Biden’s Climate Policies May Exceed Initial $400B, Says CBO
TL/DR –
The Congressional Budget Office (CBO) estimates that climate initiatives in President Biden’s Inflation Reduction Act (IRA) will cost over $400 billion more than initially anticipated. A large portion of these increased costs arose from clean vehicle tax credits and revenues from excise taxes on gasoline. The CBO’s estimate aligns more closely with the $800 billion projected by investment banking company Credit Suisse, and is lower than the University of Pennsylvania Wharton School of Business’s prediction of over $1 trillion.
Increased Cost of Biden’s Inflation Reduction Act Climate Initiatives
President Joe Biden’s Inflation Reduction Act (IRA) climate initiatives are projected to cost over $428 billion more than expected, as per the latest reports from the Congressional Budget Office (CBO). These estimates are likely to change due to factors such as the adoption rate of low-emission technologies and electric vehicles, and the remaining unclaimed tax credits under the IRA.
CBO’s Uncertain Projections
The CBO has warned that “the budgetary effects of energy-related tax provisions remain highly uncertain”. The initial estimate from the CBO in 2022 was around $400 billion for the IRA’s climate and energy provisions. But this was contradicted by Credit Suisse, who estimated the cost at over $800 billion, closer to the CBO’s latest projection.
Outside Estimates of the IRA Cost
Other external estimates have been even higher, with a report from the University of Pennsylvania Wharton School of Business predicting a cost of more than $1 trillion to taxpayers. The increased projections were largely due to technical revisions, with $224 billion arising from clean vehicle tax credits and excise tax revenues on gasoline.
EPA’s Proposal and Treasury Guidance
These projections were influenced by the Environmental Protection Agency’s (EPA) proposal to impose stricter vehicle emissions standards from the 2027 model year. Moreover, the Treasury’s guidance on credits for leased vehicles has driven an increase in electric vehicle leasing, adding to the overall cost.
Economic Outlook
The CBO didn’t paint a positive picture for the US economy beyond these costs. They project a steady increase in the nation’s deficit, reaching $2.6 trillion in 2034 from $1.6 trillion this year. The deficit, as a percentage of GDP, is anticipated to rise to 6.1% in 2034. Public debt is also expected to climb to 116% of GDP ($48.3 trillion) by 2034 and reach 172% of GDP by 2054 from the current projection of 99% ($26.2 trillion) by the end of this year.
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