Market Forces

The Economic Case for Preserving Clean Energy Tax Incentives

By Jeremy Proville / Bio / Published: May 1, 2025

This blog was authored by EDF economists Aurora Barone, Luis Fernandez Intriago and Jeremy Proville.

As Congress returns to debate the future of clean energy tax incentives, sound economic analysis should drive decisions.

These incentives aren’t just climate policy; they represent strategic investments in America’s economic future, energy security, and global competitiveness. As Congress considers major changes to clean energy incentives, focusing on economic fundamentals reveals the substantial risks that come with repeal.

The Stakes

The debate over clean energy tax incentives comes at a pivotal moment for American economic competitiveness. U.S. electricity demand is surging and projected to increase 54% by 2035 and 135% by 2050, driven by new data centers, new manufacturing facilities in the US, and electrification of buildings, transportation and industry. This dramatic increase raises fundamental questions about how the US can power our growing economy affordably and reliably. Early evidence shows that clean energy incentives are delivering strong economic returns. They’ve already created more than 400,000 new jobs across multiple sectors.

Repealing them would threaten American livelihoods, energy affordability, and domestic production capabilities. According to multiple economic studies, repealing these incentives would increase consumer energy costs while undermining America’s energy independence during heightened global instability.

Employment and Investment Impacts: The Numbers

Multiple independent economic analyses demonstrate that repealing clean energy tax incentives would cause significant economic harm. This wide range of estimates reflects different modeling approaches and assumptions, but the consistent conclusion is that repeal of the clean energy provisions would significantly harm American employment and economic growth:

Aurora Energy Research: Net loss of 97,000 clean energy jobs across 31 states (103,000 fewer clean energy jobs, only partially offset by 6,000 new fossil fuel jobs; does not include job impacts on manufacturing)
International Council on Clean Transportation: 130,000 auto manufacturing jobs directly threatened, plus 310,000 additional indirect jobs by 2030
Energy Innovation: Nearly 790,000 jobs lost by 2030, over 700,000 still missing by 2035
Brattle Group: Cumulative loss of 3.8 million job-years through 2035 (averaging 345,000 jobs annually)

Clean Energy Tax Incentives as Job Creation Engines

The reason why reversing these clean energy incentives has such a sweeping impact that could eliminate so many jobs is because they take a comprehensive approach to job creation. Unlike narrow policies targeting single industries, these incentives offer broader economic signals that stimulate job creation:

Investment and Production Tax Credits: Providing tax credits for companies that produce goods or materials in the US, drives American construction and manufacturing to create long-term operations jobs in renewable energy and clean transportation.
Clean Energy Manufacturing Credits: Boosting domestic manufacturing of batteries, EVs, and solar panels, making us competitive within global markets.
Direct Pay Provisions: Allowing tax-exempt entities, like municipal governments and schools, to receive direct cash payments from the IRS without having to wait until tax filing to receive the benefit. Direct pay provides more flexibility for the school or church or local government to finance the project independently.
Domestic Content Bonuses: Boosting American manufacturing of iron, steel, and manufactured products used in clean energy projects like solar and wind farms.
Energy Community Incentives: Targeting job creation in regions transitioning from fossil fuels.

The geographic distribution of these benefits is particularly impressive. The top 20 congressional districts account for over 100,000 operational jobs from announced projects catalyzed by these incentives. These incentives significantly impact employment in construction across diverse South, Midwest, Southwest, and Mountain West regions. Of 390 announced clean energy projects, over 60% are in Republican congressional districts.

Notably, these job figures primarily reflect announced projects and may underestimate the full employment impact. The Department of Energy’s U.S. Energy Employment Report (USEER) methodology captures a broader range of indirect and induced jobs throughout supply chains and local economies that aren’t always reflected in project announcements. This suggests the economic benefits of clean energy incentives may be even more substantial and widespread than current estimates indicate.

Public Health and Economic Savings

A crucial but often overlooked economic dimension is reduced air pollution’s substantial public health benefits. The Treasury Department projects health benefits valued at $20-49 billion annually by 2030 from clean energy tax incentives. These represent real economic savings that offset a significant portion of the program’s fiscal expenses, including avoided healthcare costs, increased productivity, and reduced mortality risk.

Energy Security and Strategic Competition

As of 2024, nearly half (42%) of U.S. electricity comes from low-carbon sources. This diversification strengthens American energy security and energy dominance – strategic advantages that would be undermined by repeal. Solar and wind generation are playing dual roles: both replacing retiring coal capacity and meeting rapidly rising electricity demand, particularly during extreme weather events that are increasingly straining the grid.

