Inflation Reduction Act Analysis

By: Hung-Yeh Lee



The Inflation Reduction Act passed by Congress in August 2022 has brought lights towards the climate saving goal that the Biden administration set out to achieve during his campaign. The package will allocate $369 billion dollars in climate and energy related funding, much of it aimed at incentivising households and businesses to modify their energy source to a more sustainable form.

For households, the act makes the installation of energy-efficient products such as solar panels, electric vehicles and other appliances more affordable. Consumers may qualify for up to $10,000 in tax breaks and rebates for those purchases.

The act also helps with the current high inflation rate related to electricity and energy bills by diversifying the energy mix. Households and businesses who decide to make energy efficiency-focused upgrades would likely save about $170-$220 a year in electricity costs based on estimates by Resources for the Future. One of the reasons for this reduction in electricity price is due to the fact that diversifying the energy mix can increase consumers’ resistance over the volatile oil and gas market caused by shocks such as the Russian-Ukraine war.

The legislation would also be a step towards achieving the Biden administration’s goal in cutting U.S greenhouse emission. It is estimated that the Inflation Reduction Act would help cut greenhouse gas emissions by 42% below 2005 levels