Wealth Inequality and Planetary Boundaries in a Stylized Agent-Based Model

2026-06-12

AI Summary

This study demonstrates that wealth inequality is not merely a consequence of environmental crises but also a structural barrier to ecological transition. The authors develop a heterogeneous agent model incorporating Pareto-distributed initial wealth, dynamic agent choices between brown and green sectors, and differential perceptions of environmental risk across wealth strata. Simulating fiscal policies—including universal basic income, carbon taxation, green subsidies, and their combinations—they find that when inequality exceeds typical levels observed in advanced economies, economies become prone to high-carbon lock-in, even when most agents internalize environmental externalities. Policy effectiveness critically depends on the degree of inequality and the regressivity of the tax system, revealing complex trade-offs among decarbonization speed, environmental damage, economic growth, and fiscal sustainability.

Abstract

At the intersection of rising wealth inequality and intensifying environmental pressures, we investigate a reverse causal relationship that has received comparatively little attention: wealth inequality may not only be a consequence of environmental crises, but also act as a structural obstacle to the ecological transition itself. We develop a stylized agent-based model in which heterogeneous agents, whose initial wealth follows a Pareto distribution, allocate their income between either a Brown or a Green sector through a utility function. The function is designed to capture the trade-off between short-term returns and exposure to long-term systemic risks. A central ingredient is that wealthier agents perceive themselves as less vulnerable to environmental shocks, thereby reducing the amount of resources available for the transition. We show that, beyond inequality thresholds compatible with those observed in most developed countries, the economy remains locked in a Brown regime, even when a substantial share of agents is sensitive to externalities. We then assess a set of stylized fiscal policies (basic income, carbon taxation, Green incentives, and a combined scheme) and find that their effectiveness depends strongly on the inequality regime and on the regressivity embedded in the fiscal mechanism, revealing multidimensional trade-offs between transition speed, cumulative environmental destruction, growth, and fiscal pressure.

Problem

• wealth inequality
• ecological transition
• planetary boundaries
• agent-based model
• environmental crisis

Innovation

• agent-based modeling
• wealth inequality
• ecological transition
• Pareto distribution
• fiscal policy