Macroeconomic and distributional consequences of net zero policies in the United Kingdom

This paper presents new simulation results for the UK combining macroeconomic simulations in ThreeME, a computable general equilibrium model, with household-level micro-simulations with the aim to provide consistent estimates of macroeconomic and distributional consequences of policy action to curb greenhouse gas emissions. One main and overarching result is that if an economy-wide and significant carbon price is introduced it leads to large emission reductions. Macroeconomic and distributional consequences are very limited in comparison. Redistributing 30% of total tax revenue as a lump-sum transfer to households would ensure that a majority of income deciles in most regions increase their disposable income, with gains notably in the lower part of the income distribution.