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Optimal Fiscal Policy in a Climate-Economy Model with Heterogeneous Households

Thomas Douenne et al.

The Economic Journal2026https://doi.org/10.1093/ej/ueag006article
AJG 4ABDC A*
Weight
0.50

What the paper says

We study optimal fiscal policy to address climate change and inequality. We theoretically characterise optimal carbon and income taxes and quantify them for the US economy with a climate model calibrated to DICE. In contrast to the representative-agent setting, we find that (i) tax distortions have a negligible effect on the optimal carbon tax; (ii) inequality only slightly reduces it; (iii) the revenue from carbon taxes is optimally split about equally between reducing tax distortions and increasing transfers. Unlike the double-dividend policy, optimal carbon taxation has progressive welfare effects and low-income households benefit even in the short run.

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https://doi.org/https://doi.org/10.1093/ej/ueag006

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@article{thomas2026,
  title        = {{Optimal Fiscal Policy in a Climate-Economy Model with Heterogeneous Households}},
  author       = {Thomas Douenne et al.},
  journal      = {The Economic Journal},
  year         = {2026},
  doi          = {https://doi.org/https://doi.org/10.1093/ej/ueag006},
}

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Optimal Fiscal Policy in a Climate-Economy Model with Heterogeneous Households

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Evidence weight

0.50

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

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