Repealing the Clean Energy Credits: A Macroeconomic Assessment of the GOP Proposal

Repealing the Clean Energy Credits – A Macroeconomic Assessment

by Ignacio González, Juan Montecino, and Vasudeva Ramaswamy

This brief explains a new analysis of a Republican proposal to repeal the clean energy credits from the 2022 Inflation Reduction Act. The analysis finds that withdrawal of the clean energy credits would reduce GDP by approximately 2% in the long run from its anticipated level under current policy, while depressing employment and wages by approximately 0.5% and 1.5%, respectively. The proposal to repeal the clean energy credits seeks to reduce the government deficit. The analysis shows that an alternate policy of retaining the clean energy credits, while also raising the headline corporate tax rate to 28%, simultaneously raises government revenue, promotes economic growth, and alleviates wealth and income inequality.