Repealing clean energy tax incentives would leave the United States more dependent on natural gas to meet rising demand, creating multiple vulnerabilities:

Price Volatility: Natural gas prices can spike dramatically during extreme weather events, affecting consumer costs and economic stability
Geopolitical Exposure: Greater reliance on a single fuel source increases vulnerability to global energy market disruptions
Supply Constraints: Natural gas infrastructure requires significant lead time to develop, potentially creating bottlenecks
Strategic Disadvantage: While global competitors like China and India rapidly build clean energy capacity, repealing incentives would cede America’s competitive position

Understanding Fiscal vs. Economic Costs

Critics often focus exclusively on fiscal costs, presenting an incomplete economic picture. The Treasury Department’s analysis distinguishes between fiscal costs (payments from the government to individuals, e.g. a government bailout or government spending on infrastructure) and true economic costs (net losses to the overall economy, e.g. costs of pandemic, natural disasters on an economy).

Multiple forecasts estimate the fiscal costs of these clean energy tax incentives:

Credit Suisse: $800+ billion
Brookings Institution: $780 billion through 2031
Goldman Sachs: $1.2 trillion
University of Pennsylvania: Just over $1 trillion (2023-2032)

However, as Treasury explains, in the context of clean energy incentives, “fiscal costs are the wrong costs to consider.” The Office of Management and Budget’s Circular A-4 recommends that transfers be excluded entirely from economic analysis or counted as both a cost to the government and a benefit to taxpayers.

An economic analysis must account for the full value generated, including jobs, consumer savings, health improvements, and environmental benefits. A recent report estimated that the tax credits will deliver a 4x return on investment that grows the economy by $1.9 trillion over the next ten years, and further comprehensive studies will be key in better assessing impacts on American households.

Conclusion: Policy Stability Drives Economic Growth

Any subsidy can spark job growth, so the real question is: which types of jobs will last and lift communities for years to come? The ones spurred on by clean energy incentives are creating durable opportunities in manufacturing, construction, and research that far surpass job quality from sunsetting legacy energy industries with high social and environmental costs.

The economic case for preserving clean energy tax incentives is compelling across multiple dimensions:

Employment Impact: Preserving millions of job-years across diverse regions and sectors
Consumer Protection: Preventing $75-400 in increased annual household electricity costs that would function as a regressive tax
Health Economics: Delivering tens of billions in annual health benefits from reduced air pollution
Energy Security: Strengthening America’s resilience against price volatility and geopolitical tensions
Regional Development: Driving investment to communities across the country, including those transitioning from fossil fuel economies

While more ambitious climate policies theoretically exist, the clean energy incentives are already working and have earned broad, bipartisan support. Repealing them now would introduce harmful volatility that undercuts American jobs, economic growth, investment certainty, and global competitiveness. The evidence is clear: preserving these incentives represents prudent economic policy that strengthens America’s future.

Also posted in Climate Change, Economics, Energy Transition, Politics, Trump's energy plan / Leave a comment

What’s behind President Trump’s mystery math?

By Susanne Brooks / Bio / Published: June 9, 2017

This post originally appeared on EDF’s Climate 411

By this time, your eyes may have glazed over from reading the myriad of fact checks and rebuttals of President Trump’s speech announcing the United States’ withdrawal from the Paris climate agreement. There were so many dizzying falsehoods in his comments that it is nearly impossible to find any truth in the rhetorical fog.

Of all the falsehoods, President Trump’s insistence that compliance with the Paris accord would cost Americans millions of lost jobs and trillions in lowered Gross Domestic Product was particularly brazen, deceptive, and absurd. These statements are part of a disturbing pattern, the latest in a calculated campaign to deceive the public about the economics of reducing climate pollution.

Based on a study funded by industry trade groups

Let’s be clear: the National Economic Research Associates (NERA) study underpinning these misleading claims was paid for by the U.S. Chamber of Commerce and the American Council for Capital Formation (ACCF) – two lobbying organizations backed by fossil fuel industry funding that have a history of commissioning exaggerated cost estimates of climate change solutions. When you pay for bad assumptions, you ensure exaggerated and unrealistic results.

