Distributive Justice

Abstract

In this chapter, we draw on political philosophy and ethics to identify ten principles of distributive justice that are relevant to climate policy. We have divided these principles into four categories: ‘greatest utility’, ‘individual rights and freedoms’, ‘solidarity and capacity’ and ‘contribution and benefit’. We briefly discuss some important ethical and political-philosophical schools associated with these categories, and elaborate on the ten principles.

2.1 Principles of Distributive Justice

Distributive justice is an important element of climate policy. Which sector needs to reduce the most carbon emissions? How can you fairly distribute the enormous costs of the energy transition? Or of adaptions to the unstoppable sea level rise? Who will pay for the damage caused by extreme rains or droughts? The concept of distributive justice can be used to find answers to these questions. We can draw on a rich literature to this end, because issues of distributive justice are everywhere in society. Over the past centuries, political philosophers, philosophers of law and ethicists have considered how governments can fairly redistribute burdens among their citizens, and under what principles.

In this chapter, we draw on that rich literature to identify ten principles of distributive justice that are relevant to climate policy. We have divided these principles into four categories: ‘greatest utility’, ‘individual rights and freedoms’, ‘solidarity and capacity’ and ‘contribution and benefit’. Because our aim in this book is to introduce a justice perspective to climate policy, in Box 2.1, we briefly discuss some important ethical and political-philosophical schools that discuss this. Although not exhaustive, the distributive principles we describe in this book can largely be traced back to these schools.

Box 2.1: Origins of Distributive Principles

Where do distributive principles come from? There are two lines of reasoning in the ethical-philosophical literature that describe what is ‘just’: deontology and consequentialism. In deontology, the question of what constitutes just distribution starts with considering individual rights and duties (the literal translation of deontology is ‘duty’). Duties can be negative–thou shalt not steal or kill– but also positive, for example helping those in need. Consequentialism looks primarily at the broad consequences of actions. Central to this thinking are the notions of collective utility and well-being. More specifically from a consequentialist perspective, actions are ‘good’ if they contribute to a common good or general well-being.

A few political-philosophical schools can subsequently be distinguished in Western thought. Liberal egalitarianism and libertarianism have a deontological starting point. These schools put individual rights at their centre, but differ strongly in their view of the role of government. Liberal egalitarianism accords important roles to the government, such as levying taxes to help lower-income households. Property and wealth, after all, are the result of social cooperation and cannot exist without society. Libertarianism holds that the government is only required to ensure that citizens do not harm each other, and respect each other’s rights. The individual and their freedom are pivotal. This automatically implies an important role for individual responsibility. Libertarian thinkers are critical of egalitarian principles of distribution.

Utilitarianism is the most important consequentialist approach in relation to climate justice. Here, collective outcomes are an important measure of distributive justice. The goal of government intervention and redistribution is not to protect individual rights and property, but rather to maximise the collective benefit.

The above schools of ethical and political-philosophical reasoning are all potentially useful for climate policy. For example, a government that allocates emission rights to stop polluters from harming the climate and environment can base its policy on both utilitarian and liberal egalitarian viewpoints.

2.2 Four Categories of Distributive Principles

Distributive justice can involve several principles in relation to climate policy. Below we describe four categories of principles.

• Greatest utility. Social outcomes are central here. The applicable distributive principle is: the manner of distribution maximises the social benefit. We call this a distribution based on ‘greatest utility’.

• Individual rights and freedoms. This is all about legal certainty and legal equality. Citizens and businesses must be able to rely on existing agreements and rules, they must be treated equally, and they must be held to their individual responsibility. Relevant for climate policy are the distributive principles of ‘per capita’, ‘based on existing rights’ and ‘based on individual responsibility’. These three principles focus on existing individual rights, acquired status and responsibilities.

• Capacity and solidarity. This is about the effects of distribution systems on the social positions of citizens. These positions must not mutually reinforce each other to the benefit of higher social groups (or in any case not too much); it involves an appeal on capacity and solidarity. Distributive principles in this category are ‘based on capacity’, ‘benefit the least well-off’ or offer everyone ‘sufficiency’.

