Policies to mitigate climate change are high on the political agenda and their distributional consequences are actively discussed. This paper makes two contributions to this discussion. First, it empirically identifies the spatial dimension between rural and urban households as important for the distributional consequences of carbon taxes, because the average annual carbon footprint of rural households in Germany is 2.2 tons higher than that of urban households, around 12 percent of the average carbon footprint. Second, it builds a quantitative spatial general equilibrium model to evaluate different policies of recycling carbon tax revenues in terms of their redistributive effects and their political support along the transition to clean technologies. I find that recycling carbon tax revenues as lump-sum transfers redistributes from rural to urban households. For a carbon tax of 300 Euros per ton, the difference in the present value of net transfers is 8,000 Euros. In contrast, place-based transfers avoid this spatial redistribution without reducing the speed of the transition to clean technologies. This has important implications for the political support for these policies, as place-based transfers allow to set a higher carbon tax under the constraint that the policy is beneficial to a majority of households in both regions. Finally, carbon taxes have sizeable general equilibrium effects on housing prices, increasing those of non-emitting houses by 5 percent, while decreasing those of carbon emitting houses by the same amount.

Policies to support the transition to a carbon-neutral economy are high on the policy agenda. Their effectiveness in reducing carbon emissions and their distributional consequences are actively debated. One key reason for the ongoing debate is that quantitative answers regarding the reduction-redistribution trade-offs of such policies remain limited. Looking at the emissions of household consumption, this paper makes two contributions to the discussion. First, we empirically show that infrequently adjusted consumption goods, i.e. consumption commitment goods such as cars or heating systems, together with their complementary consumption (gas, oil), account for more than 35 percent of household carbon emissions. Second, we develop a quantitative life-cycle model with heterogeneous adoption rates of carbon-neutral commitment goods by income to quantify the reduction-redistribution trade-off of different policy mixes. Our results for the reduction-redistribution trade-off show that a percentage subsidy for carbon neutral consumption effectively reduces emissions by targeting high-income households. If the subsidy is financed by a progressive income tax, it yields a policy mix that leads to rapid emission reductions and a majority of households supporting its distributional effects.

This paper examines the macroeconomic consequences of green versus brown government spending using public procurement data. We classify around 171,000 government contracts across ten Eurozone countries between 2011 and 2023 to construct quarterly panels of green and brown spending, and use the timing of contract awards for identification. We find contrasting effects: green procurement lowers energy prices, reduces energy-sector output, and cuts oil import dependence, while brown procurement raises energy prices and suppresses green innovation. Green spending generates GDP multipliers of around 0.7 on impact, rising above 1 within two years, while brown procurement has negligible short-run effects on GDP.