Clean Energy Investments Are Boosting the U.S. Economy

Thank you, Chair Duncan, Ranking Member DeGette, and members of the subcommittee. I appreciate this opportunity to provide testimony on the progress of clean and affordable energy investments, roughly two years after the enactment of the Inflation Reduction Act.

This groundbreaking legislation is at work today, growing the economy by investing in the middle class. The law’s clean energy investments are laying the foundation for continued climate action in ways that bring benefits to people in their everyday lives and make it possible for the United States to cut carbon pollution to half of peak levels by the end of this decade.¹ By restructuring global supply chains and unlocking a domestic manufacturing renaissance, these investments are preparing America to compete in the global clean energy economy for decades to come, and more immediately, the law cuts household energy costs throughout the country. High energy prices spike costs across the economy, including for groceries. In 2022, the U.S. Department of Agriculture found that food prices increased faster than any year since 1979, in part due to the conflict in Ukraine.² The rise of gasoline prices as a result of the war has caused higher food prices in the United States, particularly for dairy and cereals.³

Since the enactment of the Inflation Reduction Act, overall inflation has slowed by two-thirds,⁴ grocery price inflation in particular has slowed by nine-tenths,⁵ and energy price inflation has not only slowed but fully reversed and dropped 7 percent.⁶ Meanwhile, wages have risen 8.5 percent, far outpacing inflation.⁷ Since enactment, total employment has grown nearly 4 percent⁸ and economic output is up 10 percent.⁹ This is an exceptionally strong record. As a point of comparison, the U.S. economy has grown more than 8 percent, compared with 0.5 percent in Germany, even as they have faced similar inflation.¹⁰ The Inflation Reduction Act is living up to its name.

Clean energy investments are lowering energy costs

The law’s strategic investments in clean energy are driving economic growth, creating new opportunities for the middle class, and lowering energy costs in at least three major ways.

1. Federal grants, loans, and tax incentives are unlocking record-breaking levels of private investment in building the clean energy economy. In the last two years, total U.S. investment in domestic clean energy manufacturing has quadrupled, according to the Clean Investment Monitor—part of a surge in the pace of private investment—and more than half of which has been due to the growth in clean energy.¹¹ These investments are positioning the United States to remain competitive in the global clean energy economy, particularly the investment of $161 billion since the law’s enactment in clean energy production and industrial decarbonization.¹²

Investments in the productive capacity and international competitiveness of the economy are broadly beneficial, but investments in clean energy specifically are a primary strategy in the fight against inflation and price volatility. Fossil fuel dependence renders the daily costs of operating our energy systems vulnerable to supply shocks after extreme weather, to manipulation by petrostate dictators, and to corporate stock buybacks using the oil giants’ profits that are obtained from consumers during price spikes. Fossil fuels push electricity prices higher, including through the price volatility of the natural gas market, uneconomic utility investments in coal plants, and the surge in wildfires exacerbated by climate change. As a report from Energy Innovation has documented, states that are investing in clean electricity, such as Iowa, New Mexico, and Kansas, have seen less increase in electricity prices than states who have remained most dependent on natural gas.¹³ In Texas, for example, wind and solar saved $11 billion in wholesale electricity costs in 2022 alone.¹⁴ Clean electricity has become the most affordable source of energy there is,¹⁵ and these investments are getting it built.

2. New investment programs are directly supporting families and communities who want to switch to electricity and improve energy efficiency. Federal tax credits and rebates are now available for people who purchase an electric vehicle (EV)—noting that EVs cost less than half as much to drive and to maintain compared to a gasoline-powered car¹⁶—and for people who install efficient home heat pumps, which save typical households between $60 and $840 annually, depending on fuel type.¹⁷ Grants, loans, green banks, and direct pay tax credits are making it possible for local libraries to add rooftop solar,¹⁸ for small businesses to fix up the energy efficiency of their storefronts,¹⁹ for school districts to buy pollution-free school buses,²⁰ and for retrofitting affordable housing apartments with up-to-date equipment.²¹ These upfront financial investments are making it affordable for people from all walks of life to participate in the clean energy economy if they choose to.

3. Even households who are not ready to make the switch to electricity will still see major savings from the economywide transition to clean energy. Under current policy, some projections show demand for fossil fuels declining in the United States by as much as 16 percent for petroleum and 20 percent for natural gas over the coming decade.²² When demand falls, prices fall, and that benefits everyone. Depending on export volumes, this effect could translate into significant price reductions for the domestic manufacturers and households who continue to depend on these fuels for some time still.²³

The overall effect of these policies is to shift the economy toward affordable clean energy. Under current policy, household energy costs are on course to drop by one-third by 2035, an annual savings of roughly $2,000 per household.²⁴ The combined effects of Clean Air Act pollution standards and clean energy investments are unmistakably powerful tools in the fight against inflation.

