One of the major concerns with the 2050 net-zero emissions target lies in its potential distributional impacts. This talk investigates the distributional impacts of implementing the net-zero emissions target in the U.S. for the 2050 horizon. Modelling a heterogeneous household economy, I will show that the 2050 net-zero policy is welfare enhancing in the long run, but induces short/medium-run distributional costs. Through this talk, I will outline how distributing revenue from the carbon policy could partially offset consumption losses and smooth the net-zero transition. Extending the scope of the analysis, I will argue that the net-zero emissions target induces inflationary pressure over the long run, but that green innovation would significantly ease the transition’s distributional impacts, increasing welfare over the transition.
