Carbon Dividends pose no opportunity cost to pollution, are regressive, disproportionately harm the poor, and exacerbate capitalist accumulation.

Auctions versus gifts Would auctioning permits solve this problem? Although there has not been a substantial experiment in the full auctioning of pollution permits it has been widely proposed. Policy in the EU also seems to be moving in this direction. Under Phase II of the EU ETS, which began in January 2008, a (very small) proportion of permits have been auctioned.37 Under Phase III, which begins in 2013, the European Commission estimates that 60 per cent of permits will be auctioned.38 The Australian government has, however, rejected the recommendation of its own Garnaut Review to fully auction permits, and instead proposes to hand-out around 40 per cent of permits to industry for free.39 If permits are auctioned under an ETS, polluters would at least be denied the windfall profits outlined above. As long as the market for permits functions competitively (which it may not), emissions trading with fully auctioned permits does put a real cost on pollution, and not simply an opportunity cost. This means that the state captures the revenue from this new commodity, and not polluters. However, we should not conclude that this represents an unambiguous victory against the interests of polluters in particular, and capital in general. Since auctioning permits makes no difference to the opportunity cost of pollution, it follows that it will have the same consequences for the prices of emissions intensive goods and services.40 Whether the overall effect is regressive depends upon how the state spends the additional revenue it raises. Under a ‘cap and share’ scheme, the money would be distributed on an equal basis to each citizen (with each having the option to ‘spend’ this dividend on retiring permits).41 Peter Barnes bases his advocacy for such a scheme on what he sees as the unfortunate but necessary recognition that environmental ‘goods’ can only be preserved if they are priced and commodified.42 He argues that if the Earth’s carbon cycling capacity can be said to belong to anyone, it must belong to everyone: hence the need to share the revenue from emissions trading equally. In his book Heat, George Monbiot argued for a scheme which would have a similar effect, combining state-auctioned permits for industry with an equal allocation of tradeable carbon ‘rations’ for consumers. Such proposals avoid the kinds of problems outlined so far. In theory they would have a progressive effect on the distribution of income, since, in absolute terms, the poor consume fewer emissions intensive resources than the rich, but both would receive the same dividend or allocation of rations. There are still important problems with ‘cap and share’ type proposals. They theoretically provide lower income households with a carbon dividend which on average would cover the costs of increased prices, but there is still a strong case that these price increases themselves are objectionable. Imagine a pensioner who is barely scraping by switching off their heating in winter so that they can spend their carbon dividend on food and petrol. Think also of someone on a low income who needs to travel long distances and has no access to public transport: the carbon dividend may well not cover their increased transport costs. Moreover, it is not hard to imagine a situation in which politicians or bosses cynically justify cuts in welfare payments or wages by pointing out that the carbon dividend has made lower income households ‘better off’. The ETS outlined in the Australian government’s White Paper would be significantly worse than ‘cap and share’. Unsurprisingly, the White Paper makes no reference to the Earth’s natural systems as a form of common property. Instead, it commits only to using some of the revenue raised by the proposed ETS for the purposes of compensating households for price increases.44 Indeed, there are reasons to suspect that even this commitment will not be maintained over the long term. If the carbon price increases significantly, compensation payments will also need to rise substantially for lower income households not to be left worse off. The scheme proposed in the White Paper would effectively make the carbon dump just another commodity that consumers must pay to access. Auctioning permits combined with compensation is certainly no guarantee that the poor and working class will not be made to pay for the costs of whatever cuts in pollution an ETS does manage to achieve. From a political economy perspective, this redistributive aspect of emissions trading is surely a crucial one. It suggests that one goal lying behind the current trend towards adopting trading schemes is to shore up the profitability of capital at the expense of labour. Indeed, the Treasury’s own modelling reveals that under an emissions trading scheme, ‘labour income growth slows more than capital income’.45 Interestingly, while Matthews and Paterson ignore this possibility, it actually supports their overall conclusion that states are pursuing emissions trading as part of their role in promoting capital accumulation. Indeed, it is also possible to combine the analysis of the distributional consequences of an ETS with their original insight that emissions trading promotes the dynamic process of capital accumulation within a more consistent Marxist framework. However, it is first necessary to examine in more detail how Marx explains the relationship between the environment and capital accumulation.