Independent, nonprofit research institution Resources for the Future conducted a study on the potential implications of repealing the Inflation Reduction Act tax credits.
It specifically analyzed the two "technology-neutral" tax credits, 45Y and 48E, as Congress was considering their repeal.
What are the 45Y and 48E tax credits?
The 45Y tax credit encourages clean energy production and provides a credit for electricity generated from qualified clean energy sources.
The 48E tax credit is a federal incentive for investments in clean electricity generation, applying to various forms of clean energy technology.
Both of these tax credits relate to technology that produces electricity without generating pollution.
Why is repealing clean energy tax credits significant?
Resources for the Future researchers determined that repealing the tax credits would increase energy prices by about 5-7%.
They wrote, "The repeal of the tax credits leads to greater reliance on natural gas, and the high gas prices are passed on to consumers through higher electricity prices."
The researchers also found that repealing the tax credits would reduce tax expenditures, increase carbon dioxide pollution, and reduce wind generation capacity.
To reach these conclusions, the research team used an energy policy modeling analysis tool that focuses on the electric sector. It assessed the differences between the various U.S. census regions and the consequences of a tax credit repeal across multiple scenarios, including natural gas prices and electricity demand.
How is tax credit research helpful?
This study is timely because Congress was in the process of considering the elimination of various clean-energy tax credits and policies. Understanding how these repeals would impact citizens and businesses helps inform lawmakers so they can make the best decisions for their constituents. (Congress has since passed a version of the Big Beautiful Bill with significant cuts to clean-energy programs.)
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