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Environmental Finance

Environmental Finance

Environmental Finance is still the only independent global magazine offering comprehensive coverage of the financial impact of environmental issues on the business community.  Leading industry…

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Environmental Markets at Centre of Chesapeake Clean-Up Plan

In a ground-breaking initiative that could trigger a new era in ecosystem markets, the Obama administration issued an executive order yesterday to protect and restore the Chesapeake Bay, the US’s largest and most polluted watershed.

The Strategy for Protecting and Restoring the Chesapeake Bay Watershed embraces environmental markets in their multiple forms – nutrient, sediment, habitat, carbon and wetlands trading – as the primary tool for environmental restoration. It establishes steps to create robust markets and endorses the concept of stacking ecosystem services to allow landowners to sell ecosystem restoration credits into multiple markets. This makes it a model for environmental restoration efforts throughout the US, said Scott Van de Mark, director of special projects at the Pennsylvania Environmental Council.

The order could generate a windfall for environmental market investors. Cy Jones, a senior associate at environmental think-tank the World Resources Institute, predicted that nutrient trades alone could produce up to $300 million annually for farmers that trade credits to reduce the nitrogen their land leaks into the Bay.

This historic initiative responds to 26 years of frustrated efforts by state and federal governments to clean up the Chesapeake Bay, a 64,000-square mile watershed spanning six states that became so polluted by runoff from sewers, farms and factories that fish cannot survive in nearly half its water.

The federal government must create by December of this year an enforceable pollution cap – an essential element for driving market trades – called the Total Maximum Daily Load, limiting phosphorus and nitrogen leaked from wastewater treatment plants and runoff from farms that pollute the Bay. Simultaneously, states are required to develop plans on how to achieve their caps, said Rick Perish from the Southern Environmental Law Center.

Drawing on evolving state markets that have so far generated minimal trades, the order calls on the US Department of Agriculture, in cooperation with the Environmental Protection Agency (EPA) and other federal agencies, to establish a nutrient trading market to improve water quality, develop scientific tools to measure market performance, build a platform to facilitate trades and create a management infrastructure to over see the markets. It directs the Federal Wildlife Service to develop habitat-based credits by 2011.

The announcement was made the day after the EPA settled a lawsuit with Bay advocates. Its potential to drive ecosystem markets could skyrocket, said Beth McGee, senior water quality scientist with the Chesapeake Bay Foundation, if pending legislation to allow credit trades across state lines is approved.
“If this reduces pollution, it is well poised to be a model for broader trading schemes throughout the nation," McGee added.

By. Alice Kenny

Source: Environmental Finance




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