• Contribution and benefit. Here we focus on citizens’ and businesses’ contribution to climate change, but also how much benefit they derive from their actions. It therefore concerns both the behaviour and interests of citizens and businesses and includes the principles of ‘polluter pays’, ‘beneficiary pays’ and ‘sustainability pays’.

Figure 2.1 provides an overview of the four categories. In the next section, we explain these distributive principles in more detail.

Fig. 2.1

Four categories of distributive principles in climate policy

2.3 Distribution Based on Greatest Utility

An important consideration in distributive justice is which measures will bring the policy objective closest. In distribution based on greatest utility, the maximum effect is the measure of success. In climate policy, this benchmark is often the reduction of greenhouse gas emissions. Here, investments may focus on the major polluters, where a lot of emissions can be reduced or prevented. The closer the deadline for meeting the climate targets becomes, the more likely this principle will be the last option available. In practice, this principle is already an important starting point in shaping policies today.

According to this principle, the fairest system of distribution is that with the greatest impact. Only the result counts.¹ The ‘greatest utility’ principle thus has characteristics of utilitarian thinking.² In practice, this principle is often complemented by cost-effectiveness or efficiency–that is, by the relationship between the effectiveness and the cost of a measure. This is often an important parameter in mathematical models used to analyse climate measures.

However, the example at the beginning of this book shows that things are not always so simple in practice. France could claim that increasing the carbon tax was fair from the point of view of ‘greatest utility’, as it is a very effective measure for preventing emissions. But that does not mean it was perceived as fair by the public, because the negative effects of this policy would mainly be felt by less wealthy citizens and businesses. This also illustrates the general objection to distributive justice based on greatest utility. Only considering the effect on the policy objective–in this case carbon reduction–is to neglect the fairness of the resulting distribution.

2.4 Individual Rights and Freedoms

In distribution based on greatest utility, the rights of individual citizens and businesses may take second place to the interests of the general populace. Furthermore, some citizens or companies may have to bear a much heavier burden than others. This can be difficult to reconcile with important principles of law, such as legal certainty and equality. In the next category of distributive principles, the individual takes centre stage. Below we discuss three principles that take into account individual rights, freedoms and responsibilities.

2.4.1 Distribution Per Capita

The ‘per capita’ distributive principle involves distributing costs or benefits equally between the citizens of a region or country.³ Based on this starting point, it is unfair if some groups have to contribute more to carbon reductions, or get more subsidies or emission rights, than others in a similar position. After all, every citizen is equal before the law and has the same rights and obligations as any other citizen.⁴ In other words, equal rules for all.

This distributive principle comes into play, for example, in the debate about who owns natural resources. The distribution of the carbon emissions budget is derived from this. According to this principle, the carbon budget should be divided equally per capita⁵; each person is allocated an equal share of the carbon budget.⁶

A per-capita system of distribution is also conceivable for financing the energy transition, where everyone contributes an equal amount. It means people on a narrow budget will contribute as much as those with plenty of money. A variation on this principle is that every household or business contributes the same amount, regardless of the number of people in it.⁷ A real-life example is the energy tax relief scheme for Dutch citizens announced in 2021, a response to the rise in gas prices. This general tax measure means that households will spend an average of some €400 less on energy costs annually. This generic measure applies to every household regardless of income or size.⁸

Opponents of a per-capita distribution of climate costs cite two objections. First, it does not take an individual’s income or capital into account. For someone on a low income, even a slight increase in their energy bill could be a major drain on their budget. But a per-capita tax relief scheme for energy also benefits people who can easily afford the higher energy bill. So, the rules are not so equal after all. Second, per-capita distribution does not take into account citizens’ own contribution to climate change. Surely the distribution measures should take account of how much citizens’ own behaviour contributes to global warming? This would amount to an incentive to change behaviour, and so make the measures much more effective.

