2.1. Evidence about net winners

The expected climate gains are of various natures; our purpose in this subsection is to introduce a few indicative data. According to the IPCC, although ‘negative impacts of climate change on crop yields have been more common than positive impacts (high confidence)’ (2014: SPM 1.3.2) ‘[t]here is also high confidence that warming has benefitted crop production in some high-latitude regions, such as northeast China or the UK’ (also cf. Jaggard et al. Reference Jaggard, Qi and Semenov2007; Tchebakova et al. Reference Tchebakova, Parfenova, Lysanova and Soja2011; Gregory and Marshall Reference Gregory and Marshall2012). Similarly, Arctic economies like Greenland’s stand to gain from more productive cod and mackerel resources in a warming world (Kjesbu et al. Reference Kjesbu, Bogstad, Devine, Gjøsæter, Howell, Ingvaldsen, Nash and Skjæraasen2014; Fossheim et al. Reference Fossheim, Primicerio, Johannesen, Ingvaldsen, Aschan and Dolgov2015; Jansen et al. Reference Jansen, Post, Kristiansen, Oskarsson, Boje, MacKenzie, Broberg and Siegstad2016). Broadly speaking, habitats towards the poles become more accommodating for various species as the climate warms (of course the converse is broadly true for habitats closer to the equator) (e.g. Poloczanska et al. Reference Poloczanska, Brown, Sydeman, Kiessling, Schoeman, Moore, Brander, Bruno, Buckley, Burrows, Duarte, Halpern, Holding, Kappel, O’Connor, Pandolfi, Parmesan, Schwing, Thompson and Richardson2013).

But gains can be felt outside of agriculture and wildlife as well. Longer summers boost the tourism industry in Arctic and polar regions (Buckley Reference Buckley, Hall, Gössling and Scott2015). At the same time, less rigorous winters provide ‘reduced requirement for indoor heating and a reduction in cold weather related deaths’ in the UK (Vardoulakis and Heaviside Reference Vardoulakis and Heaviside2012: 109). Finally, an overall more moderate climate may even increase productivity in Russia and Canada (Burke et al. Reference Burke, Hsiang and Miguel2015; Dellink et al. Reference Dellink, Lanzi and Chateau2019), as well as facilitate oceanic trade due to an ice-free Northwest Passage between the Atlantic and Pacific oceans (Stroeve et al. Reference Stroeve, Serreze, Drobot, Gearheard, Holland, Maslanik, Meier and Scambos2008). Generally speaking, Dellink et al. (Reference Dellink, Lanzi and Chateau2019) find that of 25 regions modelled to $2060$ , two are predicted to be net winners from climate change: Canada and Russia (with Japan having roughly neutral expected net effects). ^{Footnote 12}

2.2. The externalities argument

It is worth explicating that we are assuming the initial externalizing actions in question – emitting GHGs – are permissible (i.e. neither required nor impermissible). If it were straightforwardly morally wrong to perform the action associated with the externalities in a given instance, it is plausible that society should provide no incentive to perform the action. We are not committed to this claim, but we do assume that the actions under consideration are permissible. What is morally impermissible, we claim, is generating externalities while not internalizing them.

It is also important to note that we consider this question in isolation from background injustices or antecedent distributions (i.e. we are considering changes from the status quo, not evaluating absolute outcomes). We see two reasons for this. First, we want to separate the descriptive statement that net winners (may) exist from the evaluative questions about how they came to exist. There may well be background injustices that led to these winners, but trying to untangle these would overly complicate the analysis. We believe that introducing more complexity can be done at a later stage, perhaps leading to principles with more conditions or caveats. Second, on the reverse side of the previous point, we are intending to determine what moral obligations may arise merely in light of climate net winners (losers) or, more generally, in light of different distributions of positive (negative) externalities. By focusing directly on one morally interesting phenomenon, we believe we can understand it more clearly.

This is just to say that we are assuming that there is a special morally interesting question with respect to these net winners and we want to examine what the answer to such a question would be.

The motivation for our answer comes from two intuitions. The first is the intuition that those who do not face all the effects of their actions will, insofar as they are responsive to incentives, fail to act in ways that are best for society. The second is the intuition that, in remedying actions which generate externalities there should be transfers that, to the greatest practical extent possible, correct the incentives with respect to these externalities. In the long-term, these incentives will encourage better decision-making. Our view is that these straightforward intuitions have surprisingly broad implications.

The justification for the first intuition comes from the study of externalities. If there are costs (negative externalities) or benefits (positive externalities) which accrue without being accounted for (internalized) in the agent’s decision-making, the agent will fail to act in ways that overall best benefit society. In the negative externality case, this is because there will be extra harms that are not counted and make the action less choiceworthy than the agent takes it to be; in the positive externality case, this is because there will be extra benefits that are not counted and make the action more choiceworthy than the agent takes it to be.

