Excerpts from Who Owns the Sky?
by Peter Barnes
Copyright Island Press 2001
Click on a chapter to read key excerpts.
1. The Wealth Around Us
2. Winds of Change
3. The Sky Is Filling!
4. Selling the Sky
5. Who Owns The Sky?
6. How a Sky Trust Would Work
7. Thought Experiments for Economists
8. The New Commons
9. Capitalism 2.0
Appendix: Key Features of a Sky Trust
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1. The Wealth Around Us
This book is about your inheritance, my inheritance and our children's
inheritance. I'm not talking about the money our parents may or
may not have given us. If you were lucky enough to have been born
to rich parents, then you started life with a big advantage. That's
your individual inheritance, and if you got one you should
be grateful for it, because in truth, you did nothing to earn it.
The inheritance I'm talking about is much larger, and at the same
time, less obvious. It's our inheritance of gifts we don't normally
think we own. Things like air, water and forests. These gifts are
very valuable, perhaps even priceless. They're valuable for basic
biological reasonswe can't live without themand they're also valuable
in an economic sense...
How much is our shared inheritance worth? While it's impossible
to come up with an exact price tag, it's safe to say it's worth
trillions of dollars. And even though we're physically destroying
much of this wealth, its economic valuewhich derives in large
part from its scarcityis actually rising. Think about it:
the more we pollute our free-flowing water, the more we pay for
bottled clean water.
Well, you may ask, what good does this wealth do us if we never
see it in cash? One answer is: this wealth is the basis for all
we hold dear, including life itself. Even if we never see a penny
in cash, we must preserve and protect it for creatures yet unborn.
But that's not my point in this book. My point, without belittling
the previous one, is that we can and should turn some
of our shared inheritance into cash. This can be done by (1) charging
market prices for using our inherited assets, and (2) paying dividends
to ourselves as their rightful inheritors. We should do this not
out of greed, but out of concern for protecting these assets and
passing them on, undiminished, to future generations
The key is to realize there's wealth right in front of our
noses, if we would but see it and claim it. This book shows
how we can do that.
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2. Winds of Change
There were two questions I contemplated [after leaving Working
Assets]. First, how can we make markets respect the boundaries nature
is signaling us not to cross? In particular, how can we make markets
recognize there's only so much carbon dioxide the sky can safely
absorb? Second, how can more Americansin fact, every Americanhave
the good luck of birth that I had: a little inherited capital to
help with education, first home purchase, or starting a business
(if not all three)?
I imagined the answers to these two questions might intersect,
but I wasn't sure how. Soon, however, a line of thinking emerged.
If we limit emissions into the sky, markets will see the sky as
scarce. If markets see the sky as scarce, it will no longer be free.
If polluters must pay to use the sky, the sky will become a hugely
valuable asset. If the sky is a hugely valuable asset, who should
own it? Is there a way all of us can own ita way all of
us can benefit from a valuable shared inheritance?
The trick, it seemed to me, was to create a financial institutionperhaps
similar to a mutual fundto own and manage the sky on behalf of
millions of owners. Maybe, I even mused, there's a business opportunity
here. I soon concluded, however, that the sky can't be managed for
profit. The sky is a sacred trust, a shared inheritance we must
pass on intact to our heirs. Hence the proper entity to own it is
a trust.
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3. The Sky Is Filling!
There's nothing more fundamental to us than the skyour sky,
our unique sky. We're sky animals. We live on land but in
sky. We inhale from and exhale into it about 15,000 times a day.
We fly in airplanes and communicate with cell phones. We are to
air as fish are to water...
Here's a short list of what the sky does for us:
o It shields us from asteroids, meteors and harmful ultraviolet
rays.
o It maintains the earth's temperature within a range suitable
to life.
o It continuously replenishes our supply of fresh water.
o It delivers oxygen to our lungs and machines.
o It cycles and recycles nearly all our nutrients.
o It absorbs our exhausts and moves them somewhere else.
o It carries radio signals and returns them to earth
Unfortunately, the sky's ability to keep doing these wonderful
things for us isn't assured. Many of its services require a precise
mix of gases in the air, and that mix is threatened by human activities
By the 1990s, governments had officially recognized that Chicken
Little had it almost right. The sky isn't falling, but it
is filling. It can safely absorb only so much ozone-eating chlorine,
acid-brewing sulfur and heat-trapping carbon dioxideand we're now
reaching those limits. Putting it another way, it's not oil we're
running out of, it's sky.
