## Emissions Reduction, Fiscal Costs, and Macro Effects: A Model-based Assessment of IRA Climate Measures and Complementary Policies

_IMF Working Papers, February 9, 2024_

## Source details

**Canonical URL:** [Emissions Reduction, Fiscal Costs, and Macro Effects: A Model-based Assessment of IRA Climate Measures and Complementary Policies](https://www.imf.org/en/publications/wp/issues/2024/02/09/emissions-reduction-fiscal-costs-and-macro-effects-a-model-based-assessment-of-ira-climate-544749)

## Other formats

- [Markdown version](/en/publications/wp/issues/2024/02/09/emissions-reduction-fiscal-costs-and-macro-effects-a-model-based-assessment-of-ira-climate-544749/index.md)
- [Structured JSON version](/en/publications/wp/issues/2024/02/09/emissions-reduction-fiscal-costs-and-macro-effects-a-model-based-assessment-of-ira-climate-544749/index.json)
- [Bundle manifest](/en/publications/wp/issues/2024/02/09/emissions-reduction-fiscal-costs-and-macro-effects-a-model-based-assessment-of-ira-climate-544749/bundle-manifest.json)

## Bibliographic details
- Authors: Simon Voigts, Anne-Charlotte Paret
- Published: February 9, 2024
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400268786.001

---

### Summary findings
- The IMF’s Macroeconomic Model for the Energy Transition (GMMET) is applied to assess the climate-related measures in the U.S. 2022 Inflation Reduction Act (IRA).
- Explicitly accounting for corporate income tax funding and assuming no permitting delays for energy-related investment, the IRA measures are expected to cut annual greenhouse gas emissions by 710 MMT by 2030.
- Emission reductions are predominantly driven by more electricity generation from renewables combined with a rising share of electric vehicles.
- Aggregate output and inflation are not impacted significantly under the baseline assumptions.

### Emissions impact
- Expected annual greenhouse gas emissions reduction: 710 MMT by 2030.
- Primary drivers: increased electricity generation from renewables; rising share of electric vehicles.

### Fiscal costs and modelling scope
- Fiscal costs amount to about $700 billion through 2030.
- An additional $120 billion of fixed grants and loans are noted as not modelled.

### Permitting delays scenario
- In the presence of investment delays from permitting, emission cuts would be reduced by about a third.

### Additional abatement opportunities and cost implications
- The IRA leaves room for sizable additional emission abatement at very low costs.
- Targeted opportunities identified: electricity generation from coal and methane emissions from oil and gas industries.

### Macro and sectoral effects
- Aggregate output: not impacted significantly under baseline assumptions.
- Inflation: not impacted significantly under baseline assumptions.

---

## Content in this bundle

- **Working Paper**
  - [Working Paper (Markdown version)](/-/media/files/publications/wp/2024/english/wpiea2024024-print-pdf.pdf.md){rel="alternate" type="text/markdown"}
  - [Working Paper (PDF)](/-/media/files/publications/wp/2024/english/wpiea2024024-print-pdf.pdf){rel="external" type="application/pdf"}

---

_Source: https://www.imf.org/en/publications/wp/issues/2024/02/09/emissions-reduction-fiscal-costs-and-macro-effects-a-model-based-assessment-of-ira-climate-544749_