The Inflation Reduction Act (IRA) was passed on August 16, 2022, but the contents of the legislation do little to achieve its titular purpose. A large part of the spending bill comes in the form of tax credits to “green” energy sources such as wind and solar power, as well as battery storage and electric vehicles (EVs).
As touted during its passage, these green subsidies were to total $369 billion, “the most significant action…taken on clean energy and climate change in the nation’s history,” according to the Biden administration. Since then, however, the price tag on these tax credits has increased.
In November 2022, Credit Suisse estimated total federal spending on these provisions would be more than $800 billion, double the Biden administration’s claims. An estimate from the Joint Committee on Taxation from April 2023 put the spending figure at $515 billion between 2023 and 2033. Also in April 2023, Goldman Sachs estimated the IRA’s spending incentives at $1.2 trillion through 2032. In a March 2023 report, the Brookings Institution produced a range between $900 billion and $1.2 trillion through 2031. The Committee for a Responsible Federal Budget’s February 2024 cost estimate was $870 billion through 2031. An estimate from the Cato Institute in March 2024 found the cost of the IRA’s green subsidies could be north of $1.8 trillion over a decade.
The true cost of these green subsidies is anyone’s guess, but it is a practical certainty that they will come in far higher than originally proclaimed. We know this because the last federal budget before the incorporation of the IRA—fiscal year (FY) 2024—contained a ten-year cost projection for green energy subsidies that was only $145 billion, while the FY 2025 budget—which does incorporate the IRA—saw the cost of these subsidies balloon to over $1.1 trillion. This clearly suggests the true price tag of the IRA’s green subsidies will be closer to $907 billion than $369 billion.