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4. Selling the Sky
The idea of buying and selling the sky is indeed strange. Many
even consider it sacrilegious. Yet, given the logic of capitalism,
drawing a line and then selling a gradually declining amount of
sky below that line is the best way to save it.
By the foregoing, I don't mean to suggest that the sky has no value
other than its exchange value. The sky, in my mind, is a gift of
creation, an utterly indispensable partner in sustaining earthly
life. If anything we know can be called sacred, the sky is such
a thing. It has much more than exchange value. It has incalculable
intrinsic value.
The trouble is, markets have no appreciation for intrinsic value.
They're blind and dumb and stunningly mindless; they do what they're
programmed to do with ruthless aplomb. That wouldn't matter if we
could run our lives without markets. But we can't. We need to communicate
with markets because markets determine how resources are used. All
our preachings and sermons will be for naught if we don't inscribe
them on tablets markets can understand.
The very incalculability of intrinsic value is what makes it necessary
to create an artificial value markets can understand. This
artificial value then becomes a proxy for the incalculable value.
It's not the equivalent of the intrinsic value, nor an editorial
comment on it. It's merely a proxy, a useful numerical substitute.
And it's much better than the proxy markets currently usenamely,
zero.
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5. Who Owns The Sky?
Who ownsor should ownthe sky? In the coming era of scarce sky,
the answer will affect every American's pocketbook. The answer will
determine to whom we and our childrenand every generation of Americans
thereafterpay sky rent. It's nothing less than a trillion dollar
question.
Practically speaking, there are three possible beneficial owners
of America's chunk of the sky: private corporations, the federal
government, and citizens through a nationwide trust.
Corporate ownership isn't as far-fetched as it might seem. U.S.
history has been marked by numerous giveaways of common assets to
private corporations, from the enormous land grants to railroads
in the 19th century to the recent gift of spectrum to broadcasters.
The standard argument used to justify such largesse is that, in
exchange for common assets, the receiving corporations deliver a
quid pro quo of public value: they build railroads, extract
valuable minerals, or transmit sharper TV images.
Whether past in-kind investments of this sort were good deals for
the public is debatable. But there's no doubt a future gift of carbon
storage capacity to private corporations would be a terrible investment.
There's nothing we'd get in return. Such a gift would be
a pure handout, like giving away offshore oil for free.
Fortunately, there's another way to own the skya citizen's trust
fund similar to the Alaska Permanent Fund. My proposal can be boiled
down to this: what Alaska did with oil, the whole country should
do with sky.
Why is Alaskan-style citizen ownership of the sky preferable to
corporate or government ownership? One reason is essentially religious.
It rests on a belief that the sky is a gift from our common creator.
It wasn't given to a government, and certainly not to private corporations.
We, the meek, are its inheritors. If it turns out this gift is worth
real money, well, that money belongs to us and our heirs.
A second reason has to do with values and priorities. Federal ownership
of the sky would strengthen the apparatus of the state; citizen
ownership would strengthen families and children. If we truly believe
that families and children are the bedrock of our society, we should
design our institutions and allocate our resources accordingly.
A third reason is that the sky is nothing if not the ultimate commonswe
all inhale from it, exhale into it, and use it daily in many other
ways. On the theory that use implies ownership, or simply that commoners
own the commons, the sky should be our common property.
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6. How A Sky Trust Would Work
The Sky Trust is a cap-and-trade system in which the initial emission
rights are given to a trust, which sells them to polluters and distributes
the revenue to all citizens equally.
You can look at the Sky Trust as both a civic institution and
a mechanism for recycling scarcity rent. As a civic institution,
it would embody our common ownership of a shared inheritance. Its
trustees would have three legal responsibilities: (1) to issue carbon
permits up to a limit established by Congress; (2) to receive market
prices for those permits; and (3) to distribute the income equally.
In the event of a conflict between these responsibilities, preservation
of the sky would take precedence.
The other way to view the Sky Trust is as a scarcity rent recycling
machine. We, the users, pay scarcity rent for the sky becausewell,
because it's scarce. We, the owners, then get back our share of
the scarcity rent becausewell, because we're the owners. In terms
of money in and money out, the whole thing's a wash. But for you,
me and millions of other individual citizens, the recycling of scarcity
rent can make a big difference.
