![handle is hein.journals/endnot77 and id is 1 raw text is:
COVARIANT RISK AND NUTRIENT CREDIT TRADING
BRIAN SAWERS*
Every summer, a dead zone is created in the Chesapeake Bay. The
dead zone is created by too much of a good thing: nutrients, especially
nitrogen and phosphorus. The largest source of excess nutrients in the
Chesapeake is agriculture; manure and artificial fertilizers are washed into
streams that eventually reach the bay.' In the bay, nitrogen and phosphorus
create an algae bloom, which consumes all the dissolved oxygen. Some
fish escape, but other creatures expire in this dead sea within the
Chesapeake Bay.2
To reduce the excess nutrients reaching the bay, several states are
experimenting with nutrient credit trading.3 A large part of the appeal is
political: Nutrient credit trading is popular in an ideological climate hostile
to regulation. Part of the appeal is a response to policy success. Pollution
trading reduced acid rain at low costs, which raised hopes that
environmental markets can produce outsized benefits at low costs. To date,
nutrient credit trading has disappointed and it is likely to continue to
disappoint. Better market design cannot remedy the inherent defects in
nutrient credits. This Article identifies previously unidentified defects in
nutrient credit markets, contributing to an already large literature on the
shortcomings of nutrient credit trading. This Article adds to the weight of
mounting evidence that nutrient credit trading cannot deliver improvements
in water quality.
I. WHY NUTRIENT CREDIT TRADING?
The enthusiasm for environmental markets in general, and nutrient
credit trading in particular, does not rely solely on their merits. The
intellectual climate in academia and the political climate in government has
been hostile to direct government regulation for several decades. In a
policy environment where government mandates are disfavored and all
things market are favored, nutrient credit trading is an attractive answer to
C 2018 Brain Sawers.
* I would like to thank Shi-Ling Hsu, Jonathan Nash, and Michael Pappas. Disclosure: I was
paid by the Conservation Voters of Pennsylvania for related research.
1. U.S. ENVTL. PROTECTION AGENCY, CHESAPEAKE BAY TOTAL MAXIMUM DAILY LOAD
FOR NITROGEN, PHOSPHORUS AND SEDIMENT 4-29 (2010) [hereinafter CHESAPEAKE TMDL].
2. Id. at ES-3.
3. In addition to Pennsylvania, Maryland and Virginia have nutrient credit trading schemes.
MD. CODE REGS. 15.20.12 (2016); VA. CODE ANN. § 62.1-44.19:12 (West 2005).
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