‘Inflation Reduction Act’ a Win for Renewable Energy, Won’t Help Inflation

By Katie Spence
Katie Spence
Katie Spence
Katie covers energy and politics for The Epoch Times. Before starting her career as a journalist, Katie proudly served in the Air Force as an Airborne Operations Technician on JSTARS. She obtained her degree in Analytic Philosophy and a minor in Cognitive Studies from the University of Colorado. Katie’s writing has appeared on CNSNews.com, The Maverick Observer, The Motley Fool, First Quarter Finance, The Cheat Sheet, and Investing.com. Email her at katie.spence@epochtimes.us
August 22, 2022 Updated: August 22, 2022

In his prepared remarks, President Joe Biden called the 2022 Inflation Reduction Act (IRA) one of the most “significant laws in our history” and hyped it as a win for reducing inflation and tackling the “climate crisis.”

Likewise, Senate Democrats claim the IRA will “help fight inflation” while simultaneously lowering the cost of energy for Americans and “substantially” reducing greenhouse gas emissions.

Epoch Times Photo
Sen. Joe Manchin (D-W. Va.) departs the Senate floor following a vote on Capitol Hill in Washington on Aug. 6, 2022. (Anna Rose Layden/Getty Images)

The IRA is indeed a significant win for renewable energy—it includes $369 billion in incentives for renewable energy, allowing the “most aggressive action ever” to meet Biden’s climate goals.

However, non-partisan third-party analysts state that the bill’s impact on inflation is “negligible.”

Under certain scenarios, the IRA could make inflation worse, experts add.

Inflation Reduction?

On Aug. 16, Biden signed the 2022 IRA into law and touted it as the “biggest step forward on climate ever.”

“[The IRAs] going to allow us to boldly take additional steps toward meeting all of my climate goals,” Biden further stated at the signing.

Indeed, the IRA includes several significant tax credits, manufacturing incentives, and grants that Senate Democrats claim will lower energy costs for Americans.

They also claim the IRA will increase U.S. energy security by encouraging domestic production, help decarbonize the economy, support disadvantaged communities’ transition to cleaner economies, and support rural communities.

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An array of solar panels and wind turbines. (Soonthorn/Adobe Stock)

Specifically, some of the tax credits in the IRA include a $9 billion energy rebate program, which would allow Americans to purchase or retrofit their homes with energy-efficient appliances. Plus, there are ten years of consumer tax credits for Americans to outfit their homes with rooftop solar, and energy-efficient heating and water systems.

Some programs include $60 billion in incentives for onshore clean energy manufacturing in the United States and billions in grants to retool or change manufacturing and farming operations.

Pointedly, Senate Democrats claim the above manufacturing provisions are one of the ways the IRA will help fight inflation.

“These manufacturing incentives will help alleviate inflation and reduce the risk of future price shocks by bringing down the cost of clean energy and clean vehicles and relieving supply chain bottlenecks.”

Actual Impact on Inflation

On Aug. 4, the non-partisan Congressional Budget Office stated in a letter to Sen. Lindsey Graham (R-S.C.): “In calendar year 2022, enacting the [IRA] would have a negligible effect on inflation, in CBO’s assessment. In calendar year 2023, inflation would probably be between 0.1 percentage point lower and 0.1 percentage point higher under the bill than it would be under current law.”

Similarly, the Penn Wharton Budget Model at the University of Pennsylvania stated, “We estimate that the Inflation Reduction Act will produce a very small increase in inflation for the first few years, up to 0.05 percent points in 2024.” After that, inflation will decline in the late 2020s.

Senate Works On Capitol Hill In Last Week Before Recess
Senate Majority Leader Chuck Schumer (D-N.Y.) speaks during a news conference about the Inflation Reduction Act outside the U.S. Capitol in Washington, on Aug. 4, 2022. (Drew Angerer/Getty Images)

Penn Wharton concluded, “These point estimates, however, are not statistically different than zero, thereby indicating a very low level of confidence that the legislation will have any impact on inflation.”

On Aug. 12, the Tax Foundation, using its General Equilibrium Model, found that the IRA would “eliminate about 29,000 full-time equivalent jobs in the United States” and “may actually worsen inflation by constraining the productive capacity of the economy.”

The Tax Foundation concluded that while the IRA didn’t include many of the “major tax rate increases” in the House-passed Build Back Better Act, it would still reduce long-run GDP by approximately 0.2 percent.

Slimmed-Down BBB?

On July 1, Rep. Kevin Brady (R-Texas) stated, “This ‘slimmed-down’ Build Back Better couldn’t come at a worse time.”

On July 28, Biden said that while the IRA didn’t contain all of the proposals in Build Back Better, “you will see a lot of similarities” between BBB and the IRA. “It’s not all of [BBB], but we’ve moved a long way.”

Before signing the IRA on Aug. 16, Biden rejoiced, “And now I’m going to take action that I’ve been looking forward to doing for 18 months.”

Epoch Times Photo
President Joe Biden delivers remarks on the Inflation Reduction Act of 2022 in the State Dining Room of the White House in Washington on July 28, 2022. (Anna Moneymaker/Getty Images)

When discussing the IRA on Aug 16 and how it “Builds a Better Future for Young Americans,” Biden’s first remark asserted that the IRA “is delivering on his promise to meet the climate crisis.”

Biden added, “This law represents the single most aggressive action the U.S. is taking to tackle the climate crisis and create clean energy solutions in American history.”

Indeed, the IRA is a significant win for renewable energy causes, but according to independent experts, it won’t help fight inflation and could make it worse.

Katie Spence
Katie covers energy and politics for The Epoch Times. Before starting her career as a journalist, Katie proudly served in the Air Force as an Airborne Operations Technician on JSTARS. She obtained her degree in Analytic Philosophy and a minor in Cognitive Studies from the University of Colorado. Katie’s writing has appeared on CNSNews.com, The Maverick Observer, The Motley Fool, First Quarter Finance, The Cheat Sheet, and Investing.com. Email her at katie.spence@epochtimes.us