2.4.2 Distribution Based on Existing Rights

Another important principle of law is legal certainty: agreements made in the past must be honoured. Citizens and businesses must be able to trust that previous investments will not be devalued simply because the government has decided to change course. So, previously raised expectations, existing practices, positions won in the past, and previously acquired rights all play a role in deciding on a system of just distribution.⁹ In other words, according to this principle, existing ownership rights or past investments should play a defining role in the distribution of climate costs.¹⁰

Existing rights particularly play a role in the allocation of carbon budgets. The current practice is that countries that emitted a lot of CO₂ in the past can count on getting additional emissions rights. An emissions right is the right to emit greenhouse gases, such as defined by the European Emissions Trading System (EU ETS). The rationale behind this is that these countries made costly investments in the past, when climate change was not a big issue, and these investments would otherwise be negated. Conversely, countries with historically low emissions are allocated less emissions rights.

We also see the distribution of compensation based on existing rights in Dutch climate policy. An example is the Coal-Fired Power Generation (Prohibition) Act, passed in late 2019. This act banned coal-fired power, suddenly rendering the costly furnaces of coal-fired power plants worthless. Energy companies such as Vattenfall, the operator of Amsterdam’s Hemweg power plant, consequently suffered financial losses. The Ministry of Economic Affairs and Climate Change and Vattenfall eventually agreed on compensation of €52.5 million.¹¹

The ‘existing rights’ principle is at odds with the principle of equality. Some groups are exempted and continue to benefit from the old, less stringent rules. So, not everyone is equal. In this example, four other coal-fired power plants were eventually allowed a transition period of up to ten years. The operators will be able to recover most of their previous investments and in the meantime make their plant suitable for non-fossil electricity generation.¹²

2.4.3 Distribution Based on Individual Responsibility

In a country based on the rule of law, citizens not only have rights, but also responsibilities. The government cannot solve all their problems for them. This principle assumes citizens and businesses have an individual responsibility to anticipate the consequences of climate change, or to contribute to climate change mitigation. The distributive principle of ‘individual responsibility’ says that everyone must bear their own burdens and take their own precautions. The individual is key, and responsible for their own actions. Consequently, the costs of climate change must in principle be borne by citizens and businesses themselves. They can do this by taking out insurance against climate risks, for example. According to this principle, a distribution system based on income-dependent levies or compensation would be out of the question. Individual responsibility can also play an important role in other areas of climate policy. For example, under this principle, homeowners are themselves responsible for making their homes more sustainable. And anyone who knowingly builds their house in a flood-prone area will themselves need to take flood protection measures, and also bear the costs if things go wrong.

One area of tension in this principle is how to distribute the costs of climate damage. We can make citizens or businesses individually responsible for insuring or otherwise protecting themselves against climate damage from floods and storms. Or we can make them bear the costs of any damage that occurs themselves under the principle of individual responsibility. But climate damage is by definition at least partly the result of greenhouse gases emitted by others, who cannot be individually identified or held responsible. Is it fair to make citizens and businesses wholly responsible for preventing or bearing the extremely high costs of climate damage, while they do not bear full responsibility for it?

2.5 Capacity and Solidarity

The objection to many of the principles discussed so far is that their application could lead to the disproportionate distribution of climate costs. By disproportionate, we mean that some citizens or companies will have to bear much higher costs, or in fact benefit much more, relative to their financial position. The question then is what constitutes proportionate distribution. The following three principles try to answer this question.

2.5.1 Distribution Based on Capacity

Households vary hugely in their financial situation. Some households are rich, others are less well off. This clearly means they also have varying financial capacity. Where an additional income tax of 10% will have little effect on wealthier households, poorer households may no longer be able to meet their basic needs under it.

A distribution system based on capacity takes account of differences between the economic positions of citizens, or between citizens and businesses. Citizens and businesses with greater capacity will bear a larger share of the climate costs or will receive less grants. In other words, the broadest shoulders bear the greatest burden. The underlying idea is that growing up in a wealthy family, or happening to be very talented, is not something someone themselves has earned. In practice, applying this principle would involve the redistribution of resources from the rich to the poor.

