Repeal of the Inflation Reduction Act's clean energy and manufacturing tax credits could lead to an estimated $6 billion annual increase in US consumer energy bills and a more than $160 billion cumulative decline in GDP by 2030, according to a new analysis.
By 2035, US energy consumers would see $9 billion in additional annual energy costs — with cumulative GDP losses growing to $190 billion — assuming the Inflation Reduction Act (IRA) tax credits are repealed in 2025, the analysis by Energy Innovation, a nonpartisan climate policy think tank, found.
The March 20 findings are the latest in a series of analyses on the potential impacts of IRA tax credit repeal as congressional Republicans pursue a budget reconciliation package calling for up to $4.5 trillion in tax cuts.
Republicans on congressional tax-writing committees are expected to take a hard look at partial or wholesale repeal of the IRA's clean energy subsidies to offset the costs of a broader GOP tax cut package.
Production, investment tax credits drive findings
Robbie Orvis, senior director of modeling and analysis at Energy Innovation, said eliminating the IRA's investment and production tax credits for clean energy, as well as credits for advanced manufacturing, would have the biggest impact.
With orders for new gas-fired turbines facing five-year delivery backlogs, power providers are looking to solar, energy storage, and wind to a lesser extent to meet a projected surge in power demand from datacenters.
"The incentives in the Inflation Reduction Act are great catalysts for getting that deployment up and running faster than it might otherwise happen," Orvis said in an interview.
The IRA, passed by Democrats in 2022 using Senate filibuster-skirting budget reconciliation procedures, has already coincided with $600 billion in private investment across roughly 750 clean energy projects since the law's passage, the Energy Innovation analysis noted.
The historic climate law offers a production tax credit of up to 1.5 cents per kilowatt-hour for zero-emission generation projects placed into service in 2025 or later.
Solar, energy storage and geothermal facilities can qualify for an investment tax credit of up to 30%. Advanced energy manufacturing projects, such as electric vehicle battery manufacturing plants, can also qualify for an investment tax credit of up to 30% on qualified facilities.
"What happens when you eliminate the tax credits is you get a lot less deployment of those clean electricity technologies," Orvis said. "Then we're much more reliant on other fossil fuel technologies like gas, which is expected to rise in cost, and that makes rates higher for everyone."
Texas seen as biggest loser in IRA repeal
The Energy Innovation analysis also modeled the individual impact of IRA tax credit repeal for all 48 contiguous US states.
Texas, a US leader in clean energy deployment, would feel the greatest impacts, the analysis found. The state would see more than $8 billion in additional consumer energy costs from 2025–2035 while losing roughly 115,000 direct and indirect jobs compared to a no-repeal scenario, the analysis found.
California, Florida, Pennsylvania and Georgia were projected to experience damages along the same lines. The five states all ranked in the top 10 in terms of most job losses and largest increases in total household energy spending.
Overall, the analysis estimated that IRA repeal would lead to more than 700,000 direct and indirect job losses by 2035.
Orvis said the March 20 analysis is likely conservative because it did not model the repeal of signature Biden-era emission rules targeting vehicles, power plants, and US oil and gas operations. The Trump administration is already working to rescind those regulations, arguing the rules have led to higher energy costs and risks to grid reliability.
"This round of modeling does not assume that any regulations are reversed, but of course that is very much on the table," Orvis said.