This leads to the second intuition. In order to address these externalities, we want there to be transfers that correct these incentives going forward. In some ways, this is a familiar claim; in the climate ethics literature, PPP theorists defend the claim that emitters should compensate those harmed by their emissions. However, we think this claim should be justified on the basis of the desirability of internalizing the externality. Doing so suggests that PPP is actually part of a broader project. If this is right, for any given externality, the best way to make it incentive-compatible is to introduce incentives with the same valence as the type of externality; if causing negative externalities, one should pay and, if causing positive externalities, one should be rewarded. At a first approximation, these should scale with the size of the negative and positive externality generated. The harms and benefits from these externalities are, we will argue in section 3, unearned but caused by the agent who is externalizing them. ^{Footnote 13}

One of our key contributions follows from these intuitions. If (at least some) of those affected by positive externalities do not deserve those gains, then it is appropriate to use those resources to reward anyone who generates those positive externalities. They were lucky to receive them, but society would benefit more if the resources were used to align incentives in such a way that those who generate positive externalities gain from doing so, exactly in parallel to the claim that society would benefit if those who generate negative externalities paid for doing so. It is worth emphasizing that these intuitions may well be driven by luck egalitarian considerations (or at least luck-sensitive distributional ethics – we are not committed here to egalitarianism as the shape or pattern of justice). We are not trying to punish – in the moral sense of the word – those who generate the negative externality; nor are we trying to punish anyone who gains from a positive externality. Instead, the idea is to align incentives in general so that, over the long term, society overall benefits from it being more expensive to generate negative externalities and more valuable to generate positive externalities.

A first reason for accepting our claims over, say, BPP is that an account that assesses gains and losses symmetrically has virtues in terms of simplicity and broader applicability. A theory that rewards positive externalities while penalizing negative externalities is conceptually simpler than one that assesses them asymmetrically. Indeed, the same logic operates throughout: a net winner is simply one that experiences a net ‘negative loss’. The corresponding transfers are the same as for a net loser (i.e. they occur between emitters and the affected) but in reverse. ^{Footnote 14} Also, the concept has greater applicability because it applies to the broader class of cases with mixed externalities. For instance, it can handle cases where the negative externalities are smaller than the positive externalities or, at the limit, where one type of externality is absent. Another way of framing this advantage over alternatives is that thinking of having both transfers for this path via the emitters is didactic, in the sense that it draws attention to the conjunction of two externalities.

Second, from a social point of view, we should reward those who generate positive externalities in line with their contributions to society. Many gains to society, such as knowledge and innovation, are not sufficiently rewarded, which sends the wrong signals about how we want society to develop. In particular, there are familiar theoretical reasons to expect under-provision of public goods and over-provision of public bads. This fits into a broader background picture of internalizing all externalities, even in a case like climate change, where the (small) positive externalities are coupled with (far larger) negative externalities. ^{Footnote 15} Systematically internalizing both positive and negative externalities is of value. Also, we think that these externalities should be addressed through transfers that are directed towards the agents who created the externalities, in order for the resources to be used to generate those incentives. It is easy for intuitions about the very sizeable negative externalities of climate change to dominate our judgment to the point where we neglect the positive externalities. However, addressing only the negative externalities does not suffice to address the whole picture.

For many utilitarians, efficient incentivization of externalities (i.e. encouraging positive externalities and disincentivizing negative externalities) is morally justifiable in and of itself; we want our policies to lead people to be motivated to act prosocially. A secondary reason to internalize externalities is that it leads people to more explicitly recognize and weigh costs and benefits that are easily ignored when externalized. However, our account goes beyond merely advocating the theoretically appropriate internalization of externalities to arguments regarding the direction of these transfers. The common intuition that you should clean up your own messes can be cashed out as introducing directed transfers. We believe that such transfers apply also in the case of positive externalities. This contrasts with a standard economic position, whereby the revenues from a Pigouvian tax need not be used to address the source of externalities, but instead should be used for whatever is most socially beneficial.

One objection to our account is that the emitters may no longer exist at the time of reparation. This is often a way of motivating BPP. However, we believe that we can meaningfully think of collectives like countries and firms as being the subject of significant responsibilities and continuity. First of all, appealing to countries is plausible because a significant amount of emissions can be traced back to countries (Moss and Kath Reference Moss and Kath2019); indeed, significant proportions can be traced back even to individual firms (Heede Reference Heede2014; Frumhoff et al. Reference Frumhoff, Heede and Oreskes2015; Shue Reference Shue2017). Second, appealing to countries is also how international negotiations are structured, and we think that this has significant practical importance. Finally, we think that common sense takes groups of people to be subject to obligations and debts to society. Ultimately, the objection may also be moot because the set of cases we outline below can fully handle situations where emitters no longer exist.

