“Nothing is so permanent as a temporary government program.” This adage, often attributed to economist Milton Friedman, rings particularly true today concerning energy subsidies. Time and again, subsidy mechanisms like tax credits and production mandates are introduced with specific expiration dates or phase-down schedules, framed as temporary boosts for nascent technologies or short-term solutions to specific problems. Yet, history shows these policies are not temporary, with Congress granting “temporary” extensions year after year after year.

Congressional Republicans are reportedly considering a “phase down” of the Inflation Reduction Act’s (IRA) green energy subsidies. But history shows there is no such thing as a “phase down” of these policies because they will inevitably be resurrected. If the goal is to protect taxpayers from never-ending subsidies and protect the electric grid from the destabilizing influence of the Production Tax Credit (PTC) and Investment Tax Credit (ITC), these tax credits need to be ended now.

The IRA’s Tax Credits are Very Expensive 

Analysis from the Treasury Department shows that the Investment Tax Credit (ITC) for wind and the Production Tax Credit (PTC) for solar are already the most expensive energy-related tax expenditures, projected to cost $31.4 billion in 2024 alone. Since 2015, their 10-year cost has grown 21-fold, and by 2034, they’re expected to make up more than half of all energy tax provisions.

The Inflation Reduction Act (IRA) put these subsidy programs into overdrive, extending their timelines and ensuring that the American energy economy becomes a politically driven race to the bottom. The Cato Institute projects that the IRA’s total green energy subsidies will potentially reach between $2.04 trillion and $4.67 trillion by 2050. These figures reveal how dramatically the original 10-year cost estimate by the Congressional Budget Office (CBO) missed the mark. Independent analyses, including a $1.2 trillion estimate from Goldman Sachs, land well within Cato’s projected range and suggest the actual cost over the next decade could be roughly triple what the CBO projected when the IRA was passed. Additionally, the Tax Foundation estimates that repealing the Inflation Reduction Act’s green energy tax credits could return $851 billion to federal coffers over the next decade. Supporting this, an EY analysis finds that cutting the EV tax credits alone could save about $300 billion between 2026 and 2035.

The IRA’s Tax Credits Harm the Reliability of the Electric Grid 

However, these figures don’t explain the total harm of the IRA. These tax credits distort electricity markets to the point where wholesale power prices can turn negative, forcing other generators to pay the grid to accept their electricity. While wind and solar producers still profit thanks to the subsidy, conventional power plants like coal, natural gas, and nuclear facilities operate at a loss under these conditions. As a result, many of these baseload generators have been forced to shut down, even as electricity demand is expected to climb due to the rapid growth of AI data centers and manufacturing.

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