Subsidies
Slides [link]Required Reading
- In August 2022, President Biden signed into law the largest climate bill in US history, the Inflation Reduction Act (IRA). Read this summary from McKinsey on the major provisions.
- Some have argued that the bill reflects the declining influence of economics in US climate policy. Read this NY Times article for an overview of this debate.
Response questions
- How does the Inflation Reduction Act reduce carbon emissions?
- This approach differs from the policies we covered in class, namely taxes or cap-and-trade. What do you think the consequences of departing market based climate policy will be? Do you think they will be economically large or small?
Additional material:
- A more level headed take on the IRA’s implications for environmental economics by Jody Freeman, “The Climate Bill Isn’t Perfect, but It’s Still a Major Victory”.
- You can watch a very accessible, in depth, presentation on the main attempt to model the impact of the IRA by Jesse Jenkins here.
Key Points
- Overview of the history of US climate policy.
- Taxes vs subsidies