Eric A. Offner

Higher interest rates in recent years have sparked concerns about their adverse impact on clean energy investments. Such investments are needed to support the transition to a low-carbon economy, which is necessary to avoid further climate change damage to the economy. While higher interest rates typically reduce all types of business investment, there are worries that they may disproportionately hinder efforts to build renewable energy infrastructure and decarbonize the economy more generally.

The Inflation Reduction Act of 2022 (IRA) is widely considered to be the most ambitious climate policy action in U.S. history. Over the next decade and beyond, a broad array of new tax credits and direct government expenditures will provide substantial support for clean technologies and industries, as well as direct incentives for U.S. households and firms to invest in the equipment and capital needed to reduce their carbon emissions.

Working Papers 2023-30 | September 2023 More Working Papers The Inflation Reduction Act of 2022 (IRA) represents the largest climate policy action ever undertaken in the United States. Its legislative path was marked by two abrupt shifts as the likelihood of climate policy action fell to near zero and then rose to near certainty. We investigate equity price reactions to these two events, which represent major realizations of climate policy transition risk.