In the past five years alone, NERA has released a number of dubious studies funded by fossil fuel interests about a range of environmental safeguards that protect the public from dangerous pollution like mercury, smog, and particulate matter – all of which cause serious health impacts, especially in the elderly, children, and the most vulnerable. NERA’s work has been debunked over and over. Experts from MIT and NYU said NERA’s cost estimates from a 2014 study on EPA’s ozone standards were “fraudulent” and calculated in “an insane way.” NERA’s 2015 estimates of the impacts of the Clean Power Plan, which are frequently quoted by President Trump’s EPA Administrator Scott Pruitt and others, have also been rebutted due to unrealistic and pessimistic assumptions.

The study does not account for the enormous costs of climate pollution

In his speech about the Paris agreement, President Trump crossed a line that made even NERA so uncomfortable that it released a statement emphasizing that its results were mischaracterized and that the study “was not a cost-benefit analysis of the Paris agreement, nor does it purport to be one.”

The most important point embedded in this statement is that the study does not account for the enormous benefits of reducing the carbon pollution causing climate change. Climate change causes devastating impacts including extreme weather events like flooding and deadly storms, the spread of disease, sea level rise, increased food insecurity, and other disasters. These impacts can cost businesses, families, governments and taxpayers hundreds of billions of dollars through rising health care costs, destruction of property, increased food prices, and more. The costs of this pollution are massive, and communities all around the U.S. are already feeling the impacts – yet the President and his Administration continue to disregard this reality as well as basic scientific and economic facts.

Cherry-picking an impractical and imaginary pathway to emission reductions

The statistics the President used were picked from a specific scenario in the study that outlined an impractical and imaginary pathway to meet our 2025 targets designed to be needlessly expensive, as experts at the World Resources Institute and the Natural Resources Defense Council have noted. The study’s “core” scenario assumes sector by sector emission reduction targets (which do not exist as part of the Paris accord) that result in the most aggressive level of mitigation being required from the sectors where it is most expensive. This includes an almost 40 percent reduction in industrial sector emissions – a disproportionate level not envisioned in any current policy proposal – which results in heavily exaggerated costs.

An expert at the independent think tank Resources for the Future, Marc Hafstead, pointed out:

The NERA study grossly overstates the changes in output and jobs in heavy industry.

Yale economist Kenneth Gillingham said of these numbers:

It’s not something you can cite in a presidential speech with a straight face … It’s being used as a talking point taken out of context.

The NERA analysis also includes a scenario that illustrates what experts have known for decades – that a smarter and more cost-effective route to achieving deep emission reductions is a flexible, economy-wide program that prices carbon and allows the market to take advantage of the most cost-effective reductions across sectors. Even NERA’s analysis shows that this type of program would result in significantly lower costs than their “core” scenario. Not surprisingly, that analysis is buried in the depths of the report, and has been entirely ignored by the Chamber of Commerce and ACCF as well as President Trump.

Study ignores potential innovation and declining costs of low carbon energy

Finally, the NERA study assumes that businesses would not innovate to keep costs down in the face of new regulations – employing pessimistic assumptions that ignore the transformational changes already moving us towards the expansion of lower carbon energy. Those assumptions rely on overly-conservative projections for renewable energy costs, which have been rapidly declining. They also underestimate the potential for reductions from low-cost efficiency improvements, and assume only minimal technological improvements in the coming years.

In reality, clean energy is outpacing previous forecasts and clean energy jobs are booming. There are more jobs in solar energy than in oil and natural gas extraction in the U.S. right now, and more jobs in wind than in coal mining.

The truth is that the clean energy revolution is the economic engine of the future. President Trump’s announcement that he will withdraw the U.S. from the Paris accord cedes leadership and enormous investment opportunities to Europe, China, and the rest of the world. His faulty math will not change these facts.

Also posted in International, Politics, Trump's energy plan, Uncategorized / Leave a comment

Alternative Facts: 6 Ways President Trump’s Energy Plan Doesn’t Add Up

By Jeremy Proville / Bio / Published: March 23, 2017

Photos by lovnpeace and KarinKarin

This blog was co-authored with Jonathan Camuzeaux and is the first in an occasional series on the economics of President Trump’s Energy Plan

Just 60 days into Trump’s presidency, his administration has wasted no time in pursuing efforts to lift oil and gas development restrictions and dismantle a range of environmental protections to push through his “America First Energy Plan.” An agenda that he claims will allow the country to, “take advantage of the estimated $50 trillion in untapped shale, oil, and natural gas reserves, especially those on federal lands that the American people own.”

