September 15, 2014

Editor's Page

Cleaning Up

Mark R. Howard | 1/1/2006

Mark Howard
One of the most interesting and important bits of government policy-making these days is going on in a group called the Pollutant Trading Policy Advisory Committee (PTPAC). PTPAC's job is to help the state Department of Environmental Protection create a system for trading "pollution credits" as part of cleaning up polluted waterways in Florida.

The committee is at the leading edge of the trend in Florida toward incorporating more free-market principles in environmental regulation. The thinking is that government should focus more on telling polluters how much to clean up and less on specifying exactly how they have to do it. Credits are supposed to provide the financial incentives to do the right thing.

Credit-trading is new only to water regulation. The federal government has used credits for years as part of air pollution-control efforts, and the principle is built into wetlands mitigation banking in Florida. The notion of using credit-trading to help clean up polluted waterways in Florida first appeared, relatively unnoticed, in the 1999 Florida Watershed Restoration Act, which encouraged DEP to work on a pollutant-trading system. DEP -- not exactly quick on the trigger -- set up PTPAC in 2004. Then, a largely unnoticed part of Senate Bill 444, last year's landmark water supply legislation, put some heft behind credit-trading by requiring DEP to develop a trading system. The law also says DEP has to submit its rules to the Legislature for review, but not for approval.

PTPAC's members include officials from the DEP and EPA, ag and development interests, county officials, engineers, stormwater experts and representatives from the League of Cities and utilities. They have a lot of work yet to do on their recommendations, but a skeleton-sketch of how credit-trading works would go something like this:

To lower amounts of major pollutants like nitrogen or phosphorus that end up in a waterway, the state first sets a cutoff level for those pollutants called "total maximum daily load." (More nitrogen or phosphorus than the "TMDL" means the waterway is officially polluted.) Within the "basin" that feeds that waterway, the state then carves up that TMDL and allocates it among all the businesses and municipalities and farms and developments. The allocation comes in the form of targets -- so many pounds of nitrogen or phosphorus, for example -- that they're not supposed to exceed. Bigger polluters are supposed to get a bigger share of responsibility for cleaning up.

The businesses that decide to quickly clean up beyond their goals get "credits." The credits don't equal the total amount of the pollutant below their goal, however: A business that cut its nitrogen discharge by, for example, 10,000 pounds more than its target would get a credit amounting to only some portion of that.

Meanwhile, businesses that either can't or don't want to meet their goals as quickly have to buy credits to cover the excess pollution they discharge. The net effect: While some may still exceed their individual targets for a time, less nitrogen and phosphorus overall is discharged into the waterway, and pollution levels will drop even further as more businesses clean up.

In principle at least, the businesses that clean up beyond their goals should realize a financial reward. Credits should minimize economic disruption for businesses that need more time to clean up, while still imposing costs. The process should get better results faster and less expensively.

Some believe the biggest promise of a credit-trading system may be in providing a way to discourage pollution generated by new growth. Big polluters like municipal wastewater plants have always been relatively easy to monitor and regulate. Regulators say some of the hardest pollution to get a handle on is potential runoff from a proposed new subdivision five miles up a stream from a polluted river.

Creating a credit-trading system, of course, is as complex as my sketch is simplistic. PTPAC must wrestle with questions like who administers the trading program. Exactly which pollutants get traded -- just phosphorus and nitrogen? Are a business's credits transferable if the business is sold or goes bankrupt? Should credits be traded to parties outside the basin -- or even between parties at opposite ends of a basin?

A number of states, including North Carolina, Idaho, Maryland, Michigan and Virginia, have fledgling water quality credit-trading programs, but there's no well-proven template because none of the programs have generated much trading so far.

There are several big-picture dangers in all this: The system may end up being too complex to maintain support among its various stakeholders. Some, no doubt, will try to "game" it through the political process, tweaking the system via legislation, creating loopholes, contesting standards.

Just as dangerous, however, is the possibility that politics of a different sort will hold Florida back from innovation. Command-and-control bureaucrats have a lot invested in the old system. And many who consider themselves environmentalists may concede privately that the old approach to environmental regulation has failed but can't stomach the notion that anybody should be allowed to make a buck in the course of making the water cleaner.

Meanwhile, credit-trading gathers momentum. Paul Steinbrecher, a Jacksonville Electric Authority executive on the committee, told a PTPAC meeting that a Basin Management Action Plan including TMDLs for the Lower St. Johns River Basin will be finished before the committee's work is done. Some informal credit trading may occur as part of that plan and serve as a pilot program for the rest of the state.

Whatever system PTPAC recommends for Florida will take some time to evolve and play out. It's important work: The tide is going out fast on command-and-control models everywhere, and PTPAC's work may well determine whether the state can create a system that's able to balance the economic realities of today with the environment we want in the future. Ultimately, the committee's efforts must be about effectiveness rather than philosophy.Information about PTPAC, including minutes of its meetings and lists of members, is available at dep.state.fl.us/water/watersheds/ptpac.htm.

You can reach Mark Howard at mhoward@floridatrend.com

Tags: Politics & Law, Editor's column, Around Florida, Environment

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