Macroeconomic effects of the Inflation Reduction Act

The Inflation Reduction Act (IRA) constitutes the largest green public investment package by the US government thus far. On the other side of the Atlantic, European policymakers quickly voiced concerns over the presumed impact of the IRA on European competitiveness and strategic autonomy, with a focus on protectionist elements in the IRA. This analysis seeks to contribute to the policy debate by i) comparing descriptively the IRA’s size to Dutch and European funds towards climate policy and ii) assessing the short- to medium-term macroeconomic impact of the IRA on the Netherlands and the EU. The main findings are that i) the US spends significantly less on climate policy compared to the EU and the Netherlands and; ii) the short- to medium-term macroeconomic impact of the IRA on the EU and Dutch economies is small.