As the European Union expands the scope of carbon pricing through the implementation of the EU ETS2—set to include emissions from heating and transport sectors starting in 2027—and as carbon prices are expected to rise in line with increasingly stringent climate targets, the allocation of carbon revenue has become a central issue in policy discussions. Current debates highlight a range of potential uses: lump-sum transfers to households to mitigate the regressive distributional effects of carbon pricing and bolster political support; targeted investments in the research, development and deployment of clean technologies; and revenue recycling via reductions in distortionary taxes or social security contributions, which may yield a "double dividend" by simultaneously improving environmental and economic efficiency.  Employing a newly developed, state-of-the-art computable general equilibrium (CGE) model that incorporates endogenous technological change and and highly granular households, this project assesses macroeconomic and distributional effects of alternative carbon revenue recycling strategies, thereby offering policy-relevant insights into the trade-offs and complementarities associated with different approaches.