The E-axes Forum on Climate Change, Macroeconomics, and Finance

Ghassane Benmir

“The Distributional Costs of Net-Zero: A Heterogeneous Agent Perspective”

Young Scholars' Webinar on Climate Finance and Economics

This paper investigates the distributional impacts of implementing the net-zero emissions target in the U.S. for the 2050 horizon. The paper models a heterogeneous household economy and shows that the 2050 net-zero policy is welfare-enhancing in the long run, but induces short/medium-run distributional costs. The paper quantifies this trade-off by a 0.54% consumption equivalent welfare gain (compared to the laissez-faire) in the long run and a 6-10 percent increase in financially constrained households by 2050. It also shows how distributing revenue from the carbon policy could partially offset consumption losses and smooth the net-zero transition. It extends the analysis to the cases: i) sticky prices, showing how net-zero emissions induce inflationary pressure over the long run, which could represent a challenge for monetary policy conduction in a world with high inflation, and ii) abatement learning, showing how green innovation decreases carbon prices and boosts consumption over the transition.


Michael Barnett
Assistant Professor of Finance, Arizona State University – W. P. Carey School of Business

Organizing Committee

Michael Barnett, Arizona State University
Alissa M. Kleinnijenhuis, Imperial College Business School
Ishita Sen, Harvard Business School
Diego Känzig, Northwestern University

Ghassane Benmir

Ghassane Benmir is Assistant Professor of Economics at IE University and IE Business School. He is also an associate fellow at the London School of Economics and Political Science (LSE), King’s College Business School, and Paris Sciences et Lettres (PSL Research). His research explores the linkages between macroeconomic theory and heterogeneity, asset pricing theory, climate change, and the distributional impacts of both environmental externalities and policy.

Paper and slides

The Distributional Costs of Net-Zero: A Heterogeneous Agent Perspective (Paper)

The Distributional Costs of Net-Zero: A Heterogeneous Agent Perspective (Slides)



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