On the “Sky Trust”
by Devanshu Mehta
Maybe I just don’t understand the “Sky Trust”:http://onthecommons.org/node/1178 proposed by Peter Barnes, but it sounds like a recipe for disaster. Here is the gist of the idea:
Under the Sky Trust plan, all companies that bring burnable carbon into the economy would be required to buy permits for the carbon content of their fuels. Each year the number of permits would be reduced.
Revenue generated from the sale of permits would be placed in a trust, managed by independent trustees. Earnings from the trust would be returned to U.S. residents as dividends and used for public investments that accelerate the transition to a low-carbon economy.
I’m not sure giving Americans financial gain for pollution is the solution; I understand that taxing pollution is already being floated as an idea, but giving the average citizen a bigger check when pollution levels rise can’t possibly make him appreciate the seriousness of the situation.
Of course, the idea of Sky Trust is a bit more nuanced, especially with the caps on total permits given to polluters which are reduced every year. The issue, however, is that if people get used to getting a $500 check every New Year’s day and all of a sudden that starts drying up, won’t the people be demanding a little more pollution?
I may be underestimating the general populace and I may be misunderstanding Sky Trust- let me know, I’d love to see it work.
What Devanshu overlooks is that, for the next 30 years or so, dividends will rise as emissions go down. Less pollution = more revenue, not less. That’s because the demand for carbon is inelastic â€” lower the supply and the price rises steeply. (Just ask OPEC if you doubt this.) By the time demand becomes elastic â€” less pollution = less revenue â€” we’ll have a post-carbon economy and it won’t matter. In any case, the sky trust will be legally required to LOWER the number of permits sold until the climate stabilizes.