Sky Trust

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= Air or sky trusts acknowledge that everyone has a stake in the atmosphere and that those who pollute it are rob¬bing us of something valuable. [1]


Proposed by Peter Barnes, described by David Bollier:

"A more recent innovation is the Sky Trust, a trust proposed by Peter Barnes and inspired by the Alaska Permanent Fund. Barnes proposes auctioning rights to emit carbon. Large corporate polluters will pay significant sums into a trust fund in which all citizens own equal shares. The expense of buying pollution rights will encourage companies to find more cost-efficient technologies to reduce their pollution. The trust fund, in turn, yields dividends that helps citizens offset the higher prices they must pay for using resources (like oil) requiring pollution abatement. The principle behind the Sky Trust – also known as “cap and dividend” – is that polluters should not have a presumptive right to treat the atmosphere as a private dumping ground." (


Peter Barnes:

"Coase was a colleague of Milton Friedman at the University of Chicago. His breakthrough was to show that markets could set prices for pollution without government. Markets could do this if—and it’s a big if—polluters and pollutees had property rights and could bargain with each other easily. They’d then arrive at an amount and a cost of pollution that was agreeable to both sides. Pollution would cost more and there’d be less of it—with no EPA needed.

Coase’s model intrigued me, but I saw a few problems. First, pollutees—which is to say, all of us—presently have no property rights with regard to ecosystems being polluted, and thus no way to bargain with polluters. If Coase’s model is to have any practical use in the real world, that problem must be solved.

A second problem is that, while the agreed amount of pollution would be ‘optimal’ for buyers and sellers of pollution rights, it might not be optimal for nature, which isn’t included in the bargaining.

A third problem lies in the distributional impacts of Coase’s model—which, if it were adopted widely, would be huge. One of the key questions Coase avoided was who should pay whom. Should polluters pay pollutees for the right to pollute? Or should pollutees pay polluters to pollute less than they currently do? Coase argued that for the optimal price and quantity of pollution to be reached, it makes no difference who pays whom. This may be true theoretically, but in the real world, who pays whom makes a big difference. If pollutees have to pay higher prices to polluters, polluting corporations would benefit and ordinary people would see their living standards fall.

While thinking about climate change in the early 2000’s, I saw a way to solve all three problems in Coase’s model. A ‘sky trust’ could be created to hold America’s atmospheric pollution rights in trust for future generations and living pollutees equally. Using peer-reviewed science, the trust would decrease its sales of pollution rights over time until a safe level for nature was reached. Meanwhile, revenue from the sales would be distributed equally to every legal US resident with a Social Security number, offsetting—and in many cases, more than offsetting—the impact of higher fuel prices.

The sky trust model was based on the Alaska Permanent Fund, which since 1982 has been sharing oilbased income with every Alaskan equally. In 2009, the sky trust became known as ‘cap and dividend’ and was considered, though not passed, by Congress. It’s still the best climate change solution out there—and one that Congress is starting to re-visit." (

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