Intergenerational Redistribution in the Green Transition

Jean-Guillaume Sahuc (), Barbara Annicchiarico and Gauthier Vermandel
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Jean-Guillaume Sahuc: EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique

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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)
Date: 2026
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