Home > Uncategorized > Spitting in the Ocean, Batting 1000

Spitting in the Ocean, Batting 1000

After disparaging the idea of a 2:1 trading ratio for nascent water quality trading schemes in the Chesapeake Bay watershed (https://spittingintheocean.wordpress.com/2012/10/25/whats-a-progressive-to-think/), I came across a draft technical memorandum detailing EPA Region III expectations for nutrient trading and offsets in the Chesapeake Bay states. They like the idea of a 2:1 trading ratio (http://www.chesapeakebay.net/channel_files/19160/draft_uncertainty_tm_6_18_13_for_review.pdf).

EPA’s prime rationale for recommending a 2:1 trading ratio between a point-source buyer and a nonpoint-source seller is that point source loads are more certain than nonpoint source loads. Since there is uncertainty surrounding loads and load reductions from nonpoint sources, they argue that it would be better to guarantee the reduction being bought by adding in a 100 percent margin of error in the purchase arrangements. They also argue that their recommendations are consistent with other aspects of the Chesapeake Bay TMDL.

Insurance is a worthwhile service (my father sold it), but a premium priced at the full cost of the insured good seems a bit steep to me. EPA could strengthen their argument with some empirical evidence justifying the need for such a large insurance margin. It might also be useful for them to explain why this uncertainty matters in the case of traded reductions but not in the accounting of non-point source reductions obtained under existing programs.

With respect to consistency with other aspects of the TMDL, it is difficult to square the 2:1 trading ratio with the way in which the states account existing (publicly funded) nonpoint source pollution reduction. Under the current TMDL/WIP process, riparian buffers bought by USDA’s CREP funding (for example) are credited with a specific amount of nutrient and sediment reduction; not one half their expected reduction. Under EPA’s proposal, the same practice that is counted at full value when USDA or MDA pays for it or when a seller qualifies for their baseline only gets half that value in any water quality trade.

Because costs are so vastly different between high cost urban stormwater reductions and lower cost agricultural reductions, it is possible that imposing a “buy two – get one” deal on pollution credit buyers will not reduce traded volumes at lower levels of trading. If an agent’s choice is paying $500,000 to get 1000 pounds of pollution reduction from stormwater practices, or paying $200,000 to buy 2000 pounds of agricultural pollution reduction (to offset her 1,000 pound overage), she is still better off buying the agricultural reductions. Not as well off as she would have been if she only had to buy 1,000 pounds of agricultural reductions, but better off than paying the full cost implied by her reduction obligation.

Perhaps EPA’s market designers calculate that they could double the credits bought (i.e., twice the number of credits accounted) “for free” this way. Perhaps they think that buyers in these markets will not notice. But if I were a buyer in this market, I would wonder why my purchased reductions only count half as much as those paid by public sector agencies. And, on that basis, it will surprise me if local politics allow this proposal to prevail.

In another recent post (https://spittingintheocean.wordpress.com/2013/06/20/the-trouble-with-normal-is-it-always-gets-worse/), I concluded that the Chesapeake Bay was sick and not visibly getting better. In fact, according to a recent story in the Baltimore Sun (http://articles.baltimoresun.com/2013-07-03/features/bs-md-bay-report-card-20130703_1_chesapeake-bay-health-grade-um-scientist) University of Maryland scientists have assigned the Chesapeake Bay a better grade – a “C” – than it earned the previous year. So, by those lights, things are getting better for the Bay.

How are things getting better for the Bay? Because they aren’t getting worse any faster. Seriously. In a wonderful twist of imagination, the University of Maryland scientist suggests that worsening water clarity seems to be hitting a plateau. As noted in my earlier post, there was a 95 percent failure rate for water clarity in 2012. A plateau is not wholly unexpected that close to 100 percent. What is less clear is how that’s a good thing. It is a peculiar sort of pitch. And yet, its author is the science communication walla for UMCES.

Perhaps there is other data than that posted by the CBPO at http://www.chesapeakebay.net/track/health/bayhealth, and perhaps that other data indicates different trends for the Chesapeake Bay’s health. But the CBPO data does not paint a positive picture at all. It is not whether the glass is half empty or half full. It is whether your black lab can jump in the water without fear of getting skin-eating bacteria that makes his hair fall out. It is about being unable to see far enough into the water in the middle of the Choptank to be able to tell whether there are sea nettles there or not. It’s about having to think twice before you chow down on a bucket of crustaceans so recently living and eating in that muck.

Fortunately for the scientists whose job it is to put a positive spin on whatever is happening to the Chesapeake Bay, not many people live at the head of a creek where the water is so nasty it smells like despair. And those who do, know to keep their dogs out of it. So am I batting 0 or 1,000?

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