To cover the cost of extending expiring tax cuts, Congressional Republicans are considering repealing the green energy tax subsidies expanded or introduced in the Inflation Reduction Act. The Tax Foundation estimated that repealing all such tax breaks could generate $851 billion over the next decade.

Despite some House Republicans defending parts of the act, lawmakers could still raise substantial revenue through a partial repeal. To do so effectively, they should focus on eliminating ineffective credits and simplifying those that work by removing overly complex provisions.

While the Inflation Reduction Act aimed to reduce greenhouse gas emissions, its impact is most notable in reducing emissions in the power sector. Subsidies for transportation and buildings do not provide the same environmental benefits, with studies showing that many beneficiaries would have made their purchases even without the incentives.

The rising costs of electric vehicle credits and residential subsidies, combined with their skewed distribution to higher-income individuals, raise concerns about the effectiveness of these programs. Repealing specific tax provisions related to electric vehicles and clean energy could generate $296 billion in revenue over the next decade.

Given the need for significant funds to extend the expiring tax cuts, lawmakers could look to overhaul the power sector tax credits. While more effective than electric vehicle subsidies, these credits are overly complex and burdened with unnecessary requirements that drive up costs.

Simplifying the power sector tax credits and reconsidering eligibility criteria for high-income taxpayers could generate an additional $207 billion in revenue over the next ten years. By streamlining and reducing the maximum subsidy for various provisions within the Inflation Reduction Act, policymakers could raise additional funds.

Ultimately, replacing the Inflation Reduction Act with a low carbon tax could provide emissions reductions and generate revenue. In the meantime, legislators should prioritize eliminating ineffective credits and simplifying existing programs to achieve emissions reductions at a lower fiscal and complexity cost.