The Inflation Reduction Act could be three times as expensive as originally believed, while falling short of its goals for cutting greenhouse gas emissions, according to an analysis from the environmental think tank The Breakthrough Institute.
The 2022 IRA intended to reduce the federal deficit, lower prescription drug prices, and invest in domestic energy production while promoting clean energy.
The Congressional Budget Office originally projected the clean energy incentives and tax subsidies in the IRA would cost $390 billion in the 10-year period from 2022 to 2031. Over the last two years, other groups have placed the cost much higher.
Goldman Sachs estimates the legislation’s clean energy provisions will actually cost $1.2 trillion. The National Bureau of Economic Research also believes the climate provisions will cost $900 billion to $1.2 trillion. Credit Suisse’s estimate came in at $800 billion — still more than twice what the CBO projected.
Meanwhile, the Princeton Net Zero Project estimated last year that by 2035, U.S. emission levels will only fall by 40% compared to 2005 levels. Princeton originally predicted the IRA would help cut emissions by 50%.
Lawmakers’ stated goal for the IRA was to cut emissions by 80% by 2030, when compared to 2005 levels.
The Breakthrough Institute argues that the IRA’s apparent emission reduction failures stem from its commitment to subsidizing already well-established wind and solar technologies and electric vehicles.
Currently, the government pays for one-third of wind and solar installations and $7,500 for every electric vehicle purchased. Those subsidies alone could cost up to $650 billion in the next decade, Breakthrough estimates. There is good reason for calling them wasteful: most of the tax breaks for solar panels are going to wealthy families that can afford the panels.
Instead, the think tank believes the government should be subsidizing emerging technologies that search for new ways to store and transport the energy generated by wind and solar sources. Princeton’s studies support that idea, showing that 80% of the expected emissions reductions from the IRA will not happen unless America changes the way it transmits energy, not just generates it.
“The solution … is to invest in and deploy transmission and energy storage technologies to increase the value of intermittent energy by making it available where and when there is actual demand for it,” the Breakthrough Institute wrote. “We suspect that transmission, interconnection, and cheap battery storage are much more critical to the future of wind and solar — and the emissions benefits that additional wind and solar deployment might bring— than are the IRA tax credits.”
If the U.S. government is going to pump billions of dollars into green projects, it should be supporting useful solutions, not sinking more cash into stagnant technologies that have not yet proven to be economically viable.
(The #WasteOfTheDay is from forensic auditors at OpenTheBooks.com via RealClearWire.)
