How Texas Could Benefit from the Inflation Reduction Act

    The U.S. is moving toward net-zero emissions energy goals under the Inflation Reduction Act, but an independent research group believes some regions already heavily dependent on fossil fuels, including Texas, appear to be ineligible for a new tax credit.

    Roz Brown

    Resources for the Future's Daniel Raimi says to mitigate the impacts of a clean-energy transition, the bill offers tax credits for projects sited in so-called "Energy Communities" - those reliant on energy production for jobs or their economy. Right now, he says the definition applies to places in the Northwest that don't necessarily need the help - and excludes areas in some states that do.
    "If the goal of the policy is to directly channel additional investment to the places where fossil fuels are the most important for local economic activity," Raimi outlined, "Then this law does not do that very precisely."
    Raimi says as the legislation is written, Texas would need to compete for investment with places that extend far beyond where fossil fuel production takes place.
    Resources for the Future Analyst Sophie Pesek says the current bill's language defines "Energy Communities" as those with significant unemployment - which could exclude large portions of Texas.
    "Just based on our analysis, a lot of Texas has pretty low unemployment rates compared to the national average," Pesek reported. "Areas get filtered out because of that conditional definition."
    Texas leads the country in energy production, an expertise Raimi believes could benefit the nation as a whole, if the state's talent and know-how in the energy sector is put to good use. At the same time, he acknowledged a successful energy transition will require a variety of tools.
    "Those parts of Texas and other parts of the country that are heavily dependent on fossil fuels, are going to need to additional economic development tools to increase the resilience of their economy," Raimi pointed out. "Clean energy can help in that journey, but it's not going to be a silver bullet."

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