The cost of the Inflation Reduction Act’s energy and climate provisions is now expected to be significantly higher than previously projected, at least partially because of greater-than-anticipated investment in climate-friendly technology.
This week, the Congressional Budget Office (CBO) revised its projections, greatly increasing how much it believes the law’s energy tax credit-related provisions will cost.
“The costs of energy-related tax provisions are much higher than the staff of the Joint Committee on Taxation originally projected,” said CBO director Phillip Swagel.
One of the factors the agency cited is a greater number of people expected to claim tax credits for electric vehicles, as proposed environmental regulations push the market in that direction and the Treasury Department issues flexible guidance for the credits.
Another is more investment than expected in battery manufacturing and wind and solar power development.
In total, the CBO says the law’s energy provisions will cost $428 billion more than originally projected. While the increase in claims on tax credits is a major factor in that, the agency also said that it is reducing its projected revenues from gasoline excise taxes based on technical factors.
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