States slowly move ahead with water pollutant trading programs Water pollutant trading is off to a slow start with only one trade im­plemented in the two years since EPA released its guidance docu­ment to promote trading. Numer­ous regulatory and financial barri­ers are keeping trading programs from blossoming, and EPA is do­ing little to support the handful of states that are moving ahead with what they say is a promising approach, according to senior state environmental officials speaking at EPA's All States meet­ing earlier this year

In early 1996, EPA came out in favor of effluent trading when it published the Draft Framework for Watershed-Based Pollutant Trading (ES&T, ,eptember r196, p. 386A). It was seen by many as a way to control unregulated non-point sources, and as a tool to reduce polluted runoff from agri­culture and urban areas. Trading occurs when a permitted effluent source is allowed to discharge more than its legal limit, as long as a second polluter agrees to re­duce its discharge below a speci-

fied baseline. The overcontrol at the second source is counted as a credit and is applied to the first source A handful of trades took place prior to the release of EPA's guidance

But the level of trading is not an indication of activity gener­ated by these programs, or their promise, said Paul Faeth, director of the economics program at the World Resources Institute (WRI), and the author of a report on pol­lution trading slated for release this fall. Faeth said that in Minne­sota, Wisconsin, and Michigan, trading is far cheaper than subsi­dizing agricultural controls or regulating point sources to reduce pollution. Trading is favored in these states Faeth said because there aire numerous small point

plants that cannot afford upgrades and many agricultural sources

Indeed, state-level interest in trading is intense, and several pi­lot projects are underway in Michigan, Colorado, and Con­necticut, funded by the Water En­vironment Research Foundation, said WERF Director of Technical

Programs, Ray Grant. State pro­grams and pilots are being initi­ated in Maryland, Illinois, New York, and North Carolina.

"Every single trading program in the states has something inno­vative in it," said Len Shabman, professor of environmental eco­nomics at Virginia Tech. While none of the state programs meet the conceptual ideal of trading,

The lack of trading is not an indication of activity generated by these programs, or their promise.

Shabman said, taken together they show how to get around the barriers to trading.

But "trading will not happen just because nonpoint source pol­lution is cheaper to reduce," Shabman warned. Environmen­talists and point source polluters are leery of trading with unregu­lated nonpoint source partners which have no legal obligation to make reductions, he said. There are significant regulatory barriers to trading, added Shabman. EPA

guidelines specify that trades can occur only on impaired water bodies. This means, said Faeth, that trades cannot be used to maintain water quality where standards are already being attained.

Shabman added that in cases where effluent permits prescribe best available technology to con­trol pollutants, trading between point sources would violate the Clean Water Act. This is because the plant seeking to buy credits from a better-performing partner would be required to adopt that partner's technology. An impor­tant step to encourage trading, he said, is to allow point source dis­chargers more flexibility in achieving standards.

Several state commissioners indicated that EPA is not fully supporting states' efforts to im­plement effluent trading pro­grams. Mahesh Podar, director of policy and budget at EPA, said the agency would like to work with the states to do more, but contended that the states are moving very slowly. EPA needs more information from state-run pilot projects to support issues surrounding point-nonpoint source trades Podar said. —JANET PELLEY

State commissioners band together to reduce greenhouse gases State environmental commission­ers are expected to agree this month to work together to reduce greenhouse gas emissions on a regional basis.

The possibility of establishing state-by-state programs that would work together regionally was discussed at an August work­shop held by the Environmental Council of States (ECOS), com­prising U.S. state environmental commissioners. The talks were prompted by a policy statement on climate change recentiy issued by the National Governor's Asso­ciation (NGA), which encourages states to remove barriers and create incentives for companies to voluntarily reduce greenhouse

gas emissions. New Jersey is the first state in

the nation to receive an EPA grant to design a trading bank for greenhouse gases, said Mary Jo Kopecky, deputy administrator for the air and waste division of the Wisconsin Department of Natural Resources. A report on the pro­gram's conceptual design is due at the end of next year. And at least 25 states already have emis­sions trading programs in place for other pollutants, such as vola­tile organic compounds.

But neither the states nor the governors are announcing their support for the Kyoto Protocol on Climate Change reached last De­cember. "Where the governors

4 4 6 A • OCT. 1, 1998 / ENVIRONMENTAL SCIENCE & TECHNOLOGY / NEWS