Think of it this way. If carbon emissions are limited, the effect
is the same as limiting the supply of fossil fuels. That's what
OPEC did in the 1970s, and you know what happened. Without a Sky
Trust, the higher prices from limiting carbon emissions would be
a windfall for oil companies and their shareholders. With
a Sky Trust, we'd return the scarcity rent to its rightful ownersourselves.
Also remember this: though everyone will receive an equal
share of scarcity rent from the Sky Trust, not everyone will pay
the same amount. Those who burn more carbon will pay more than those
who burn less. If you drive a sports utility vehicle, you'll use
more sky than if you ride a bus; hence you'll pay more scarcity
rent. Since your dividend is the same no matter what, you'll come
out ahead if you conserve and lose money if you don't.
In other words, money will flow from over-users of the sky to
under-users. Economizers will be rewarded, squanderers will pay.
This isn't only fair; it's precisely the right incentive to reduce
pollution.
ADD SKY TRUST DIAGRAM HERE
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7. Thought Experiments for Economists
When I began writing this book, the question "Who owns the
sky?" was like a Zen koana seemingly innocent query that,
upon reflection, opens many unexpected doors. Thus, if you accept
the notion that the sky belongs to all of us, you soon wonder if
there's a practical way to structure common ownership. (Answer:
yes.) Likewise, if you start with the premise that the sky is a
valuable asset that shouldn't be given away free, you soon pose
the question, "Are there other assets like this?" (Answer:
yes.) You then ask whether there's a whole class of hidden
assetslike the dark matter of the universethat should be owned
by all of us. And you go on to inquire, "If this were so, what
difference would it make?"
Such musings have occupied me for several years. They've also
led me to propose several thought experiments for 21st century economists.
Thus:
(1) Imagine waste sinks are scarce.
I trust by now you agree we're running out of sky. Let's assume
other industrial waste sinksland, water, our own bodiescan also
safely absorb only so much. What then?
Ideally, what we'd want is a mechanism like the governor in a
steam enginea device that automatically slows a system when it
runs too fast or too hot. An analogous mechanism for the economy
might work like this. As the economy fills a waste sink with pollution,
market forces lift the price of the sink's remaining capacity. Demand
for the pollutant then falls, reducing the amount that enters the
economy.
(2) Imagine externalities are large.
An "externality" is a cost that markets don't recognize.
For example, when a factory emits pollution, causing people downwind
to get sick, the victims' pain and medical bills aren't part of
the polluter's costs.
At the moment, externalities are just out there, floating
in space, on no one's balance sheet. There are no property rights
attached to them, hence no owners, hence no one to pay. But if we
turn them into assets and attach owners to them, then self-regulating
markets can run the show.
(3) Imagine multiple paths to happiness.
Commerce, however useful it may be, isn't the sole source of happiness.
The trouble is, our economy steadfastly encourages only one path
to happiness: acquisition of more stuff, usually by working and
spending more.
This is where new property rights come in. Property, if you happen
to own any, is a wonderful source of income. Unfortunately, most
income-producing property is owned by a small percentage of the
population. But what if we "assetized" externalities and
assigned them to everyone through a set of trusts? Pollution and
other forms of illth would go down. But just as importantly, everyone
would have a source of property income. We could use this income
to buy more timeand, I'd venture, more happiness as well.
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8. The New Commons
These pages propose to define a new class of common property that
lies somewhere between private property and state property. This
class would include things the ancient Romans called res communes,
plus many things the Romans never dreamed of. Broadly speaking,
it would encompass a variety of assets we inherit together, as part
of a community, as distinct from assets we inherit individually.
The sum of the assets in this classlet's call them common assetswould
constitute an intangible commons.
Unlike the old commons, the new commons would be a patchwork of
property rights rather than a plot of land. The distinguishing feature
of the assets in the new commons is that they'd be held in trust
for everyone equally, and for future generations. In many cases,
beneficial ownership would be represented by non-transferable shares
acquired at birth, like shares of the Alaska Permanent Fund.
My thesis is simple. This new class of property is the missing
piece that will save capitalism from itself. It's the proxy
capitalism needs to start charging for externalities now priced
at zero. And it's the trustee capitalism needs to discharge
its responsibilities to future generations and those without private
property income.
