Strange as it may sound, during the next several years Congress will need to decide who owns the sky. That decision will determine whether each American citizen becomes a stakeholder -- receiving "rent" from the private use of natural resources -- or merely a tenant, paying out a thousand or more dollars per year in rent to the government or (more likely) to private interests.

Scientists say we are running out of sky. More specifically, we are rapidly depleting the ability of the atmosphere to absorb heat-trapping carbon dioxide, a by-product of burning gasoline and other fossil fuels. This causes problems like global warming, which may already be the source of last year's record-high temperatures and string of weather-related disasters.

The sky problem is as old as civilization itself. Things that belong to everyone -- and to no one in particular -- tend to get overused and abused. This is the "tragedy of the commons." As the world's population expands and achieves higher levels of consumption, we are approaching real limits in terms of pollutants that can be dumped into the air and waters.

Creating money out of thin air

Use of the atmosphere as a garbage dump will be rationed. Last year the U.S. and 100 other nations signed the Kyoto Protocol on global warming, which will establish an international trading system for carbon-emission rights. By allocating each nation limited emission rights, a potentially new and valuable property right is being created out of thin air.

These emission rights will be, by design, scarce, tradable and increasingly valuable. Consumer prices will rise as oil companies and other producers pay more for the privilege of polluting. The tens of billions of dollars paid for emission permits will add to the cost of gasoline, home heating fuels and every other product with a high energy content.

The only remaining question is whom will Americans pay to rent the sky? Will we pay this "sky tax" back to ourselves -- as collective owners of new common wealth -- or give it away forever to whatever private interests lay first claim?

There are basically three options. The traditional model is to give the emission permits away to today's polluters in proportion to their emissions.

This "giveaway model" is the one Congress used in fashioning the Clean Air Act of 1990, which capped sulfur emissions that cause acid rain. Coal-burning utilities received the sulfur emission permits designed to gradually reduce emissions to 50% of the 1980 levels. Firms not lucky enough to get them free can buy those put up for sale at the Chicago Board of Trade -- where they are traded alongside pork bellies and stock-index futures.

A more market-based model was embraced by Congress in 1993, when it gave the Federal Communications Commission authority to auction scarce broadcast spectrum. By 1997 broadcasters and wireless networks bid over $20 billion to rent portions of the public airwaves. As Bob Dole, the 1996 Republican presidential nominee, justified it, "The bottom line is that the [broadcast] spectrum + belongs to every American equally. No more, no less."

The Sky Trust Initiative

A third model, called the Sky Trust Initiative, has been proposed by the Corporation for Enterprise Development (CFED), a San Francisco-based nonprofit that promotes sustainable development and low-income asset building. CFED's proposal is premised on a belief that the sky (or other common assets) does not belong to private corporations or to the government. Because the sky belongs to all of us equally, they argue, companies should pay for pollution permits. Revenues should go into a Sky Trust that makes equal dividend payments to every American citizen.

Peter Barnes, who directs CFED's Common Assets Project, estimates that by 2010 the Sky Trust would pay out $1,000 a year to every American (including children) if emissions are limited to 90% of 1995 levels. He would also set aside part of the trust, as much as 25% in the beginning, to reimburse the 50 states for transition costs related to dislocations, such as worker lay-offs in mining or in energy-intensive manufacturing.

Public stakeholding using a trust is by no means unprecedented. CFED modeled Sky Trust after the Alaska Permanent Fund, which pays each citizen a dividend from the investment of public oil revenue. In October, each Alaskan received this year's dividend check: $1,770 per citizen.

Alaska's fund resulted from a similar windfall. Huge oil reserves were found on state-owned land around Prudhoe Bay in the 1970s. Jay Hammond, Alaska's Republican governor, opposed tax cuts and spending projects, insisting that each citizen should "decide how to use the resource wealth each owned." He pushed through a plan to invest the oil money in a trust that would generate income even after the oil ran dry. Half the income is used for public investments in education and infrastructure, and half is returned directly to the people on a one person, one share basis.

Another argument in favor of a Sky Trust is that without a rebate, average citizens will be worse off because of higher energy prices. For example, Barnes estimates that when carbon emissions rise to $100 a ton, gasoline prices alone will be 30 cents a gallon higher. He argues that because the cost of polluting is inevitably going up, at least Sky Trust recycles the "scarcity rent" directly back to the public rather than to private interests or to the government (which, he argues, is too vulnerable to special interests). Barnes also proposes that Sky Trust dividends earned by children should be placed in special tax-deferred savings accounts. This would make every youth, however poor, a "trust fund baby" with enough saved by age 18 to help pay for college, start a business or simply live a little better.

Green tax shift

One alternative to Sky Trust, proposed by Barnes' former colleagues at Redefining Progress, an environmental think tank, would use emission permit revenue (and other pollution taxes) to lower the payroll tax, which finances Medicare and Social Security. More than 70 percent of American families now pay more in payroll taxes than in income taxes. Unlike the income tax, which applies a higher rate to higher incomes, the payroll tax is terribly regressive -- taking 15 cents out of every dollar of wage income up to a $72,600 cap.

While this "green tax shift" is a good deal for workers, Barnes counters that the Sky Trust is more fair because the elderly, the unemployed and children will be paying higher energy prices, but receiving no payroll-tax rebate. In addition, he fears that only an independent trust that directly benefits all Americans can counter political pressures on Congress to use the pollution revenue for other, less progressive purposes.

Selling off the sky a slice at a time is an unsettling concept. Nevertheless, to the extent that scarcity -- and the need for conservation -- puts a price on our common assets, then the sky should not be the limit when it comes to extending the principle of public ownership.

Michael Calabrese directs the Public Asset Program at the New America Foundation, a non-partisan policy institute in Washington, D.C. His e-mail address is calabrese@newamerica.net.