Energy Institute at Haas

We provide the first ex post microeconomic welfare analysis of the electric vehicle (EV) tax credits in the Inflation Reduction Act (IRA). Relative to pre-IRA policy, the credits generated $1.96 in domestic benefits per dollar of government spending, with taxpayer cost of $36,500 per additional EV. Relative to having no EV credits, they yielded $1.11 in domestic benefits per dollar of government spending. A leasing loophole that sidestepped domestic content rules created negative domestic benefits. A prominent example of green industrial policy, the credits harmed foreign countries by shifting surplus to domestic producers and helped them by decreasing CO2 emissions.