Beyond Clean Energy: The Financial Incidence and Health Effects of the IRA

The Inflation Reduction Act of 2022 (IRA), signed into law by President Biden on the August 16, 2022, will affect household budgets and wellbeing in several ways. The law contains provisions to promote clean energy technologies, facilitate domestic energy production, and address global warming, alon...

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Bibliographic Details
Published in:Policy File 2022
Main Authors: Roy, Nicholas, Domeshek, Maya, Burtraw, Dallas, Palmer, Karen, Rennert, Kevin, Shih, Jhih-Shyang, Villanueva, Seth
Format: Report
Language:English
Subjects:
Energy
Environment
Resources for the Future
Online Access:Request full text
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Summary:The Inflation Reduction Act of 2022 (IRA), signed into law by President Biden on the August 16, 2022, will affect household budgets and wellbeing in several ways. The law contains provisions to promote clean energy technologies, facilitate domestic energy production, and address global warming, along with health care and tax provisions. In light of the legislation's title, a key question is how the energy and climate provisions will affect energy prices and household expenditures. The effects of the monumental legislation also derive from its provisions to raise revenue as well as bring about changes in environmental and public health. The effects will vary across different types of households, distinguished by their consumption of electricity and other goods, their levels and sources of income, and where they live. We employ three models in tandem to examine the effects of the IRA's tax provisions focused on grid-connected electricity generation. We do not address the green bank, tax credits targeting low-income and tribal communities, or home energy investments. First, we deploy RFF's Haiku Electricity Model to project investment in the electricity sector and changes in emissions and electricity retail rates. We model a range of potential scenarios that account for variability in future fuel prices and changes in electricity demand that would arise from faster electrification. Second , we use RFF's Social Welfare Incidence Model to estimate the financial impacts of changes in expenditures and taxes for households distinguished by household-specific expenditure patterns and levels and sources of income. Third, we map associated reductions in emissions of sulfur dioxide (SO2) and nitrogen oxides (NOX) from Haiku into the EASIUR atmospheric transport model to estimate their effect on concentrations of fine particulate matter (PM2.5), the primary atmospheric pollutant affecting human health. We estimate these changes at the county level and compare to demographic characteristics of affected counties.