Having laid out the guiding intuitions, we can now turn to more specific questions.

3.1. Active policies and desert

Adaptation to climate change is an important pillar of climate policy, and it can involve changing practices, such as agricultural activities at the farm level or at the national scale. A first argument for the claim that there is a moral difference between active and passive net winners is that the active net winners have (actively) changed their relevant practices in order to benefit from climate change. This type of argument appeals to a certain type of libertarian or classically liberal political theory. In that respect, we believe that it results from one of the most prima facie unfriendly background positions to the significant redistribution we advocate.

By engaging in active measures, this argument goes, active winners have earned or deserve those gains. In contrast, the passive winners have not responded to climate change, and therefore have no desert basis for their winnings. This is endorsed in ‘desert-based justice’, a theory whereby agents deserve rewards (‘deserts’) given ‘desert bases’ that are appropriately both the agents’ responsibility and relevant to the reward (Olsaretti Reference Olsaretti, Dryzek, Honig and Phillips2008; Brouwer and Mulligan Reference Brouwer and Mulligan2019). In this context, the agents are the active net winners, their deserts are their climate gains and the desert basis is their active policies taking advantage of changing climatic conditions. In contrast, it looks like passive net winners do not have any desert basis for their climate enhanced gains. ^{Footnote 16}

The distinction is thus between those who actively respond to climate change and those who do not – and therefore would act the same in the counterfactual world without climate change. The theory provides a principled way of drawing the moral difference between these active and passive categories. The active net winners could be responding to climate change directly, by entering markets where positive climate externalities apply, or indirectly, by entering markets to meet demand for climate-related products or services where negative climate externalities threaten. In contrast, passive net winners would simply produce more or sell their products at higher prices due to shifts in market conditions for their existing products.

In practice, one may find it difficult to disentangle passive gains and those resulting from an active change in the course of action, but morally there is a significant difference and conceptually there is a clear distinction. As a suggestion of how one could operationalize this distinction, we propose three categories of actions that businesses could take to gain from climate change: (i) changes in prices and quantities supplied in response to demand or supply shifts; (ii) entering markets that have become profitable as market conditions evolve due to a changing climate; and (iii) developing innovative products to adapt to or mitigate climate change. Our opinion is that a category (i) change is a much less meaningful change in course of action than the other two: one could say it is a ‘quantitative’ change, as opposed to the other two, which can be deemed ‘qualitative’ in nature. Also, it is noteworthy that (ii) and (iii) do not require one’s prior activity to be affected by climate change, so that these actions differ more explicitly from the status quo. Finally, setting the threshold for what is active between (i) and (ii) has the added advantage of greater observability.

In summary, on conventional versions of desert theories of justice, the benefits which accrue to those who (primarily) take active measures are more plausibly earned than those who (primarily) benefit passively (Olsaretti Reference Olsaretti, Dryzek, Honig and Phillips2008). However, not only can we justify the active/passive distinction theoretically, we can also justify it by appealing to incentives.

3.2. Incentives

As one intention of this proposal is to align incentives, one argument for distinguishing between the active and passive beneficiaries of climate change is motivated by incentives that we believe has been missed by standard BPP theorists. BPP, when not including our distinction between active and passive beneficiaries, would have massively counterproductive implications if adopted as policy. It is not a sensible policy to undermine incentives for developing products and services which address climate problems. Yet this is precisely what the standard BPP view would entail: it would require the corresponding gains to be disgorged to those harmed by climate change. As climate change advances, we will need more solutions for climate adaptation, not fewer.

As an example, consider the developer of an innovative solution to help populations better cope with the increase in global temperature. To allay distributional concerns, suppose that this innovation is cheap and effective, so that many can have access to it, regardless of wealth. Clearly, the developer of this climate solution benefits from the new climate. Also, we surmise that this is a clear case of an ‘active’ net winner, since they are responding to the climate demand. Nevertheless, the standard BPP view would require the disgorgement of all corresponding profits. This would eliminate any incentive to develop such solutions. By contrast, our account would preserve such incentives.