We find this principle in many areas of Dutch life. On the cost side, we see this reflected in progressive tax systems, where higher incomes are taxed relatively more to bolster the government’s finances (see Box 2.2). On the benefit side, we see this reflected in income-dependent schemes like the rental allowance, childcare allowance and healthcare benefit.¹³

One objection to a system of distribution based on capacity is that, if it is implemented too rigorously, it can remove the incentive to act. For example, fully compensating people for high energy bills could discourage them from insulating their homes. We therefore also discuss two other distributive principles that have solidarity as their starting point, but retain incentives to encourage people to action.

Box 2.2: Public Funds: Taxation Based on Capacity?

This book frequently refers to the use of public funds for financing measures such as subsidies or compensation schemes. Although some climate measures are paid for with special levies, in many cases these are financed from public funds. To draw a complete picture of the funding system, we will need to take a closer look at it. The effects of distributing levies and taxes to raise public funds also apply to the distribution of climate costs. Does having a progressive tax system automatically mean that climate costs will be distributed based on capacity? The reality is more complex. If you examine the distribution of public funds more closely, the system is less progressive than you might expect. One explanation is that the tax system has several components, such as wage and income tax, sales taxes, VAT and various premiums.¹⁴ By no means all those components are distributed progressively. In fact, a recent policy brief published by the CPB concludes that the net effect of the Dutch tax system is actually slightly degressive, with lower incomes paying proportionally more tax.¹⁵ So hardly a tax system based on the capacity principle.

2.5.2 Distribution Systems That Benefit the Least Well-Off

A distribution system in favour of the least well-off sets out to ensure that the lowest incomes are in any case not disadvantaged further.¹⁶ There are several ways to distribute climate costs in favour of poorer people. One way is to make polluters pay for their own emissions through a uniform carbon tax, and use the proceeds to finance social policies that improve the lives of the least well-off.¹⁷ A system of progressive taxes on income and wealth can also benefit the least well-off if, for example, if it is used to pay for grants for energy-saving measures which only the lowest incomes can claim.¹⁸ In regard to taxation, however, the extent to which such a progressive system applies in the Netherlands is questionable (see Box 2.2).

One objection to a distribution system that favours disadvantaged people is that the outcome may be at odds with a desired distribution based on greatest utility.¹⁹ For example, lower energy bills and tax exemptions for lower incomes may reduce their incentive to insulate their homes.

2.5.3 Distribution Systems Based on Sufficiency

Under the ‘sufficiency’ distributive principle, the distribution system ensures that nobody loses out. Every citizen is guaranteed sufficient means and no one falls below the minimum. So, everyone has sufficient financial resources to live a ‘dignified life’, or everyone is offered sufficient protection, such as protection against floods, for instance. Only then can the differences or inequalities in the distribution of costs be justified.²⁰

An example of a distribution system based on sufficiency was the set of measures, introduced in the summer of 2021, to compensate for the exceptional rise in energy prices in the Netherlands. The price rise meant that some households could no longer afford to heat their homes. A term often used in this context is ‘energy poverty’.²¹ A variety of schemes were introduced to keep energy affordable and prevent or alleviate energy poverty.

This principle also faces objections. For instance, there are households living well below the subsistence level and there are those that live near it. Sometimes, alleviating the burden of the small group of people in real poverty will achieve more than improving the situation of the larger group who already live around the subsistence level. There is also the risk that pursuing a level of sufficiency could make other distributive principles seem redundant, while for people living above this level there will also be many distribution issues that require continuing attention.²²

2.6 Contribution and Benefits

Climate change is happening fast and it is caused by humans. Systems for distributing climate costs could therefore logically take into account whether citizens and businesses themselves have contributed to climate change through their behaviour. They could also take into account these citizens’ and businesses’ direct interests in a measure. Many people will think it only fair that citizens and businesses contribute to resolving the climate issue by changing their behaviour, or that the distribution system takes account of who will benefit from a measure. There are various distributive principles that take account of individual behaviour and own interests, three of which we discuss here.

