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77 Md. L. Rev. Endnotes 1 (2018)

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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