Putting aside the convenient roundness of this number, the sheer size of it makes this policy sound appealing, but buyer beware. Behind the smoke and mirrors of this $50 trillion is a report commissioned by the industry-backed Institute for Energy Research (IER) that lacks serious economic rigor. The positive projections from lifting oil and gas restrictions come straight from the IER’s advocacy arm, the American Energy Alliance. Several economists reviewed the assessment and agreed: “this is not academic research and would never see the light of day in an academic journal.”

Here is why Trump’s plan promises a future it can’t deliver:

1. No analytical back up for almost $20 trillion of the $50 trillion.
Off the bat, it’s clear that President Trump’s Plan relies on flawed math. What’s actually estimated in the report is $31.7 trillion, not $50 trillion, based on increased revenue from oil, gas and coal production over 37 years (this total includes estimated increases in GDP, wages, and tax revenue). The other roughly half of this “$50 trillion” number appears to be conjured out of thin air.

2. Inflated fuel prices
An average oil price of $100 per barrel and of $5.64 per thousand cubic feet of natural gas (Henry Hub spot price) was used to calculate overall benefits. Oil prices are volatile: in the last five years, they reached a high of $111 per barrel and a low of $29 per barrel. They were below $50 a barrel a few days ago. A $5.64 gas price is not outrageous, but gas prices have mostly been below $5 for several years. By using inflated oil and gas prices and multiplying the benefits out over 37 years, the author dismisses any volatility or price impacts from changes in supply. There’s no denying oil and gas prices could go up in the future, but they could also go down, and the modeling in the IER report is inadequate at best when it comes to tackling this issue.

3. Technically vs. economically recoverable resources
The IER report is overly optimistic when it comes to the amount of oil and gas that can be viably produced on today’s restricted federal lands. Indeed, the report assumes that recoverable reserves can be exploited to the last drop over the 37-year period based on estimates from a Congressional Budget Office report. A deeper look reveals that these estimates are actually for “technically recoverable resources,” or the amount of oil and gas that can be produced using current technology, industry practice, and geologic knowledge. While these resources are deemed accessible from a technical standpoint, they cannot always be produced profitably. This is an important distinction as it is the aspect that differentiates technically recoverable from economically recoverable resources. The latter is always a smaller subset of what is technically extractable, as illustrated by this diagram from the Energy Information Administration. The IER report ignores basic industry knowledge to present a rosier picture.

4. Lack of discounting causes overestimations
When economists evaluate the economic benefits of a policy that has impacts well into the future, it is common practice to apply a discount rate to get a sense of their value to society in today’s terms. Discounting is important to account for the simple fact that we generally value present benefits more than future benefits. The IER analysis does not include any discounting and therefore overestimates the true dollar-benefits of lifting oil and gas restrictions. For example, applying a standard 5% discount rate to the $31.7 trillion benefits would reduce the amount to $12.2 trillion.

5. Calculated benefits are not additional to the status quo
The IER report suggests that the $31.7 trillion would be completely new and additional to the current status quo. This is false. One must compare these projections against a future scenario in which the restrictions are not lifted. Currently, the plan doesn’t examine a future in which these oil and gas restrictions remain and still produce large economic benefits, while protecting the environment.

6. No consideration of environmental costs
Another significant failure of IER’s report: even if GDP growth was properly estimated, it would not account for the environmental costs associated with this uptick in oil and gas development and use. This is not something that can be ignored, and any serious analysis would address it.

We know drilling activities can lead to disastrous outcomes that have real environmental and economic impacts. Oil spills like the Deepwater Horizon and Exxon Valdez have demonstrated that tragic events happen and come with a hefty social, environmental and hard dollar price tag. The same can be said for natural gas leaks, including a recent one in Aliso Canyon, California. And of course, there are significant, long-term environmental costs to increased emissions of greenhouse gases including more extreme weather, damages to human health and food scarcity to name a few.

The Bottom Line: The $50 Trillion is An Alternative Fact but the Safeguards America will Lose are Real
These factors fundamentally undercut President Trump’s promise that Americans will reap the benefits of a $50 trillion dollar future energy industry. Most importantly, the real issue is what is being sacrificed if we set down this path. That is, a clean energy future where our country can lead the way in innovation and green growth; creating new, long-term industries and high-paying jobs, without losing our bedrock environmental safeguards. If the administration plans to upend hard-fought restrictions that provide Americans with clean air and water, we expect them to provide a substantially more defensible analytical foundation.

Also posted in Markets 101, Politics, Trump's energy plan / Leave a comment