When the law passed, the nonpartisan Congressional Budget Office projected the energy components would add $391 billion to deficits over a decade, from 2022 to 2031. It revised those forecasts upward last spring and again on Wednesday. The office now projects the energy incentives in the law will cost about twice that much for that 2022 to 2031 period. For the next decade, through 2033, the budget office projects the provisions will cost more than $800 billion.
Here’s what’s changed, and why it matters for emissions, the economy and the budget.
Clean-energy manufacturing is booming.
The law has supercharged investment in American manufacturing facilities of some low-emission technologies, led by solar panels, advanced batteries and the full supply chain for electric vehicles.
An investment tracker by the Rhodium Group, a consultancy that follows energy and climate spending, and the Massachusetts Institute of Technology shows companies spent $44 billion on clean-energy manufacturing in America over the past year, with significantly more planned in the years ahead. Those companies will benefit from the tax breaks in the climate law, either directly or indirectly.
The popularity of those credits has surprised forecasters at the budget office and the nonpartisan congressional Joint Committee on Taxation. Budget office officials said Wednesday that they now expected the provisions to add about $205 billion more to deficits through 2031 than they had initially anticipated.
Electric vehicles could also surge.
Forecasters now expect the consumer credit for electric vehicles, which is as much as $7,500 for an electric car or truck, to cost several times as much as initially expected. That calculation isn’t really based on sales of electric vehicles, which hit a record last year even though annual sales growth slowed from 2022. It stems from a pair of Biden administration regulations that are meant to fuel more electric vehicle sales — and which the budget office expects to be quite effective.