Here we see an important difference between passive and active winners from climate change. The behaviour of passive winners, whether via positive or negative externalities, does not need to be incentivized since, by definition, they would pursue the same policies regardless of climate change. So we would expect that they would be profitable (or at least would take themselves to be) regardless of climate change and regardless of the extra demand that accrues because of climate change. In contrast, the actions taken by active winners do need to be incentivized because, otherwise, they would not pursue the active policies that would be involved in, inter alia, responding to shifts in demand or production driven by climate change. ^{Footnote 17}

The upshot of the discussion in these subsections is that there are two arguments for the claim that passive net winners, unlike active net winners, owe something to someone. The first depends on a certain type of desert-based theory; the second appeals to the incentives involved in rejecting our distinction. Note that we need not take a stand on the extent of the obligation, just that it arises in light of their status as passive net winners and that it has a relationship to the amount of their net winnings. The next question is where the gains that we argue are subject to permissible redistribution should be directed.

5.1. Sectors of the economy

As mentioned in section 2, the likely climate winners can be most easily identified by sectors of activity within a population: for instance, evidence suggests the agricultural and tourism sectors in northern countries stand to gain from longer warm seasons. It therefore seems natural to identify those sectors that would have the duty to reward emitters.

A climate policy based on the concept of hierarchy of claims would require revenues from a carbon tax, say, to be aimed first and foremost at compensating the victims. ^{Footnote 24} Should these revenues not suffice to make victims whole, a supplementary tax, such as a corporate tax on those winning sectors, could be levied to further compensate climate victims. ^{Footnote 25} Should revenues from the carbon tax prove sufficient, those of the supplementary corporate tax would accrue to the emitters.

From a practical standpoint, one can envision ways to make these future outlays relatively predictable despite the uncertain nature of the future climate. One such possibility would be to compute climate gains based on climate trends (which can be predicted with reasonable accuracy in the short-to-medium run) rather than on given realizations (which cannot). Such trends are made available – although they could still be refined and, ideally, converted to monetary terms – by reputable institutions like the IPCC.

Moreover, from an efficiency standpoint, focusing on climate trends does not weaken incentives for emitters because efficiency requires them to consider the expected marginal harm of their emissions in their decision to emit. Furthermore, such an approach would have the added benefit of encouraging information gathering about the realized impacts of climate change. ^{Footnote 26}

Although much easier to implement than an international agreement, a within-country sectoral approach would suffer from the fact that we are using a within-country instrument to try to address a global problem. As a result, transfers would only apply to the externalities within a single country or jurisdiction. If the mix of externalities within that country were non-representative, this policy could generate counterintuitive results. For instance, in a high-emitting country with disproportionately large positive externalities, this can lead to cases where transfers add up to a net reward to its fossil fuel industry, since within the country there are greater positive externalities than negative externalities (although, globally, the opposite is the case). Ideally, we would ultimately want the emitters of that country and, if need be, its winning sectors to compensate the harmed in other countries, addressing all the externalities as opposed to this artificial territorial limitation. The situation depicted is not a mere thought experiment. A country like Canada, with high emissions per capita and relatively low negative externalities from the changing climate – and, arguably, net winning sectors – would most likely see its own harm covered by a relatively low carbon tax, meaning that Canadian emitters would have to internalize a relatively small fraction of the negative externalities they cause worldwide, since the policy would consider only domestic externalities whereas the bulk of negative externalities are global. These emitters would even be entitled to the gains of Canadian (passive) climate winners. However, note that this counterintuitive case arises neither from the concept of hierarchy of claims itself, nor from the structure of the policy, but from the fact that we have regionally constrained the policy’s application whereas the externalities are global. ^{Footnote 27} This is why we turn next to federalism, which we believe can yield useful insights towards global policy.

5.2. Provinces of a federal nation

At the regional (e.g. state or provincial) level, one would first need to identify whether some regions are indeed net climate winners. This is less likely than at the sectoral level discussed above, but could happen if some regions were especially known for, say, their large agricultural sectors (e.g. the Canadian province Saskatchewan).

There is currently much debate about how revenue from carbon pricing should be recycled, notably in Canada. ^{Footnote 28} All the options put forth assume that revenues would remain within the provinces – albeit entirely for political reasons (Canada’s Ecofiscal Commission 2016). In other words, transfers between provinces would be a significant departure from the current political debate. Because these transfers would account for compensation for negative externalities, the policy would be a sort of ‘interprovincial climate liability’. ^{Footnote 29}

Because they are composed of regional governments, federal nations provide a small-scale laboratory of how international policies might play out. The two major differences are, of course, (1) that there is no supranational government to impose legislation on countries, whereas a federal government has substantial power over provinces or states; and (2) buy-in could be affected by the nationally specific mix of externalities (as pointed out in the previous subsection). Since a federal government has substantial power, what cannot work under federalism has little chance of being implemented at the international level. On the other hand, successes encountered with a federal nation may provide useful hints for what is possible on the international stage. Our view is that testing or implementing these policy proposals at regional scales is invaluable for determining their large-scale viability.