The Inflation Reduction Act could deliver more than $1 trillion in tax expenditures and outlays targeting clean energy deployment, but considerable uncertainty characterizes the economic, emissions, energy, and fiscal implications of the law. I review the features of the political system governing implementation, the regulatory system overlaying performance standards, the innovation responding to IRA incentives, and the energy networks in which IRA-supported investments operate to identify the key factors influencing IRA’s outcomes. Drawing from past research and policy experience, I illustrate how these factors could play out and how future program evaluation could reduce uncertainty and inform better climate policy.
Authors
- Acknowledgements & Disclosure
- This paper is under preparation for the March 2025 National Tax Journal Forum “Tax and Environmental Policy.” Natalie Baker provided phenomenal research assistance. Aldy acknowledges financial support from the Belfer Center for Science and International Affairs, bp, and the Roy Family Fund. The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research.
- DOI
- https://doi.org/10.3386/w33092
- Pages
- 31
- Published in
- United States of America
Table of Contents
- NBER WORKING PAPER SERIES 1
- HOW BIG IS THE BIGGEST CLIMATE SPENDING BILL EVER KEY FACTORS INFLUENCING THE INFLATION REDUCTION ACTS CLEAN ENERGY IMPACTS 1
- Joseph E. Aldy 1
- Working Paper 33092 httpwww.nber.orgpapersw33092 1
- NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge MA 02138 October 2024 1
- How Big is the Biggest Climate Spending Bill Ever Key Factors Influencing the Inflation Reduction Acts Clean Energy Impacts Joseph E. Aldy NBER Working Paper No. 33092 October 2024 JEL No. H23 Q48 Q58 2
- Joseph E. Aldy Harvard Kennedy School Ofer 403 Mailbox 114 79 JFK Street Cambridge MA 02138 and Resources for the Future and also NBER josephaldyhks.harvard.edu 2
- How Big is the Biggest Climate Spending Bill Ever Key Factors Influencing the Inflation Reduction 3
- Acts Clean Energy Impacts 3
- 1. Introduction 3
- 2. The Political System Translating Statutory Authority into Implementation 5
- 3. The Regulatory System Layering Mandates on Industries Eligible for Clean Energy Tax Credits 9
- 4. Innovation Endogenous Technological Change under Clean Energy Subsidies 13
- Annual Energy Outlook 15
- Cost of Wind 15
- Energy 15
- 5. Energy Markets Network Externalities and Clean Energy Subsidies 18
- 6. Conclusion and Opportunities for Future Research 22
- References 24
- Review of Environmental Economics and Policy 24
- Ann Carlson and 24
- Dallas Burtraw eds Lessons from the Clean Air Act Building Durability and Adaptability into US Climate and Energy Policy Cambridge UK Cambridge University Press 24
- HKS 24
- Faculty Research Working Paper Series 24
- Journal of Benefit- Cost Analysis 24
- Journal of the Association of Environmental and Resource Economists 24
- Environmental Law Reporter 24
- Science 24
- Brookings Papers on Economic Activity 24
- Finance and Development Magazine 24
- Tax Policy and the Economy 24
- Journal of Economic Perspectives 25
- Carbonomics The third American energy revolution 25
- Fueling alternatives Gas station choice and the 25
- EE News 25
- Management Science 25
- Journal of Economic Perspectives 25
- American Economic Review 25
- EarthJustice 25
- Brief 26
- American Economic Review 26
- Global EV Outlook 2024 Moving towards Increasing Affordability 26
- Treeprint US Inflation Reduction Act A tipping point in climate action 26
- Journal of the Association of Environmental and Resource Economists 26
- In Focus 26
- Focus 26
- The 26
- Design and Implementation of US Climate Policy 26
- The Energy Journal 26
- Project Finance NewsWire 27
- Energy Economics 27
- American Economic Journal Economic Policy 27
- Today in Energy 27
- Federal Register 27
- 7. Figures and Tables 28
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