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How Baywide Nutrient Trading Could Benefit Maryland Farms

This working paper evaluates the opportunities for Maryland farms to sell nutrient credits in a proposed nutrient trading program in the Chesapeake Bay Watershed.

Key Findings

Executive Summary

The largest estuary in the United States, the Chesapeake Bay is a vital economic, cultural, and ecological resource for the region and the nation. Excess runoff and discharges of nutrients—particularly nitrogen and phosphorus—from farms, pavement, wastewater treatment plants (WWTPs), and other sources is responsible for creating excess algal growth that degrades water quality and harms the ecology of the bay.

Congress is considering proposals to improve the health of the Chesapeake Bay watershed. The “Chesapeake Clean Water and Ecosystem Restoration Act of 2009” (S. 1816, H.R. 3852) would provide significant new resources and tools to help restore the bay, including a baywide (interstate and inter-basin) nutrient trading program. Nutrient trading provides a cost effective market-based mechanism for accelerating achievement of the upcoming baywide clean-up goals. With nutrient trading, entities that are able to reduce runoff of nutrients such as nitrogen below target levels are able to sell their surplus reductions as “credits” to entities facing higher nutrient reduction costs.

Agricultural sources typically have lower nutrient reduction costs per pound than other sources of nutrients such as wastewater treatment plants and municipal stormwater systems. This cost advantage opens a window of economic opportunity for farms—selling nutrient credits to sources facing more expensive nutrient control options.

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