TAX CREDITS FOR CLEAN ELECTRICITY: THE DISTRIBUTIONAL IMPACTS OF SUPPLY-PUSH POLICIES IN THE POWER SECTOR

Summary

This NBER working paper evaluates the distributional and efficiency impacts of the 2022 Inflation Reduction Act's (IRA) bulk power clean electricity tax credits, comparing them to equivalent carbon cap-and-trade policies. The study uses a linked modeling suite to assess economic welfare and health impacts across various demographic groups in the United States. Key findings indicate that the tax credit policies lead to a rapid buildout of clean energy, with annual power sector emissions projected to decline to 415 million MT by 2040, a 76% reduction from 2022 levels. Total undiscounted tax credit expenditures are estimated at $752 billion over 2024-2040. The policies show progressive outcomes for economic welfare and health, with health benefits exceeding total policy costs and leading to an estimated 208,000 reduced deaths from 2023-2040. When considering climate benefits, all modeled policies yield substantial net benefits, ranging from $1.71 trillion to $2.79 trillion.

Key Facts

Source Document

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