What are some of these common assets? In addition to nature's
gifts, we share a vast societal inheritance that makes private
wealth possible, and thus itself has economic value. We inherit
these assets not from the common creation, but from our common ancestors.
The list of such societal assets is large. It includes our languages
and cultures, our store of scientific knowledge, our legal, political
and economic institutions, and even new-fangled things like the
Internet. The exact value of this societal inheritance, like that
of nature, is incalculable. Still, it's safe to say it's enormous
Just as social insurance was one of the great achievements of
the 20th century, so building the new commons, out of various natural
and societal assets, could be a legacy of the 21st. Whereas social
insurance mainly helps people late in life, the fruits of common
assets would help people throughout life. Such assets wouldn't just
be safety nets, they'd also be ladders. They'd temper the maldistribution
of private wealth without disturbing it, and provide hope and opportunity
where those have been lacking
The new commons would be a set of wealth managing institutions,
governed by trustees and accountable to citizens. These institutions
would represent unrepresented ecosystems [and other common assets]
in real-time market transactions. And they'd let usindeed, compel
usto hold common assets in trust for future generations.
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9. Capitalism 2.0
Adam Smith wasn't often wrong, but he erred in thinking the invisible
hand would work forever without updated instructions. The world
has changed, and it's time for a software upgrade. If Bill Gates
can do it every three years for Windows, we can surely do it every
generation or so for capitalism
The operating system of capitalism isn't a bad one, except for
a few stubborn flaws. Bugs, you might call them. Because of these
flaws, common assets such as the sky are degraded. Because of these
flaws, one of five American kids is born into poverty, with slim
odds of escaping. Because of these flaws, species go extinct. Thus
the need for an upgrade.
This book shows how we can upgrade capitalism gracefully, by which
I mean gradually, fairly and transparently. The virtues of gracefulness,
I'd add, are many. Fewer people get hurt. Solidarity is strengthened.
From an economic perspective, less money is lost and more money
can be made. Graceful upgrading is good for GDP and genuine
well-being.
The big problem with graceful upgrading is getting it started.
It's much easier to react to unexpected crises than to avert foreseeable
ones. Almost by definition, gracefulness is anticipatory. It requires
action while there's still time to be gradual, changing before we're
forced to change. And this necessitates a leap of faith.
I sense that, on the matter of stabilizing the climate, most Americans
are ready to make a leap of faith, if the pain to them is
minimized. Most Americans know, at some level, that we're playing
with fire when we double the greenhouse gases in the atmosphere.
The reason we dilly-dally is that we don't see how we can break
our carbon-burning habit without pain.
A Sky Trust gives us reason to stop procrastinatingit offers
plenty of pain protection and dividends for everyone. But a Sky
Trust does more. It opens the door to upgrades in capitalism which
gracefully fix its software flaws. Here's how.
Capitalism 2.0, as I envision it, would define the commons clearly,
with property rights and boundaries markets understand. It would
assign these property rights to trusts representing all present
and future citizens. These trusts, with their universal ownership
and multi-generational time horizons, would counter-balance the
short-term profit-maximizing of private corporations. They'd add
to our current economic formulæ a new set of calculations:
If you use the commons, you pay. As a co-owner of the commons, you
get dividends (or other shared benefits). If you're modest in your
use of the commons, you come out ahead. If you're profligate, you
come out behind
That, at any rate, is my compassionate businessman's dream, a dream
that would be good for the stock market and for every living
creature.
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Appendix : Key Features of U.S. Sky Trust
Here are the key features of the proposed U.S. Sky Trust.
o Carbon emissions cap set initially at 1.346 billion tons, the
1990 level
o Tradable carbon emission permits sold annually to energy companies
at the top of the carbon chain.
o All revenue from permit sales goes into a nationwide trust.
o Trust pays equal annual dividends to all U.S. citizens (like
the Alaska Permanent Fund).
o Dividends can be placed tax-free in Individual Retirement Accounts
or Individual Development Accounts for children.
o Initial price ceiling on carbon emission permits of $25 a ton;
ceiling rises 7 percent a year for four years.
o Transition Fund to help those most adversely affected by higher
carbon prices. Fund starts at 25 percent of permit revenue, declines
2.5 percent per year.
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