Repealing the Inflation Reduction Act’s tax credits and funding programs would increase U.S. household annual energy costs by $6 billion in 2030 and more than $9 billion in 2035, according to Energy Innovation Policy & Technology.
Ending the IRA would also cost nearly 790,000 jobs in 2030 and reduce gross domestic product by more than $160 billion, mainly as the result of fewer clean energy manufacturing and construction projects, the energy and climate policy think tank said in a report released Thursday.
The analysis comes as House and Senate Republicans are mapping out budget plans that could include cuts to the IRA. The outlook is unclear, with at least 21 House Republicans supporting the IRA’s tax credits.
The Republicans have several options, including a partial IRA repeal, the Tax Foundation said on Thursday, noting that the law appears to be more expensive than originally estimated.
The IRA, which Congress passed in 2022, has sparked $600 billion in private investment across roughly 750 clean-energy projects, creating more than 406,000 jobs as of January, according to Energy Innovation.
Texas, California, Pennsylvania, Florida and Georgia would be the biggest losers if Congress repeals the IRA due to lost jobs and increased household energy costs, Energy Innovation’s state-by-state analysis finds.
In Texas, the IRA has spurred about $17.2 billion in clean energy and transportation investments and nearly 26,500 jobs, alongside $9.9 billion in announced investments from federal grants and loans, Energy Innovation said. Companies have started developing more than 600 clean energy and transportation facilities, and 206 have begun making products in the state, according to the analysis.
Energy Innovation estimated that repealing the IRA would increase average annual household electricity and fuel costs in Texas by more than $90 a year in 2030 and more than $370 a year in 2035. A repeal would drive up electricity bills because less low-cost clean energy would be available and fewer electric vehicles on the road would increase spending on gasoline, the policy firm said.
Cato Institute calls for IRA repeal
However, the IRA’s tax credits could cost $936 billion to $2 trillion over the next 10 years, in part because some of the law’s tax credits are uncapped, according to analysis released March 11 by the Cato Institute.
“The IRA’s energy subsidies are multiple times larger than initial estimates, and they expose American taxpayers to potentially unlimited liability,” Travis Fisher and Joshua Loucks, the report’s authors, said.
The authors called on Congress to repeal the IRA’s energy subsidies — or at least cap total spending on energy subsidies — and to require the Congressional Budget Office and others to publish transparent and updated estimates of the law’s long-term costs.
“The massive cash transfer from taxpayers to private firms under the guise of environmentalism creates an overwhelming and undue burden on taxpayers who continue to pay for fiscally irresponsible federal spending,” Fisher and Loucks said.
