How Big is the “Biggest Climate Spending Bill Ever”? Key Factors Influencing the Inflation Reduction act’s Clean Energy Impacts

Joseph E. Aldy

National Tax Journal, 2025, vol. 78, issue 1, 201 - 221

Abstract: The Inflation Reduction Act (IRA) could deliver more than $1 trillion in tax expenditures and outlays targeting clean energy deployment, but considerable uncertainty characterizes the economic, emissions, energy, and fiscal implications of the law. I review the features of the political system governing implementation, the regulatory system overlaying performance standards, the innovation responding to IRA incentives, and the energy networks in which IRA-supported investments operate to identify the key factors influencing the IRA’s outcomes. Drawing from past research and policy experience, I illustrate how these factors could play out and how future program evaluation could reduce uncertainty and inform better climate policy.

Date: 2025
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