Intergenerational Redistribution in the Green Transition

Jean-Guillaume Sahuc, Barbara Annicchiarico and Gauthier Vermandel

No 2026-11, EconomiX Working Papers from University of Paris Nanterre, EconomiX

Abstract: We study the intergenerational distributional effects of carbon pricing during the green transition in an overlapping-generations New Keynesian model calibrated to euro-area household micro data. Climate policy generates systematic redistribution across cohorts through two channels: a labor-income channel, driven by wage compression and lower labor demand, and a financial-wealth channel, driven by asset revaluation and higher real returns. The labor- income channel dominates quantitatively , generating persistent welfare losses of up to 6 percent in permanent-consumption equivalents for working-age households, while retirees experience comparable gains. Revenue recycling can mitigate these asymmetries, requiring 40 to 68 per- cent of carbon-tax revenues to be directed toward financial-income tax relief. Monetary policy has limited influence on the overall redistributive pattern.

Keywords: Climate policy; carbon pricing; intergenerational redistribution; overlapping generations; fiscal policy; New Keynesian model (search for similar items in EconPapers)
JEL-codes: E21 E32 E52 H23 Q54 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:drm:wpaper:2026-11

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