Impacts of the U.S. Inflation Reduction Act on Energy System Investments and Emissions

Many countries are using investment- and subsidy-based climate policy approaches such as tax credits and grants. However, evidence is limited about the impacts of these policy instruments on energy systems and emissions. This analysis highlights potential issues in assessing the impacts of investment-based policies and brings together empirical and modeling estimates of impacts of the U.S. Inflation Reduction Act (IRA) as a case study. Data on clean energy manufacturing projects, household clean technology uptake, and public expenditures in the U.S. show record levels of investment after IRA’s passage—including a 64% increase from 2022 to 2024—and analysis suggests that further increases are expected in the future. Although IRA incentives could amplify trends of increased deployment of renewables, energy storage, and zero-emitting vehicles, there has been a notable trend break in announced investments in emerging technologies such as electrolytic hydrogen and carbon management. Modeled projections suggest that IRA could lower household energy bills by $85 to $430 per year and roughly double emissions reductions over the next decade.