Working Papers

The Distributional Consequences of Net-Zero Transitions (with Hakkı Yazıcı)

Working Paper · Submitted

This paper studies the distributional consequences of net-zero transitions. Using an environmentally-extended input-output table linked with the U.S. Consumer Expenditure Survey, we show that the carbon intensity of expenditure declines with income, largely due to differences in energy expenditure shares. We develop a heterogeneous agent overlapping-generations model with non-homothetic preferences, estimated using household-level data, that matches key distributional moments of the U.S. economy. We evaluate a carbon tax path consistent with the U.S. net-zero target under the Paris Agreement. Although the reform disproportionately affects poorer households in the short run, lifetime welfare costs are similar across income groups. Across cohorts, those in their fifties when the reform is introduced experience the largest losses. We find that the time path of carbon taxes impacts the distributional consequences of climate reforms substantially. An optimal reform that maximizes average welfare almost fully coincides with the carbon tax path implied by the Paris Agreement.

Works in Progress

Skills That Stay: Mobility and Human Capital Investment Across the Skill Distribution