An EU cap-and-trade scheme for water pollution? Greens say no


Environmentalists who have gone to court in a bid to kill a US water pollution trading system say it would be a mistake for Europeans to consider a similar cap-and-trade scheme to reduce fertiliser and other agricultural emissions.

EU conservationists fear that the European Commission may be tempted to recommend market-based approaches for water pollution in its forthcoming water blueprint, or in future amendments to water pollution laws.

In a lawsuit filed in US District Court in Washington, two conservation groups seek to overturn an emissions trading scheme designed to save the Chesapeake Bay, whose future as one of America’s most vibrant marine ecosystems is in doubt because of high concentrations of agricultural pollution.

Lawyers argue in a lawsuit filed in October that the US Environmental Protection Agency illegally created a cap-and-trade system in 2010 under the Clean Water Act.

“Our argument is that the way the statute was written … there is no room for a market-based approach, that cap-and-trade for the trading and marketing of pollutants can’t exist under the laws of the United States,” said Scott Edwards, co-director of Food and Water Watch, which along with Friends of the Earth are plaintiffs in the lawsuit.

Edwards said environmentalists have learned lessons from both sides of the Atlantic that cap-and-trade schemes – such as the EU Emissions Trading System for air pollution that applies to industry, energy and, since January, aviation – do not deliver the same punch as regulatory mandates.

EU’s regulatory success

The EU’s sulphur dioxide mandates have led to dramatic reductions in SO2 levels since the EU’s air quality directive was enacted in 1999, while US efforts to reduce the same gas through a market-based system have been much less effective, Edwards said.

“Where the United States under a cap-and-trade programme for SO2 was achieving 29% reductions in Phase 1, the European Union, which was using command-and-control techniques to manage SO2, was achieving 80% reductions – two to three times our success rate,” Edwards said in a telephone interview.

There is no EU water policy comparable to the Chesapeake cap-and-trade system, although Finland and Sweden have considered such schemes.

The European Commission’s Blueprint to Safeguard Europe’s Waters – due to be published by mid-November – is not expected to include major legislative proposals but the Commission has said it could include “a portfolio of economic and communication instruments”, including “the setting up of water allocation schemes (including tradable permits)” for water pollution and consumption.

Conservation groups such as Food and Water Watch’s EU branch fear that the European Commission may be tempted to test market-based approaches for water pollution despite troubles with the cap-and-trade scheme for air emissions.

Europe’s ETS is near collapse because of a slump in carbon prices and fierce international opposition to the aviation ETS.

A solution for the Baltic?

Yet one expert says cap-and-trade isn’t necessarily a bad way to revive the Chesapeake or Europe’s Baltic Sea – bodies of water that are heavily threatened by phosphorus, nitrogen and sedimentary runoff, principally from farming practices.

James Shortle of the College of Agricultural Sciences at the Pennsylvania State University says cap-and-trade schemes can be an effective way of reducing water pollution. Though he acknowledged that the EU has faced problems with the air ETS, he said they have been used successfully on a regional basis in the United States.

When it became law in 1972, the US Clean Water Act put the forced factories and energy plants to slash pollution so legendary that the Love Canal in New York, the flaming Cuyahoga River in Ohio, and poisoned fish on the Great Lakes became icons of an environmental movement.

But as in Europe, forcing farmers to reduce pollution has been more difficult and politically sensitive.

Laws on point-source pollution are “extremely expensive”, said Shortle, adding that pollution trading can achieve similar or better results. Cap-and trade systems set emissions targets but allow polluters to ‘trade’ emissions, for example by polluting more at one facility in exchange for cutting emissions at another to achieve and overall reduction.

“You still have regulation, you still achieve water quality goals, or you achieve air quality goals, but you do it in a way that is a lot less expensive,” said Shortle, author of a report on water quality trading in agriculture published earlier this year by the Paris-based Organisation for Economic Co-operation and Development.

The Clean Water Act applied to industries rather than farms even though runoff of plant nutrients and nitrate leeching from animal manure are blamed for eutrophication – or excess nutrients – in waterways.

No green benefit

The groups behind the Chesapeake lawsuit say the EU and US experiences show that regulation – not market-based incentives – are the only effective way to combat pollution.

Edwards dismisses the idea that cap-and-trade systems can protect threatened water systems and says it’s time for stricter regulation of agriculture.

“Agriculture in the United States remains the largest source of nutrients, by far the largest source, in our waterways. And this country has not had the political will to control those sources of pollution.”

He said the main source of pollution is concentrated dairy and meat operations and large, industrialised farms, rather than small landholder farms, and that big operations should be regulated like other industries.

“We don’t think that you need to trade good, sustainable food production systems for clean water,” Edwards said. “We don’t think that they are antithetical.”


“Simply put, the Bay water pollution trading program sets bad national precedent and will allow more, not less, pollution in the Chesapeake Bay,” Friends of the Earth President Erich Pica said in a statement. “Cleaning up our national waters, including the Chesapeake Bay, is a matter of political will at the state and national level. We cannot rely on the worst polluters of the Bay and Wall Street traders to lead the efforts to revive this invaluable natural resource.”

“Water pollution is a theft of our public trust rights to clean and healthy waterways. The notion that polluters should be allowed to profit by selling the right to pollute the Bay to other polluters not only violates the letter of the Clean Water Act, but offends the very spirit of the law,” Food & Water Justice Co-Director Michele Merkel said in a statement. “EPA cannot be allowed to place a ‘for sale’ sign on the ecological integrity of the Chesapeake Bay.”


The Chesapeake Bay lawsuit (Case 1:2012cv01639) seeks to invalidate water pollution trading provisions included in the US Environmental Protection Agency’s 2010 plan to clean up the Chesapeake Bay watershed, comprising six states and Washington, DC.

The Environmental Law Clinic at Columbia University in New York, which is handling the suit for two environmental groups, argues that water pollution trading is illegal and would undermine the region’s efforts to reduced pollution.

The cap-and-trade scheme would allow for new and increased pollution discharges into the Chesapeake watershed, the plaintiffs say.


  • Mid-Nov.: European Commission to table Blueprint to Safeguard Europe’s Waters
  • 26-27 Nov.: EU Water Blueprint Conference, Nicosia, Cyprus

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