Redistribution meets decarbonisation: Exploring universal basic income through an ecological macroeconomic integrated assessment model

The dual challenge of climate change and rising inequality calls for policies capable of delivering both ecological sustainability and social equity. Within the field of Ecological Macroeconomics (EM), integrated assessment models (IAM) with biophysical and socio-economic linkages provide a promising approach to explore policy trade-offs ex ante. This paper contributes to this literature by employing the Within Limits Integrated Assessment Model (WILIAM), an EM-IAM that combines a macroeconomic multi-regional input–output structure with explicit representations of energy and material flows, biophysical constraints, and climate damages. We assess a policy mix designed to support a just low-carbon transition in 21 European countries over the period 2025–2050, including a universal basic income (UBI) financed through a wealth tax, alongside a carbon tax aimed at internalising the external costs of greenhouse gas (GHG) emissions. We examine the interactions between redistribution and emissions within a unified modelling framework that accounts for household heterogeneity, economic rigidities and ecological limits. Our results show that the policy mix substantially reduces income inequality and improves social outcomes. However, the introduction of UBI generates rebound effects through increased consumption, which can be partially mitigated in the presence of carbon pricing. These findings highlight a potential trade-off between equity and environmental objectives. We discuss the mechanisms driving these dynamics and explore policy design implications, including the role of complementary measures to decouple well-being from material throughput. The paper illustrates the value of EM-IAMs for analysing complex policy interactions and advancing the integration of social and ecological dimensions in macroeconomic modelling.