Tax Credits for Clean Electricity: The Distributional Impacts of Supply-Push Policies in the Power Sector

Technical Report · Tue Aug 01 04:00:00 EDT 2023

DOI:https://doi.org/10.3386/w31621· OSTI ID:2005595

Brown, Maxwell L. ^[1]; Becker, Jon M. ^[1]; Carbone, Jared ^[2]; Goforth, Teagan ^[3]; McFarland, James ^[4]; Nock, Destenie ^[3]; Pitman, Kristina ^[1]; Steinberg, Daniel C. ^[1]

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1. National Renewable Energy Laboratory (NREL), Golden, CO (United States)
2. Colorado School of Mines, Golden, CO (United States)
3. Carnegie Mellon Univ., Pittsburgh, PA (United States)
4. US Environmental Protection Agency (EPA), Washington, DC (United States)

We evaluate distributional and efficiency consequences of the bulk power clean electricity tax credits authorized by the 2022 Inflation Reduction Act. To do so, we link detailed electricity capacity expansion, computable general equilibrium, data-rich microsimulation, and air pollution models to estimate the policy incidence in terms of economic welfare and health impacts across a wide range of demographic groups. We evaluate the tradeoff between policy efficiency and income progressivity by comparing the tax credits to cap-and-trade policies that vary revenue recycling approaches. Under the scenarios analyzed the bulk power tax credits lead to increased clean electricity technology deployment resulting in a reallocation of capital from elsewhere in the economy, higher prices for capital and other goods, lower power prices, and lower emissions. The tax credits yield progressive outcomes for both economic welfare and health impacts. The health benefits exceed total policy costs and provide greater benefits for low-income and historically-marginalized households given the coincidence of household and emission source locations.

• Research Organization: National Renewable Energy Laboratory (NREL), Golden, CO (United States)
• Sponsoring Organization: USDOE Office of Policy (OP)
• DOE Contract Number: AC36-08GO28308
• OSTI ID: 2005595
• Report Number(s): NREL/TP--6A20-86489; MainId:87262; UUID:481d0beb-ade8-4f38-b35a-73075e8cb87b; MainAdminID:70755
• Country of Publication: United States
• Language: English

Related Subjects

29 ENERGY PLANNING, POLICY, AND ECONOMY
Distributional Impacts
Energy Policy