Economic Impacts of the Inflation Reduction Act’s Climate and Energy Provisions

By Adewale Maye and Matt Mazewski

On August 16, 2022, President Biden signed the Inflation Reduction Act (IRA), marking the biggest climate investment in U.S. history. This landmark legislation aims to accelerate domestic clean energy production, catalyze technological innovation, and reduce greenhouse gas (GHG) emissions. The REPEAT Project at the Princeton University ZERO Lab estimates that the IRA puts the U.S. on track to achieve GHG emissions that are 30-42 percent below 2005 levels by the year 2030. In addition to reducing GHG emissions and catalyzing clean energy production, the IRA will take steps designed to ensure that corporations and the wealthiest Americans pay their fair share in taxes and will create new, good-paying jobs.

In this memo, we employ the Data for Progress Jobs Model to project the output and employment effects of the climate and energy provisions of the IRA. Realizing the full potential of this legislation will require robust efforts to ensure that funds are appropriated at the levels authorized by the IRA. If such efforts are successful, we estimate that the spending contained in these provisions, together with the private investment that it would incentivize and support, would be responsible for an average of around 1 million jobs created or preserved from 2023 to 2032, and would contribute approximately $1.7 trillion to U.S. GDP over the same period. We find that nearly 50 percent of these jobs would be concentrated in the construction and manufacturing sectors, with environmental remediation, agriculture and forestry, and scientific and technical services accounting for significant portions of the overall employment impacts as well.