Tax Credits for Clean Electricity: The Distributional Impacts of Supply-Push Policies in the Power Sector / Maxwell L. Brown, Jon M. Becker, Jared Carbone, Teagan Goforth, James McFarland, Destenie Nock, Kristina Pitman, Daniel C. Steinberg.

Format:

Book

Author/Creator:

Brown, Maxwell L.

Contributor:

National Bureau of Economic Research.

Becker, Jon M.

Carbone, Jared.

Goforth, Teagan.

McFarland, James.

Nock, Destenie.

Pitman, Kristina.

Steinberg, Daniel C.

Series:

Working Paper Series (National Bureau of Economic Research) no. w31621.

NBER working paper series no. w31621

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2023.

Summary:

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.

Notes:

Print version record

August 2023.