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Who Owns the Sky?

One Sky, Many Owners

Peter Barnes

Suppose it's 1999. To reduce the risk of global warming, the United States and other industrial nations have agreed to cut carbon dioxide emissions by 10 percent in the coming decade.

To make these cuts efficiently, the United Stares has set up a system of marketable permits for carbon emissions. Every unit of oil, coal and natural gas sold in the United States must have an emission permit attached to it, and the total number of permits will decline over time.

Who receives these permits? What, if anything, do they pay for them? And, most important, if they pay, who gets the money?

This picture is not unlikely and these questions are pressing, as global warming emerges as one of the hottest issues of the end of the 20th century. At stake are literally trillions of dollars in permit costs. And underlying it all is a question of profound importance for the 2lst century: Who will own the sky?

Until now, people have battled over land, water, oil and other valuable materials. But there has always been enough sky. That was before the sky became a waste dump for industrial economies. Now it is clear that Chicken Little had it almost right: the sky isn't falling, but it is filling. The gaseous bubble we inhabit can absorb only so much ozone-eating chlorine, acid-brewing sulfur and heat-reflecting carbon dioxide. There is already a permit system for sulfur emissions, and now there is an ever more urgent need to limit carbon emissions.

When the heads of state of the seven largest industrial nations meet, they plan to discuss ways to reduce the risk of global warming. So far, they have agreed to set legally binding targets for carbon dioxide emission reductions. The many nations that will gather this December at the climate-change negotiations in Kyoto, Japan, must still decide what those targets will be, and how those levels will be enforced.

Without yet suggesting specific targets. the United States has proposed an ingenious system to encourage good behavior. Each industrial nation would have its target for carbon dioxide emissions expressed in the form of internationally tradeable emission permits. Countries that reduce emissions below their targets could sell their surplus permits and earn money, or bank them for future years. Countries that exceed their targets can purchase unused permits, if available, from other countries.

What all this means from a historical perspective is that the era of free sky is over. In the future, there will be an economy of sky. Property rights will be established, prices will be charged, and money will change hands. Lots of money.

DRI/McGraw-Hill, an economic consulting firm, estimates that if the United States stabilizes carbon dioxide emissions at the 1990 level, permits to emit carbon into the sky will cost some $230 billion in 2010. That is the extra money Americans will pay that year when the demand to burn fossil fuels meets the limited quantity of carbon emission permits then available. If emission ceilings are set below the 1990 level, as most climate scientists say they must be, those permits will be worth even more.

This brings us back to who gets the permits, how much they pay for them and where the money goes -- questions that Congress must eventually answer. Energy companies have staked a claim to carbon emission permits based on the historically free use of the sky. But if their claim is granted. the higher prices that they will charge Americans will flow almost entirely to those few corporations, in a giveaway of sky rivaled only by the giveaway of land to railroads in the 19th century. (Publisher's note -- the 1996 giveaway of $110 billion in airwave rights to broadcast station owners also rivals this. Corporate welfare schemes grow larger and larger.)

There are at least two alternatives. One is to have the Federal Government auction off carbon emission permits and pocket the proceeds, much as it does with some bits of the broadcast spectrum.

The second alternative is inspired by the 10th Amendment to the Constitution, which says that what is not explicitly granted to the Federal Government belongs directly to the people.

In this alternative, it is the people, not Uncle Sam, who would own America's share of the global sky. Instead of flowing into the United States Treasury, revenue from periodic auctions of carbon emission permits would flow into a trust fund whose beneficiaries are all current and future citizens. The trust fund would pay dividends to each of these citizen-owners, maybe in cash, but more prudently as matching contributions to restricted individual savings accounts. With such accounts, all Americans could build up savings for higher education, job training, a first home purchase, self-employment and retirement.

The concept here is simple, yet bold: if we must pay to use the sky, we should do so in a way that shifts money from consumption to savings and increases the opportunity for all citizens to achieve the American dream.

This article appeared earlier at The Progress Report .  

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