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The Sky Trust: A Cap-and Dividend System that Pays Citizens

Shannon Arvizu | Monday January 28th, 2008 | 1 Comment

sky444.jpegA new publication, “Citizen’s Guide to Carbon Capping,” presents an interesting concept for making a cap-and-trade system more effective in our nation. This 22-page book (free and downloadable on onthecommons.org) presents concise and innovative ideas for crafting a carbon policy in the U.S. that reduces emissions and enhances our country’s economic well-being. The gem of the plan relies on the idea of the “Sky Trust,” which is a cap-and-dividend system that cuts carbon while supplementing household incomes. Basically, “You gain if you conserve and lose if you guzzle.” The idea is true genius. Lawmakers and presidential candidates that promote the Sky Trust in the coming months will be sure to come out on top with public support.


Under a Sky Trust, the government caps carbon at a certain amount (with the aim of reducing emissions to 80% of 1990 levels by 2050). Permits are auctioned (not give away to industry polluters) and no offsets or safety valves are allowed. No sectors or industries are exempted. Revenue generated from the auctioning of permits are given to households, not to the government or to industries. In this way, a cap-and-dividend system would “lock in public support for emission reductions, no matter how high fuel prices would rise.” The dividends can be used by residents to subsidize the price of energy-efficient appliances and/or renewable energy generation.
The premise of this system is to learn from the experiences of the European Trading Scheme (ETS). As I reported in an earlier post, carbon emissions have increased under the ETS. “Hindsight is 20/20″ and the U.S. is in a prime position to benefit from learning from the mistakes the E.U. has made to create legislation that actually works.
The Sky Trust, as it is explained in this little guide, appears to be a very promising direction. Of course, it needs further elaboration. I have several questions about the details of this plan. For one, are households also expected to participate in limiting carbon emissions? How will this be measured and calculated?
As we become a more carbon-conscious society, it’s important to realize the end goal of carbon policy – limit emissions to stabilize the climate. However, we know that the crafting of such policy can be easily co-opted by vested interests. Is it possible for U.S. representatives to create a cap-and-dividend system, given the influence of the oil and coal lobby in this country? Numerous industry giants, including Shell Oil, have been vocal in calling for a cap-and-trade system in this country. But we have to be careful about what kind of cap-and-trade system we choose to implement. Will it be one that ultimately ends up benefitting corporations and creating a facade for carbon reductions? Or will it be one that achieves climate stability, creates a “framework for energy efficiency,” and benefits citizens?


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  • http://www.newrules.org John Farrell

    My colleague John Bailey just wrote a paper on the “cap-and-dividend” strategy, which you can find at http://www.newrules.org.
    To answer your question about household participation:
    The goal is that you regulate carbon as far upstream as possible, so that carbon allowances are sold to fossil fuel users at the point at which the carbon-containing substance enters the economy (coal mine, refinery/port, etc).
    The allowances are sold at auction, which drives up the price of carbon. But households would receive that carbon payment as a per-capita dividend check. Thus, carbon costs are internalized to the price of transportation fuel/heating fuel, etc… and households have additional funds to compensate. The best part is that low-energy households (read: low income) will come out ahead whereas heavy energy users (read: high income) will pay more.
    The biggest challenge will be addressing “embedded carbon,” such as the carbon used to manufacture an iPod in China.