The consequences of repeal would be severe

Unfortunately, although the progress to date is extraordinary, the progress toward clean affordable energy is imperiled by several threats.

1. The prospect of swiftly declining domestic demand for oil and gas is provoking the industry to build new export facilities, hoping to find overseas markets for liquefied natural gas. This would mean that declining U.S. demand would no longer translate directly into falling prices. Instead, increased exports could raise domestic natural gas prices by 10 percent, according to one study of the Energy Information Administration.²⁵

2. China, hoping to overcome its economic headwinds by monopolizing battery supply chains and exporting vehicles to the rest of the world, is eager to see the U.S. clean manufacturing investment programs repealed. They have challenged the EV incentives before the World Trade Organization.²⁶

3. In the House of Representatives, there have already been 51 votes—27 votes on the House floor and 24 votes in committees and subcommittees—to repeal the Inflation Reduction Act in whole or in part, jeopardizing the very programs that threaten China’s monopoly control.²⁷

4. Although the Senate and the president have so far rejected the House majority’s efforts to upend these policies, repealing the key provisions of the Inflation Reduction Act remains part of the deliberate 900-page plan for a conservative administration called Project 2025, which was authored by the Heritage Foundation and many former advisers and appointees of former President Donald Trump:

• On page 696, Project 2025 calls for the “next Administration [to] push for legislation to fully repeal … the dozens of credits and tax breaks for green energy companies in Subtitle D of the Inflation Reduction Act.”²⁸
• On page 382, Project 2025 calls for the “next Administration [to] work with Congress to eliminate all DOE energy demonstration programs, including those in OCED [the Office of Clean Energy Demonstrations],” which is implementing the Inflation Reduction Act and the bipartisan infrastructure law’s investments for manufacturing development, such as the steel plant being revitalized in Middletown, Ohio.²⁹
• The detailed and damaging recommendations of Project 2025 go on: End project labor agreements on federal projects, eliminate the U.S. Department of Energy’s Loan Programs Office, defund the Grid Deployment Office, disband the Office of Environmental Justice and Civil Rights at the U.S. Environmental Protection Agency,³⁰ and withdraw unilaterally from the U.N. Framework Convention on Climate Change, which the Senate ratified in 1992 to help the United States translate domestic policy into global climate action.³¹

These plans to repeal the Inflation Reduction Act would carry severe consequences for the U.S. economy, imperiling the domestic manufacturing renaissance and raising costs for hard-working Americans. Project 2025’s plans for climate and energy—not even counting the effects of the plans for health care, education, and more—would cause 750,000 direct job losses in 2030, according to Energy Innovation. These plans would raise electricity prices and prolong gasoline dependence, reversing the trajectory toward lower energy costs and instead increasing annual household energy spending by $40 in 2030, above even the alarmingly inflated levels of 2021.³²

Worse, Project 2025’s plans would lock the United States into continued greenhouse gas emissions of more than 4.7 gigatons every year from now through 2050 and beyond, undermining the progress to stop global rising temperatures.³³ Among the many disastrous and irreversible consequences, I will highlight the following, given the topic of this hearing that climate change also raises costs:

• Already at current levels of warming, insurance premiums increased an average of 33 percent between 2020 and 2023, and the National Bureau of Economic Research predicts that the “growing disaster risk will lead climate-exposed households to face $700 higher annual premiums by 2053.”³⁴
• Extreme weather was “the main disrupter of food prices” according to a Barclays researcher in 2023, after droughts and dry conditions struck India, Indonesia, and Europe at the same time as Russia resumed blocking exports and attacking Ukrainian grain supplies.³⁵
• Extreme heat places costly burdens on the American health care system. Heat-event days lead to nearly 235,000 emergency department visits and more than 56,000 hospital admissions for heat-related or associated illnesses, contributing approximately $1 billion in additional health care costs each summer.³⁶

Conclusion

Fighting climate change fights inflation. From the rising disruptions of climate change to the volatility of fossil fuel prices, from the global competitiveness of the U.S. economy to the earning power of workers’ wages, the many complicated challenges of the costs of energy are all made easier to resolve by investment in clean energy.

I am grateful to the members of the 117th Congress whose leadership in enacting the Inflation Reduction Act has so successfully channeled our country’s limitless industry into raising wages, lowering prices, and fighting climate change. I condemn the proposals of Project 2025. America must continue to invest in our own future and finish the work of building the clean energy economy.