The Inflation Reduction Act and Tax Credits for Renewable Electricity

Signed into law under the Democratic Biden administration in the summer of 2022, the Inflation Reduction Act--the core of which was a set of policies that addressed climate change by encouraging a transition to cleaner technologies in power production, manufacturing, and transportation--contained many other policies besides the resurrected Renewable Electricity Production Tax Credit (PTC) that bolstered clean energy, but the PTC was important in its own right. The way in which the PTC supported renewable electricity was broadly representative of how many of the other tax expenditures authorized by the Inflation Reduction Act would work. An investigation of the PTC and its potential effects on US electricity markets, therefore, could help shed light not only on the benefits and costs of the Inflation Reduction Act but also on who would bear those costs and to whom those benefits would flow. After Donald Trump won the 2024 election to a second presidential term, his Republican party explored these alternative offsets for the proposed tax cuts that were a top priority for them; it was highly likely that the repeal of all or many portions of the Inflation Reduction Act would come under consideration.