2.6.1 The Polluter Pays

If you damage something, you have to pay for it, and if you make a mess, you have to clean it up. These principles can count on broad public approval. Pollution is also a form of damage, and the ‘polluter pays’ principle is therefore often applied to environmental and climate measures.²³ It means you are responsible for your own waste, i.e. ‘clean it up yourself, or pay someone else to do it’. In climate policy, this means distributing climate costs such that those who produce the most emissions also have to pay the most.

‘Polluter pays’ is generally considered a basis for effective climate policy. After all, it creates an incentive for behavioural change, and is therefore often relatively effective and efficient. Perhaps the most obvious example of polluter pays is the direct tax on carbon emissions, for example through the EU ETS (see Boxes 3.1 and 3.2). Both instruments put a price on every tonne of greenhouse gas emitted, creating incentives for companies to reduce their emissions.²⁴ Other examples include waste collection levies, fossil fuel taxes, and laws requiring polluters to clean up or compensate for the damage they have caused. It is a simple principle and intuitively appealing.

However, this principle sometimes meets major objections in practice. Low-income earners, who often live in poorly insulated homes, are disproportionately affected by taxes on fossil fuels. For them, the ‘polluter pays’ principle can lead to energy poverty. It is therefore often suggested that it should be combined with the capacity principle.²⁵

Moreover, ‘polluter pays’ is sometimes difficult to put into practice. Much of today’s pollution was produced in the past. The polluters cannot always be held responsible–let alone made to pay–because they may no longer exist. An additional issue here is the extent to which past emitters could be expected to be aware of the harmful effects of their emissions. Many people advocate applying 1990 as the cut-off point: from this point on, polluters can no longer claim ‘ignorance’, because after this time the negative effects became public knowledge.²⁶

2.6.2 Distribution Based on Beneficiary Pays

Most people think it is fair to pay extra for something that benefits you. This is because there is a direct link between the money you spend and the use of the service or product.²⁷ Under the ‘beneficiary pays’ distributive principle, the costs are distributed in proportion to the benefit citizens and businesses derive from the measures in question. You could say that someone who benefits from, say, a dyke or a road, can also be expected to pay for the protection or convenience it provides. The Dutch motor vehicle tax is based on this principle. In climate policy, benefit-based distributions are often applied in adaptation policies. An example is the ‘water system tax’ that residents pay to Dutch water boards to help finance the flood protection measures. Large landowners such as farmers or nature reserve owners are taxed more heavily because they benefit more from the measures.

The beneficiary pays principle cannot be separated from the moment the benefit is enjoyed. You could benefit from a particular activity today, in the short term, or further in the future. For example, western countries are enjoying the profits today of the polluting activities they carried out in the past. According to this principle, these countries should now pay for their earlier emissions. The next question is whether these countries should also pay for current and, potentially future, climate damage felt in less well-off countries.²⁸ This issue of climate reparations figured prominently on the agenda of COP27,²⁹ the United Nations climate conference held in November 2022.³⁰

The principle of beneficiary pays need not only apply to the past and the present; it can also be used for future benefits. For example, our children and grandchildren will benefit from renewable energy that is cheaper and more reliable than what is available today. As adults they will benefit from an infrastructure tailored to a fully-fledged renewable energy sector. However, the investments are being made today. If these costs are to be distributed based on beneficiary pays, our children and grandchildren will be largely footing the bill, whereas under other distributive principles the bill ought to be paid by current generations (see Box 2.3).

Box 2.3: Should Current or Future Generations Pay?

