(October 2001) The problem of climate change has surged to the fore recently as the United States, Europe, and Japan have sparred over strategies for addressing the issue. As chairman of Americans for Equitable Climate Solutions (also known as the Sky Trust Initiative), Rafe Pomerance has laid out a strategy for reducing the U.S. contribution to this global environmental problem. PRB recently spoke with Pomerance about the Sky Trust Initiative, which involves establishing a domestic emissions trading program to control carbon emissions in the United States.
From 1993 to 1999, Pomerance was deputy assistant secretary for environment and development at the U.S. State Department. In this position, he was involved in the development of U.S. positions and strategy on a range of international environmental issues, including climate change, ozone layer depletion, biodiversity conservation, deforestation, and coral reef preservation. Before joining the State Department, Pomerance spent two decades in the nonprofit environmental world, including positions as a senior associate at the World Resources Institute and as president of Friends of the Earth. Pomerance has chaired the boards of both the League of Conservation Voters and American Rivers. He has also served as coordinator of the National Clean Air Coalition.
The following are excerpts from an interview that PRB conducted with Pomerance.
PRB: Where did the Sky Trust idea originate?
Pomerance: The general idea of establishing public ownership over the atmosphere is the product of several years of thinking, a process that has involved many people. What makes it such a good idea is that it’s not only good for the environment, it’s also designed to be politically viable …
We wanted to emphasize that the sky belongs to everyone and that the right to emit environmentally harmful gases into it should not be taken as a given, but rather purchased from the people. In a lot of ways, our proposal is based on the idea of the Alaska Permanent Fund, which recognizes public ownership over the state’s oil reserves and distributes profits from the exploitation of those reserves to residents of the state.
PRB: What are the main points of your proposal?
Pomerance: First, we call for an emissions cap. We call for setting an initial goal of returning U.S. emissions to 1990 levels. To reach that goal, we would introduce carbon emissions permits — if you’re a company and you introduce carbon into the economy, you need a permit. We would limit the number of carbon emissions permits that could be purchased in a given year to meet our goal for that year.
The emissions permits would be sold through a public auction system. To ease the transition to this system, we would have an initial price cap for carbon permits at $25 a ton. Companies could also trade permits in secondary markets. Most of the revenue (75 percent) from permit sales would be returned to the American people, who collectively own our share of the global sky.
We would also create a transition fund to assist workers, consumers, and communities that are hurt by carbon reductions. Twenty-five percent of the revenues from permit sales would be used to finance this fund.
PRB: How much political opposition have you encountered so far?
Pomerance: There are two kinds of political problems. First, right now there is not sufficient organized support for the idea to push it through. Even though the situation is quite urgent, the problem is not visible enough to motivate people. The second problem is that there are quite a few economic actors who see any attempt to reduce carbon dioxide emissions as not in their interest.
PRB: What kind of economic impact would this proposal have?
Pomerance: We designed the proposal so that it would have a minimal impact on the overall economy. One of the concerns about attempts to limit greenhouse gas emissions is that such limits will have a substantial negative impact on the economy, particularly the price of energy. So what we’ve done is to cap the price of carbon permits to ensure that the overall economic impact is limited.
In terms of impact at a grass roots level, if the price of carbon emissions were set at $25/ton, the price of gasoline would rise by about $0.06 a gallon — not a huge increase. Keep in mind of course that our proposal ratchets up the price ceiling from $25/ton by 7 percent per year, which will mean corresponding changes in energy prices. The other thing to keep in mind is that coal is more carbon-intensive than gasoline, so you’ll have a larger impact on coal than on oil.
PRB: With such a price ceiling in place, how quickly could such a system reduce carbon emissions?
Pomerance: The big question in the climate game is: Given a certain price level for permits to emit carbon, what would be the corresponding reduction in emissions? The models used to answer this question vary quite a bit, so the only way to really find out is to actually put the system in place. The estimates for our model project reductions from 3 percent to 16 percent below what emissions would otherwise be within the first few years. Of course, those estimates need to be revised based on today’s energy situation.
PRB: Are there other innovative ideas for addressing climate change out there?
Pomerance: There are — some of them are closely related to our proposal, while others are quite different. The key aspect of our proposal is that it takes on the problem upstream — selling permits at the point of production rather than at the point of combustion. It’s much easier and more efficient to regulate 3,000 sources as opposed to 300 million sources. I also think that this is the only proposal that has a safety valve that would limit the economic impact of the new system — that may be the most important feature of all.
PRB: You’ve said that the Kyoto Protocol as currently configured is too ambitious — how should it be modified so that it is both effective and acceptable to both the United States and other parties?
Pomerance: If a cost cap were incorporated into the Kyoto Protocol, it would allow a country to ratify the Protocol and be certain that their economic cost would not exceed a certain level. This kind of approach was discussed at the negotiations at The Hague in November 2000, but at a relatively low level. However, the Bonn agreement in July of this year makes such a change to the Kyoto Protocol less likely.
PRB: As part of your plan, you’ve suggested devoting 25 percent of the revenue from the permit sales to compensating people who face an especially large burden in making an adjustment to the new system. Is that really a workable plan?
Pomerance: Sure, we could do it. We’re undoubtedly going to use a lot less coal if we get serious about reducing carbon emissions, so you really need to think about putting money back into communities, workers, and industry that are dependent on coal. And our proposal would set aside a substantial sum for this purpose: 25 percent of revenues from permit sales would probably provide $30 billion over the first five years.
PRB: Do you have a strategic plan for turning your proposal into law?
Pomerance: We do. We’re working to build a coalition that includes environmental organizations, corporations, labor unions, social equity groups, and bipartisan leadership on Capitol Hill. We’ve talked to a lot of people. But ultimately, a lot will depend on the White House.
PRB: What kind of hearing have you gotten from the Bush administration so far?
Pomerance: The Bush cabinet has been divided on global warming. Some have been in favor of a mandatory regime for controlling carbon emissions, but no details have been forthcoming.
PRB: Has your idea been picked up in Congress at all?
Pomerance: A recent joint statement by Senators McCain and Lieberman embraced an economy-wide cap and trade system for carbon and suggested our approach as one that ought to be looked at. The Senate Environment and Public Works Committee will begin seriously looking at alternatives in September.
Bingham Kennedy, Jr. is a former associate editor at the Population Reference Bureau.