INTERGENERATIONAL INEQUALITY AND THE RECYCLING OF A CARBON TAX

This article analyses the redistributive intergenerational effects of recycling a carbon tax and their influence on how governments recycle this tax. We use a model with overlapping generations parameterized on real data. We consider two reform scenarios, depending on whether the carbon tax is recycled through higher public spending or lower direct taxes-the latter providing a "second dividend" for growth. A carbon tax fully recycled through lower taxes weighs on the inter-temporal well-being of baby boomers but is more favourable to youth and future cohorts. Noteworthingly, a social planner can recycle a carbon tax by increasing spending rather than reducing taxes if his aversion to intergenerational inequality is high enough.