung-ho about its adoption? That is to say, what is their motivation here if not to protect our waters?

  3. I would not characterize the EPA’s posture as “gung-ho”. I think they have allowed States to optionally pursue trading programs subject to some restrictions. Unless I have misunderstood your point, you are suggesting that EPA’s limited acceptance of trading is somehow proof that it is a good thing? It’s an odd notion. How many people believe that a drug is safe simply because the US Food and Drug Administration allows it to be sold? Nobody would call that Gung Ho. Or how about unsafe children’s toys? Is the absence of a product recall from the CPSC proof of anything at all? I have raised legitimate questions about the morality, legality, fairness and effectiveness of trading. Pointing to a Federal agency’s sloth or vulnerability to political pressure is hardly a fair rebuttal in my view.

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