Sky Trust explained

Peter Barnes looks at carbon-capping methods 3

Peter Barnes has a guest post on the Step It Up blog giving a good brief description of how a Sky Trust would work:

Carbon capping comes in three varieties: cap-and-trade, cap-and-auction, and cap-and-recycle.

In cap-and-trade, permits are given free to historic polluters. This is called 'grandfathering.' The more a company polluted in the past, the more permits it gets in the future -- not just once, but year after year. As the descending cap raises the price of fossil fuels, everyone pays more, and the com­panies that get free permits keep this extra money.

In Europe, a carbon cap-and-trade program with grandfathered permits hand­ed billions of Euros in windfall profits to a few large utilities. In the U.S., an MIT study estimates that grandfathering permits to American utilities would give them hundreds of billions of dollars in extra profits every year for several decades.

In cap-and-auction, permits are sold to polluters, not given away free. Permit revenue goes to the government rather than to private companies. What government does with the money is then up to public officials.

In cap-and-recycle, permits are also sold, not given away free. However, the revenue doesn't go to the government -- it goes to all of us, one person, one share. The model here is the Alaska Permanent Fund, which pays equal dividends to all Alaskans from state oil income. This kind of cap is sometimes called a sky trust.

The kind of cap you prefer depends on your starting assumption. If you assume the atmosphere belongs to whichever companies grab it first, then cap-and-trade makes sense. If you assume the atmosphere belongs to government, then cap-and-auction is your choice. If you assume the atmosphere is a gift to everyone, then cap-and-recycle follows.

Gar Lipow, a long time environmental activist and journalist with a strong technical background has spent years immersed in the subject of efficiency and renewable energy. He has written extensively on the economics of solving the global warming, and why pricing externalities (though important) cannot be the main driver of such solutions.

His on-line reference book compiling information on technology available today, “No Hair Shirt Solutions to Global Warming”, is available at http://www.nohairshirts.com.

His articles on the economics and politics of solving the climate crisis have been published in Z magazine and a number of small journals.

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  1. sindark's avatar

    sindark Posted 12:21 am
    14 Sep 2007

    Second order effectsWhile a 'Sky Trust' has nice equity connotations, it is worth considering what likely effect it would have on GHG emissions. Whereas a government trust fund could be legally required to fund only projects likely to generate real emission reductions in the near to medium term, individuals getting 'Sky Trust' income are more likely to spend it on goods and services that actually increase GHG emissions.

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  2. Gar Lipow's avatar

    Gar Lipow Posted 2:16 am
    14 Sep 2007

    emissionsWhile I have my criticisms of the Sky Trust idea, it is part of a cap - meaning by its nature it reduces emissions. In terms of funding alternative energy, this could and should come from sources other than a tax on carbon. Taxation can be done for two purposes - to raise revenue or change behavior. With something like carbon emissions where the ultimate goal is getting using down to zero or close to it, it makes no sense for green energy infrastructure to depend on that as a source.
    And no the need for public funding for infrastructure won't disappear when the infrastructure is green. No transportation or communication infrastructure more advance than the wagon train operates without public right of ways; heck back when horse and foot were the major transport means, you needed public rights of way and protection against bandits to keep the paths clear.

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  3. MCollins Posted 11:35 am
    04 Jan 2008

    Sides to the storyThe NYT blog Dot Earth is doing a great job covering this, and I know they're aware of the contribution grist is making to the discussion--check out the twin posts recently:
    http://dotearth.blogs.nytimes.com/2008/01/02/paying-the-h ...

    http://dotearth.blogs.nytimes.com/2008/01/03/paying-peopl ...
    The posts are fueled by an exchange between Andrew Revkin, the NYT author behind Dot Earth, and Peter Barnes, of the socially responsible investment fund "Working Assets," and center around his proposal for a cap and dividend system.

    Editor, http://www.getsolar.com

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