HILL Last week The N&O reported that the state paid twice for an
environmental restoration project. A company called EBX sold a site
once to the Department of Transportation for stream and wetland
restoration credits and then again to the N.C. Ecosystem Enhancement
Program for water quality credits. This topic deserves careful
consideration, not knee-jerk reactions.
There are several ecosystem
markets in North Carolina. Most prominent is wetland and stream
mitigation; when developers impact aquatic ecosystems they must
compensate by restoring ecosystems elsewhere, or purchase restoration
credits from mitigation bankers, like EBX.
There is also a water quality program; developers who increase nitrogen
or phosphorus must compensate by restoring riparian buffers that
improve water quality, or purchase water quality credits. Carbon
markets are likely on the horizon.
The first core issue is that, to our knowledge, no policy or legal
precedent constrains how these markets interact. Rather, EBX relied on
well-established property law. EBX sold a single, explicitly defined
service from property it owned. When a new market emerged, it sold an
alternative service. This is no different than selling oil rights from
a site from which you have already sold timber; unless the functions of
the use of the property interfere with each other, their multiple use,
or "unbundling," is perfectly legal.
As such, EBX did not break any laws. The potential for environmental
credit unbundling, or double-dipping as critics call it, was known to
mitigation bankers and agencies for several years; EBX is likely not
the only group, private or state operated, to have taken advantage of
Second, the EBX unbundling occurred retroactively by generating
nitrogen credits without performing any additional work. The
implications of this precedent are problematic and substantial.
The Ecosystem Enhancement Program, with Division of Water Quality
approval, knowingly purchased the unbundled credits from EBX during a
competitive bid process, meaning that proposals were rejected from
projects that, presumably, did not involve unbundling. Also, if
retroactive unbundling is allowed, by our estimates the ecosystem
program alone could use its existing, already sold mitigation sites and
flood the market with 1.1 million pounds of retroactive nitrogen
credits; this exceeds all credits generated since the program began in
Nitrogen pollution could increase for many years, and no new
restoration sites would be needed. The flooded market would bottom out
credit prices, discouraging private investment in restoration. Simply
put: retroactive unbundling makes polluting rivers cheap.
Unfortunately, the Ecosystem Enhancement Program and the Division of
Water Quality have set the precedent making this possible.
Third, and most problematic, is the ease with which government agencies
- state and federal - certify restoration. Under existing rules,
restoration projects require minimal monitoring to be deemed
successful. Neither fish nor aquatic insect communities, common
indicators of stream health, need to actually improve for a stream to
be certified "restored."
Similarly, for water quality trading, no actual data are required to
show that water quality has in fact improved. We doubt that the
Division of Water Quality required EBX to document actual water quality
improvement at its restored sites. We also doubt the Ecosystem
Enhancement Program collected any data to see if the sites actually
benefited water quality, despite spending $1 million in taxpayer money
purchasing the water quality credits.
In fact, we would be surprised if data showed the project actually
worked: substantial research in North Carolina and elsewhere suggests
that it is difficult to show that restored streams have any detectable
effect on water quality or biotic integrity measures. Many scientists
are increasingly skeptical of the ecological efficacy of stream
restoration, particularly in urban and suburban areas.
The state should focus its attention on ensuring that its investments
are going into projects with demonstrated ecological benefits. Success
criteria for restoration projects should be made meaningful and
rigorous. This will increase the cost of restoration, which will in
turn increase mitigation costs, which will in turn drive up the costs
of impacting streams and wetlands.
That is, increased restoration quality requirements could provide a
real economic incentive for developers to avoid impacting these
ecosystems in the first place.
EBX's unbundling, or double-dipping, is merely a symptom of a larger
problem - a mostly overlooked state environmental restoration program
that has emphasized facilitating development rather than actual
ecological benefits. The Perdue administration should take a fresh and
honest look at what taxpayers have received from their 12-year, $370
million investment in environmental restoration.
Martin Doyle is in the Department of Geography and Institute for the
Environment at UNC-Chapel Hill. Todd BenDor is in City and Regional
Planning and the Institute for the Environment at the university. Both
are GlaxoSmithKline fellows at N.C. State University's Institute for