Research
Working papers
Climate impacts on labor and capital: implications for growth, inequality, and the social cost of carbon
with Simon Feindt (under revision, draft available upon request)
Abstract
Climate change is intensifying and will generate economic damages through many channels, particularly by affecting the factors of production. In this paper, we investigate how these impacts will affect regional growth, global inequality, and the social costs of emitting carbon. We introduce regional impacts on the production factors--capital, labor and total factor productivity--in a global Integrated Assessment Model (IAM), resulting in heterogeneous and endogenously persistent damages. We depart from previous IAMs studying the inequality impacts of climate change by calibrating and projecting the joint distribution of capital and labor income within regions, and connecting it to the production-factor damages. We find that the social cost of carbon, computed along a projected emissions trajectory based on implemented climate policies, amounts to \$4,200/tC--three times larger than when omitting production-factor damages and their distributional effect. This increase reflects impacts on growth, which compound to a 14 percentage points rise in the share of global output lost due to climate change by 2100, as well as on global inequality, with the global Gini index increasing by 1.6 percentage points by 2100.Abstract
Carbon taxation is a flagship climate policy aimed at reducing greenhouse gas emissions efficiently. Yet, it fails to garner sufficient political support in many countries. This paper investigates the role of urban-rural inequalities in this lack of domestic support. I develop a model of majority voting over a carbon tax at a national level, with both income and urban-rural heterogeneity. Rural households are constrained to consume more necessary energy goods than urban households, which I capture with heterogeneous Stone-Geary utility. I characterize the conditions for the existence of a majority voting equilibrium and perform a calibration of the model using budget survey data for twenty European countries. I find that the majority voting tax may be at a higher rate than the optimal carbon tax. However, the calibration suggests that the optimal rate tends to exceed the majority voting rate by a few percent. This result holds even if the households and the social planner share the same level of environmental preference. I demonstrate that political support among rural households is always below that of urban households. The numerical exercise reveals a gap between 15 and 45 %, at the median income. Carbon taxation generates revenues that can be redistributed to households. The calibration suggests that lump-sum or means-tested transfers render the tax and rebate scheme progressive, but have only a limited effect on political support.Publications
Young-Brun M., Dennig F., Errickson F., Feindt S., Méjean A., Zuber S. “Within-country inequality and the shaping of a just global climate policy”, PNAS (2025) (open access from 04/2026)
Last Working Paper Replication code NICE2020 model code
Emmerling J., Andreoni P., Charalampidis I., Dasgupta S., Dennig F. , Feindt S., Fragkiadakis D., Fragkos P., Fujimori S., Gilli M., Grottera C., Guivarch C., Kornek U., Kriegler E., Malerba D., Marangoni G., Méjean A., Nijsse F., Piontek F., Simsek Y., Soergel B., Taconet N., Vandyck T., Young-Brun M., Zhao S., Zheng Y. and Tavoni M. “A Multi-Model Assessment of Inequality and Climate Change”, Nature Climate Change (2024) Research Brief