https://macropaperwarehouse.com/authors/eric-jondeau/Eric JondeauHugo -- gohugo.ioen-usThu, 01 Jan 2026 00:00:00 +0000https://macropaperwarehouse.com/papers/environmental-subsidies-to-mitigate-net-zero-transition-costs/Thu, 01 Jan 2026 00:00:00 +0000https://macropaperwarehouse.com/papers/environmental-subsidies-to-mitigate-net-zero-transition-costs/<p>This paper asks whether public subsidies to green-technology producers, financed by a carbon tax, can materially reduce the macroeconomic cost of reaching net-zero CO2 emissions by 2060. The motivation is a market-structure failure that standard environmental models ignore: the abatement goods sector is initially immature and highly concentrated, with 10 percent of firms capturing roughly 80 percent of operating revenue (Eurostat/Ecorys data). Under such conditions a carbon tax alone raises the cost of abatement inputs, depresses competition, and generates a deep and prolonged GDP recession — even if it achieves the emissions target. The paper shows that redirecting carbon tax revenues toward subsidizing this sector can substantially offset the recession.</p>