New U.S. Department of the Treasury Analysis on Inflation Reduction Act Benefits

Inflation Reduction Act Benefits Go Beyond Climate, While Fiscal Costs Overstate Real Costs to the Economy

WASHINGTON – Today the U.S. Department of the Treasury published analysis arguing that the Inflation Reduction Act’s benefits are greater than publicized projections while the economic costs are lower than fiscal costs.  

The analysis by Deputy Assistant Secretary for Climate & Energy Economics Arik Levinson, Economist Karl Dunkle Werner, Economist Matthew Ashenfarb, and Senior Policy Advisor Annelise Britten argues that projections of the IRA’s effect on reducing greenhouse gas pollution underestimate the IRA’s benefits, and typical projections of the IRA’s effect on the federal budget overstate the IRA’s costs to the U.S. economy.   

The Treasury officials and staff write, “The IRA will yield cumulative global economic benefits from reduced greenhouse gas pollution of over $5 trillion from the present to 2050. That understates the IRA’s benefits by counting only climate benefits, omitting … the fact that the IRA will also reduce local air pollution, providing domestic health and productivity gains to the United States. Lower-bound estimates of the benefits from those local pollution reductions range from $20 to $49 billion in 2030 alone, compared to that year’s climate benefits estimated at $137 billion. 

“The IRA’s projected costs to the U.S. federal budget are mostly reductions in taxes owed by U.S. taxpayers or increases in federal payments to those taxpayers.  Those are important but overstate the true resource costs the IRA imposes on the U.S. economy, because they only include one side of each transaction. Tax credits paid by the federal government are received as benefits by American drivers who purchase electric cars, homeowners who install efficient heat pumps, and investors who build factories and power plants to equip and fuel the clean energy transition.” 

Full text of the analysis is available here.  


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