Although the distribution of climate costs between current and future generations falls outside the scope of this book, it is undeniably an issue of growing importance. We are emitting greenhouse gases today that will continue to contribute to climate change for a long time to come. The consequences will be mainly felt by the people of the future: our children and grandchildren. We are therefore directly responsible for the habitability of the world in which they will live. However, if we actively reduce carbon emissions today, this will also benefit future generations. This leads to the question of who should pay for the cost of emissions reductions: us or future generations?

There is more than one answer to this question. For example, if the ‘polluter pays’ principle is your starting point, then the current generation can be held financially responsible. After all, it is we who are damaging the climate and therefore must bear responsibility for repairing it. But, if you apply the ‘beneficiary pays’ principle, then the cost of carbon reduction must at least partly be passed on to future generations, as it is they who will benefit from our investments and so they who should pay.³¹ This example highlights why distributive principles are so important: there are several options to choose from.³²

There are several objections to the beneficiary pays principle. It can, for example, be difficult to implement in practice, because it is not always possible to determine who actually benefits. This is relatively simple for adaptation measures: a city, or a typical Dutch government body like a water board, has registered residents who benefit from the measures they implement. However, it gets more difficult when dealing with activities in the past that benefit people today. How much of our wealth today is directly attributable to past emissions? There have been many other past developments that benefit us today, such as the rise of technology and digitalization. It will likely be even more difficult to determine who will benefit from the climate measures we are taking today, and by how much.

2.6.3 Sustainability Pays

When considering the just distribution of climate costs, you could also look at merit, i.e. the extent of someone’s commitment to sustainability.³³ Distribution based on the ‘sustainability pays’ principle assumes that this commitment should be rewarded proportionately. So, climate costs will be distributed differently based on people’s ‘sustainable merits’.³⁴ Under this principle, households or businesses who carry out sustainability measures would pay less tax than those who do not, for example. It is based on the widely felt intuition that ‘hard work should pay’.

Rewarding positive behaviour typically plays a role in mitigation policies, for example to reduce emissions and encourage the energy transition. Applying the ‘sustainability pays’ principle is a means of achieving critical mass, so that innovations and interventions will become cheaper and more generally accepted. It is a way of developing best practices that others can follow. This is the reason why those committed to sustainability should be rewarded according to their efforts.

One criticism of this principle is that some citizens have more opportunities than others to ‘do good’, whereby historical circumstances, chance and money all play a role.³⁵ Consider the aforementioned debate about whether it is fair to subsidise expensive electric cars while only the highest income groups can afford them. To what extent does ‘chance’ or simply being ‘lucky’ play a role in the commitment to sustainability? The risk here involves what is also called the ‘Matthew effect’: groups in society who already have a lot become even richer, and those that have little become poorer.

2.7 In Conclusion: Climate Policy Involves Choices

In this chapter, we discussed ten distributive principles and divided them into four categories. The first category focuses on maximizing the utility of a system of distribution. The second is all about individual rights and freedoms; do we take into account existing rights, equality before the law, or the individual responsibility of citizens and businesses? The third category of distributive principles is based on capacity and solidarity. Sometimes it will be fairer to take account of the capacity of citizens and businesses, particularly when climate policies threaten their very livelihood. Finally, the fourth category calls for costs to be distributed based on how much someone contributes to climate change or benefits from a measure. Here, it is fair to make polluters pay, or reward those who are more sustainable, or take into account the benefit citizens or businesses derive from climate measures.

The distributive principles we discussed differ in nature, origin and effect. In the following chapters, we will describe which distributive principles are applied in Dutch policy practice using a number of case studies. As mentioned earlier, these chapters are meant to be illustrative. We do not provide a comprehensive analysis of all distribution systems applied in Dutch climate policy, but rather illustrate the principles applied–implicitly or explicitly–using case studies.

These case studies will reveal that there is much variation in practice, and there are several options to choose from. For example, the ‘polluter pays’ principle is a more obvious choice for distributing the costs of mitigation policies, but less so (if at all) for adaptation policies. We will also see that some principles are better suited for distributing tax burdens, while others are more tailored to the distribution of grants or compensation for damage.