How to Shoot for the Sky When Capping Emissions

Right now, the leading global warming law pending in the Senate would give away rights to pollute the sky for free. The rights would be worth hundreds of billions of dollars. Sounds like a bad idea, doesn't it?

Here's a promising alternative, gaining popularity: it's called the Sky Trust. It's also know more technically as cap-and-dividend or cap-and-recycle, because it's different from cap-and trade.

The idea behind the Sky Trust is this: The atmosphere is a public "commons," belonging to everyone. Not to the government. Not to corporations. Not to polluters, gaming the system. We all "own" the sky, equally, and therefore we all ought to be equal beneficiaries of any system designed to protect it.

Here's how it would look in practice: America would set an economy-wide cap on greenhouse gas emissions. To enforce the cap, it would sell permits to emit carbon into the sky. No permit, no emissions. How do you get the permits? They're auctioned off, not given away for free to polluters. No safety valves allowed, either. No industry exemptions. No special favors, the kind Washington is so good at providing.

The auction revenue would then be collected into a public "trust,'' managed by independent trustees. Most of it would then be divvied up equally and distributed among all citizens, each year. One citizen, one share.

The rest of the Sky Trust revenues would go to fund development of a clean energy future.

It’s the brain child of Peter Barnes, first explained in YES! in Spring 1999. Barnes explains his idea in January '08 in Grist here, and in greater depth here in his publication, Citizen's Guide to Carbon Capping. Clearly, not breaking news. But it's grabbing headlines steadily as America tries to grapple with the existing cap-and-trade bill floating through Congress. Pay polluters hundreds of billions of dollars? There's got to be a better way. There is, and the Sky Trust provides one.

If the Sky Trust sounds familiar, it is. The concept is modeled on the Alaska Permanent Fund, which pays all Alaskans equal dividends from the revenue raised from state oil -- each year. Alaska's oil belongs to every Alaskan. They've got checks to show for it.

The Boston Globe gives Sky Trust center stage in a piece over the weekend, Brother, Can You Spare A Carbon Credit? The article also explores two other climate approaches, variations of government-monitored "personal carbon trading schemes" that are under consideration in the UK and Europe, respectively.

Both have merits but are unlikely to find homes in the US, where most agree that the sheer size of the nation makes personal carbon trading prohibitive at the federal level, not to mention that US citizens are genuinely less open to that level of government interference. Point taken.

That's why Sky Trust, at least in theory, is about as politically palatable as it gets. It's a give-give and is everything that cap-and-trade isn't. At least on paper. Equitable. Simple. Doesn't reward polluters.

Barnes explains the economics on the Step It Up blog recently:

The appeal of cap-and-recycle is more than philosophical — it’s the only approach that protects our disposable incomes as energy prices rise. That’s because, as the price of carbon permits rises, so will the dividends that come from selling them. This difference will mean hundreds to thousands of dollars every year for every American. And it will assure that the middle class supports a descending carbon cap for 40 years — something it might not otherwise do when energy prices soar.

Basically, consumers will pay more fossil fuels, but the Trust will deliver their money right back to them at the end of the year. If you drive a Hummer, you're bound to get back fewer dollars relative to what you spent on gas. Ride a bike though, and you might turn a profit. Built-in incentive structure, says Barnes:

"You gain if you conserve and lose if you guzzle."

Sure is compelling. Fair, too. Especially given the dearth of alternatives. Any reason not to shoot for the Sky?

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