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Scott Edwards

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Keep Wall Street Out Of Our Waterways

Posted: 09/12/2012 11:44 am

Up until now the United States has adhered to a public trust approach to our waterways, maintaining that waters were part of the commons--owned by no one and by everyone--and protected for future generations. It was a doctrine that gave rise to a body of water law that holds that no one can mistreat our waterways in a way that injures the rights of others. Public trust provides the underpinnings of our Clean Water Act (CWA), which recognizes that industries simply don't have the right to pollute. Unfortunately, though, there's an insidious shift underway in our nation's water policies that can only mean disaster for the most precious resource on the planet.

As populations grow and water demands increase and as industry seeks workarounds from our environmental laws, the Wall Street investment industry is looking for new ways to profit. And what's the best "commodity" for any investment banker? As Goldman Sachs puts it, "As a necessity for life, there is no substitute for water. It is the only utility you ingest...." For the investment banking industry, water-related death, drought and degradation aren't calamities; they're profit opportunities. "If you play it right," says one hedge-fund advisor, "the results of this impending water crisis can be very good."

Market managers have been pushing for years to turn our waterways into widgets. Allowing bottled water companies to suck dry our aquifers and facilitating privatization of our water delivery infrastructure isn't enough. With the latest move to steal away our public waterways, Wall Street's getting yet some more federal assistance.

In 2010 the US Environmental Protection Agency took a giant step away from the public trust approach of the CWA when they created a plan that gives polluters the option to buy the right to pollute our waterways. In the Chesapeake Bay Total Maximum Daily Load (TMDL), a regulatory pollution allocation program, EPA is allowing polluters like coal-fired power plants to purchase "credits" from other polluters, like industrial agriculture, in lieu of controlling their discharges. As we approach the 40th anniversary of the CWA this fall, this landmark piece of legislation is facing its biggest challenge to date. And, ironically, it's coming from the very agency charged with upholding it.

This is how water pollution trading in the Bay works. Financial middlemen (aggregators) harvest nitrogen and phosphorus (and soon sediment) pollution "credits" from farms in the watershed. These credits are generated when farmers fill out forms attesting to various future practices that predict reductions in these pollutants, but the reductions are never truly verified. The aggregator then bundles these unverifiable credits together, aggregating and selling something of questionable value, which we learned from the mortgage crisis is a bad idea. Then they are sold to power plants and wastewater treatment plants and other "point source" polluters who are either unable or simply unwilling to meet their CWA permit limits. Say goodbye to the one successful part of the CWA--control of point source discharges from factories and power plants. With trading, these industries can pollute waterways as much as they can afford, and they can afford a lot because they'll pass that cost onto you.

You'll find lots of rationales from trading proponents. Credit purchasers say it's a cheaper way to deal with pollution. The credit-generating agricultural industry claims trading's a win/win because it, "help[s] farmers earn money while providing polluters with the opportunity to increase their pollution to the Chesapeake Bay and its tributaries." USDA is pouring millions of dollars into trading pilot programs spearheaded by the coal-fired power plant industry that wants to find ways to continue their massive nitrogen discharges. You'll even find studies coming out of academic and NGO circles prematurely proclaiming trading as a success even though there isn't a single, documented successful water trading program. But there are lots of fraudulent pollution trading schemes.

Take the Los Angeles car scrapping fiasco of 20 years ago where scrapyards sold air emissions credits to the petro-chemical industry after taking old cars off the roads. It turned out they were pulling the engines and selling them before scrapping the car and selling the credit. And then there's the more recent example down on the very Eastern Shore where water pollution credits are now being generated, where a biodiesel market middleman was convicted of selling fake credits under another EPA-administered pollution trading scheme. The carbon emissions trading scams are simply too numerous to count. It's not hard to see where water pollution trading is going - fake credits, no oversight and dirty water.

Anyone who cares about the water they drink and recreate in should be denouncing water pollution trading and fighting to keep financial markets out of our rivers and lakes - the health of our waterways is just too important to hand over to Wall Street.

 
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