The Sky Trust

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The Sky Trust is a federal policy proposal that aims to minimize global warming by reducing carbon dioxide emissions into the earth's atmosphere.

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[edit] How it works

The Sky Trust is a type of emissions trading system that places a cap on the amount of carbon dioxide pollution allowed each year. Permits are created up to the level of the cap and are auctioned to companies that want to pollute. Once permits are auctioned, they may be traded among firms in an open market. The number of permits is initially set at the current baseline level of emissions, then reduced at the rate of 2% per year. With this progression, the amount of carbon dioxide emitted will decline approximately 40% by 2030 and 80% by 2050. Auction revenue is redistributed to citizens in the form of a yearly dividend.

[edit] The purpose of the trust

Permit sales and revenue distribution are managed by a trust. The trust is established by the government, but operates outside of direct influence of either government or corporate interests. In structure, it is similar to the Federal Reserve System. The trust is held to transparency and accountability. The trust is transparent in that citizens are able to see where every dollar comes from and goes. The trustees are accountable not only to citizens alive today, but also to future generations. Their mission is to preserve the amount of carbon dioxide in the sky at a sustainable level. They also have three legal responsibilities:

  • To issue carbon burning permits up to a limit established by Congress
  • To receive market prices of those permits
  • To distribute the permit revenue equally

If the trustees violate their mission or legal responsibilities, they may be removed from the trust or sued by the beneficiaries.

[edit] Annual dividends

Every citizen in the United States is entitled to an equal share of the Sky Trust dividend. The idea of equal distribution is similar to the Alaska Permanent Fund. The amount of the dividend would vary from year to year depending on the auction value of carbon emission permitts. It would be calculated by dividing the annual income of the trust by the number of U.S. citizens. According to economists, the value of carbon emission permits will probably rise over time as the quantity of allowed emissions is gradually reduced. Thus, the dividends will probably rise over time as well.[citation needed]

[edit] Guiding principles

  • The sky is a common resource and belongs to all of us equally
  • The sky does not belong to corporations or the government
  • Pollution must be limited to what the sky can safely absorb
  • Once limits are set, companies should pay for pollution permits
  • The money they pay should go into a trust
  • The trust should pay equal dividends to all citizens

[edit] Economic considerations

Cap-and-trade policies are attractive to policy makers because they provide an efficient way to reduce carbon dioxide emissions.[citation needed] However, any policy that reduces carbon dioxide pollution will raise the price of burning fossil fuel throughout the economy, with consumers bearing the bulk of this rise.[citation needed] By capping emissions, the right to emit carbon dioxide becomes a new commodity with permit values totaling perhaps hundreds of billions of dollars per year.[citation needed] A major consideration should be who receives the newly created revenue. Economists outline three possibilities.[citation needed]

One cap-and-trade system provides emissions permits to polluters for free based on past levels of pollution. As the price of burning fossil fuels increases, the permit-owning corporations and their shareholders receive the gains. This approach was adopted by the US government in its Acid Rain Program and by the European Union in its Emission Trading Scheme. In the second type, the government sells or auctions permits to polluters, and uses the revenue as it sees fit. The Sky Trust is a third type of system in which initial emission rights are given to a trust, which periodically sells them to polluters and distributes the revenue to all citizens equally. This third type more equitably distributes wealth throughout the economy, and it is impervious to political changes that may occur as new government representatives come into and out of office.

[edit] Equity considerations

Regardless of what type of emissions trading system is adopted, most of the program costs will be passed on to consumers in the form of higher prices.[citation needed] These price increases will disproportionately affect people at the bottom of the income scale. This is because lower-income households spend a larger fraction of their income than wealthier households do, and because energy products account for a larger share of their spending.[citation needed]

By returning permit auction revenue back to consumers in equal per-capita shares, The Sky Trust would mitigate the increased burden on lower-income households. In a recent study, the Congressional Budget Office (CBO) estimates that an annual dividend from permit revenue would more than offset higher prices, increasing average income in all but the wealthiest households.[citation needed] In other scenarios where permits are either given away free or revenue is used for government expenditures, average income decreases in all but the wealthiest households, with the poorest households hit the hardest.[citation needed]

[edit] Transition fund

Any policy that reduces carbon dioxide emissions will likely cause job losses in fossil fuel-based industries such as coal-mining and oil production.[citation needed] One study estimates that a 23% cut in carbon dioxide emissions would cause US coal production to decline by roughly 40% over time.[citation needed]

The Sky Trust proposes a Transition Fund that would go directly to helping those individuals and communities that are most affected by the carbon cap. For the first year of its operation, 25% of the Sky Trust's revenue would flow into this fund. The remaining 75% would go towards dividends. Thereafter, the Transition Fund's revenue would decline by 2.5% a year, while the dividend share would correspondingly rise. After 10 years, the Transition Fund would decline to zero and the full revenue amount would be used for dividends.

[edit] Political considerations

The Sky Trust policy proposal has elements that appeal to different political groups. For example:

  • Environmentalists support the efficacy of the policy in reducing carbon dioxide emissions over time
  • Liberals support the policy as one of the few emissions trading schemes that don't disproportionately harm lower income families
  • Conservatives support the small role that government plays in carrying out The Sky Trust's objectives

[edit] See also

[edit] References

[edit] External links