Americans availed themselves of clean energy tax credits afforded by the Inflation Reduction Act to the tune of $8 billion, the IRS and the U.S. Treasury Department announced.
Taxpayers have claimed more than $6 billion in credits for residential clean energy investments—which include solar electricity generation, solar water heating and battery storage—and more than $2 billion for energy efficient home improvements—which include heat pumps, efficient air conditioners, insulation, windows and doors—on their 2023 tax returns filed and processed through May 23, 2024, clean energy tax credit statistics revealed.
That total is twice as much as the $4 billion in credits per year that the nonpartisan congressional Joint Committee on Taxation estimated taxpayers would claim. The 2022 Inflation Reduction Act dedicated roughly $370 billion to combating climate change through a series of incentives such as tax credits, The Washington Post reported. The committee estimated the first-year costs of those incentives to be $2.4 billion.
“The reality is, the American people want to adopt solar panels, heat pumps and electric vehicles, and the federal Inflation Reduction Act is helping them do it,” said Leah Stokes, a political scientist at the University of California at Santa Barbara who advocated the inclusion of the climate credits in the law, in an interview with the Post.
Deputy Treasury Secretary Wally Adeyemo said in a call with reporters that he expected even more households to claim the credits this year, especially as more people become familiar with them, the Post reported. Adeyomo's prediction was based on conversations with companies that sell solar panels and other technologies. Although the credits existed before the Inflation Reduction Act, the law made them more remunerative, and it expanded access to credits that had already expired or were set to expire.
Nearly half the households that claimed the credits reported annual income below $100,000, but more than one in every 20 households in income brackets higher than $100,000 claimed the credit. They did so despite the fact that some of the credits limited eligibility for higher-income households.
“The focus of our outreach has been around Americans who have to deal with the cost of energy,” said Adeyemo. “We’re going to continue to focus our outreach efforts on middle-class and working-class Americans, with the hope that all eligible Americans will take advantage of these tax credits.”
Some climate experts interviewed by the Post wondered whether the tax credits are spurring people to make purchases they wouldn’t otherwise make.
“To understand the effectiveness of something like that, you have to have a good idea of what a counterfactual might be," said Karen Palmer, an environmental economics expert at Resources for the Future. "Some people who are going to take these tax credits would have perhaps made these investments anyway. It’s especially difficult the very first time we have numbers here to make inferences about what the IRA has done.”
The Clean Investment Monitor, which has been tracking spending on climate technology for years, published a report on Aug. 7 that showed that spending on heat pumps, solar panels and batteries has remained relatively flat in recent years, while consumer purchases of electric vehicles have soared.
Sara Baldwin, who leads research on decarbonization at Energy Innovation, told the Post that earlier tax credits show a history of directly spurring people to make climate-friendly purchases. She also predicted that increased purchases of new technologies will have good ripple effects beyond just the buyers’ households.
“As we see growth of technologies, whether you’re talking about heat pumps or electric vehicles, the initial adopters always drive economies of scale, which helps reduce the cost for future adopters,” she said. “You have better workforce that knows how to install them and build them. … All of the costs start to come down gradually.”