Contribution to GTI Roundtable "Common Wealth Trusts"
Trusteeship structures already in place in the US can provide valuable lessons to those seeking to expand such models. At PolicyInteractive, I have been evaluating the Alaska Permanent Fund and California's groundbreaking GHG emissions cap-and-reinvestment program (California law AB32)—both of which Barnes alluded to, and both of which qualify as common wealth funds.
1. The Alaska Permanent Fund is a direct dividend to all citizens of the State of Alaska derived as a "rent" against oil extraction. Although it is sometimes characterized as a guaranteed basic income, in reality, it falls short due to sizable annual fluctuations, ranging from a low of $331 in 1984 to a high of $3,269 in 2008. The fluctuation is caused by variations in investment returns from the $34 billion fund, which vary dramatically annually. The dividend would be $1,300 per year if the find yielded a steady 6% annual return, or about 3% of the average per capita annual state income.
A recent study of the Fund suggests two weaknesses for climate stability policy.1 First, the oil revenue dividend is expended mainly as conventional consumption. Second, it creates a citizen demand for more income and hence extraction of fossil fuel to keep the revenue dividend coming. There is no evidence that it contributes to climate stability; more likely, it does the opposite.
2. Since 2012, California’s cap-and-trade program has been collecting dividends on auctioned allowances to emit greenhouse gasses. The California emission cap declines each year so that about 3-4% fewer allowances are allocated with each passing year—signaling that allocations will become more valuable each year. This stimulates large emitters to invest in emission reduction rather than putting it off. Revenue comes from fossil fuel emissions instead of fossil fuel itself, thereby incentivizing low emission alternatives.
This year, the annual revenue is expected to exceed $2.5 billion. Instead of broadly refunding revenues as uniformly distributed individual income, targeted reinvestments focus on two broad categories: 25% is allocated to ameliorate detrimental impacts on dispossessed low-income sectors affected by the policy or climate change, and the remainder goes into state capital investments in low emission renewables, conservation, public transportation, and research. The early evidence of this program is that low carbon infrastructure investments are occurring rapidly from both the free market responding as resistance to the cost of emission allowances and state investments in low-carbon infrastructure choices.
Currently, an “allocation” (one ton CO2eq) at auction remains near the legislated floor level of about $12.50, approximately equivalent to about 11 cents per gallon of gasoline. This amount has been criticized as too little or too much depending on predictable cultural dispositions. California policymakers aimed the floor price for emissions at the nexus of political viability, effective constraint on GHG emissions, and economic stability. Contrary to what naysayers have claimed, it currently looks as though they found the sweet spot.
For some of us working in the policy arena, there is concern about protecting the commons or common wealth with market-based mechanisms. Part of the discomfort is the reinforcement of econometric conventions where everything is commodified in dollars (a Faustian Bargain) instead of valuing the web of life intrinsically and adjusting our lives accordingly. Nonetheless, it appears that we are obliged to recognize the enormous constraints to change from our current infrastructure as well as entrenched entitlements like convenience, transport, and affluence. The great challenge we face is redirecting common wealth resources quite rapidly toward achieving a low emissions, low impact society.
1. Scott Goldsmith, “Alaska Permanent Fund Dividend: A Case Study in Implementation of a Basic Income Guarantee,” 13th Basic Income Earth Network Congress, University of Sao Paulo Sao Paulo, Brazil, http://www.iser.uaa.alaska.edu/Publications/bien_xiii_ak_pfd_lessons.pdf.