Additionality in Water Quality Trading: Evidence from Maryland’s Nutrient Offset Program

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Department of Applied Economics and Statistics, University of Delaware, Newark, DE.
This paper examines the potential for nonadditional nonpoint loadings in the Chesapeake Bay as a result of institutions in the new Maryland Nutrient Trading program. The analysis uses real land/agronomic data from a survey of Eastern Shore fields—that are below-baseline—to run BMP scenarios in the trading nterface. Results show 36.8% of acres are estimated to be below-baseline, suggesting the Maryland performance-based baseline may be “looser” than many might think. Regression models isolate the marginal impact on average of seven BMPs, individually adopted, using a sample of 77 below-baseline fields. The results suggested that six BMPs generate nitrogen offsets, while four BMPs generate substantively significant phosphorus offsets. Coupled with potentially permissive rules about additionality for annual practices and monitoring costs, the analysis suggests that annual practices pose viable avenues for nonadditional loadings. The analysis concludes with an estimation of the possible impact on the Bay if 50% of below baseline fields have a BMP currently in place. The analysis shows that for some structural BMPs, the impact of one BMP can be at a level that is 3.0 - 8.3% of the current N and P load for agricultural in the Eastern Shore.