Green Subsidies and Local Transitions: Evidence from Energy Communities

TL;DR

This study evaluates how renewable energy tax credits influence local investments, economic impacts, and political support, revealing significant renewable capacity growth but increased opposition to climate policies.

Contribution

It provides new empirical evidence on the local economic and political effects of renewable energy subsidies using recent geographical variation.

Findings

Communities with higher tax credits increased renewable energy capacity by 32%.

Renewable investments raised local wages by 7%.

Opposition to climate action increased by 2% with higher renewable investments.

Abstract

This paper studies the effectiveness and incidence of the renewable energy Production Tax Credit (PTC) and Investment Tax Credit (ITC). I leverage new geographical variation in the 2023 PTC and ITC to test whether renewable energy credits had real economic impacts. Communities with greater tax credits accumulated 32% more renewable energy capital and produced 28% more renewable energy compared to similar counties. These renewable investments had local economic spillovers, increasing county level construction wages by 7%. However, local increases in investment and wages from renewable projects did not improve political support for renewable energy, but rather increased opposition to congressional action on climate change by 2%.