Budgetary Cost of the Inflation Reduction Act’s Energy Subsidies
The Inflation Reduction Act (IRA) became law on August 16, 2022. Despite its name, the act was mostly designed to decarbonize the US economy by providing subsidies to producers of clean energy and consumers of low-carbon-emitting preferred products such as electric vehicles.
A contentious point of debate surrounding the passage of the IRA was its budgetary impact—how much liability American taxpayers would have to take on to subsidize clean energy. Various governmental and nongovernmental organizations estimated fiscal costs that turned out to be too low and that they later revised upward.
Using a transparent budget scoring methodology, we estimate that the energy subsidies in the act will cost between $936 billion and $1.97 trillion over the next 10 years, and between $2.04 trillion and $4.67 trillion by 2050. This estimate is substantial because several of the IRA’s largest subsidies are uncapped.
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When Congress passed the IRA, the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) estimated the energy-related IRA subsidies would cost about $370 billion. An analysis by Goldman Sachs later estimated the IRA’s 10-year cost would be $1.2 trillion.
However, the IRA’s energy subsidies are multiple times larger than initial estimates, and they expose American taxpayers to potentially unlimited liability. …
CATO Institute, Policy Analysis no. 992, March 11, 2025.
The Budgetary Cost of the Inflation Reduction Act’s Energy Subsidies
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