The US Inflation Reduction Act’s Energy Communities provisions aimed to increase clean-energy investment in areas vulnerable to the energy transition, create jobs, and build political support for decarbonisation. This column combines data on renewable energy investment, job vacancies, and elections with survey evidence on public opinion to argue that the provisions successfully promoted solar investment, but generated little employment and did not shift political attitudes.

The green transition risks widening regional economic divides, as its costs may fall disproportionately on already vulnerable regions (Rodriguez-Pose and Bartalucci 2024). This, in turn, could fuel political backlash against decarbonisation (Rodriguez-Pose 2018, Dijkstra et al. 2020, Rodriguez-Pose 2024). Place-based policies can counter this dynamic by improving local economic conditions and easing regional discontent (Juhász et al. 2023, Fernandes and Reed, 2026). Climate policies, such as the EU Just Transition Fund, increasingly incorporate place-based provisions intended both to support exposed regions and to promote political support for the transition.

The US adopted a similar approach through the Energy Community Bonus in the Inflation Reduction Act, one of the Biden administration’s signature climate policies. The policy offered additional tax credits for clean-energy projects in areas with significant fossil-fuel employment and high unemployment, or recent coal closures. These credits aimed to promote green investment and employment in places most exposed to the energy transition. Announcing the incentives, President Biden said they would create “clean energy jobs, good-paying union jobs” while ensuring that the benefits of the clean-energy economy reached “communities left behind” (White House 2022).

In a new paper, we study whether the Energy Community Bonus achieved its intended objectives (Keuzenkamp et al. 2026). Combining census-tract and county-level data on renewable-energy investment, job vacancies, elections and survey evidence on public opinion, we examine the policy’s effects on investment, labour demand, climate attitudes, and voting. The results reveal a stark contrast: investment responded strongly, but employment and political outcomes barely moved.

How the Energy Community Bonus worked

The Energy Community designation targeted regions exposed to the transition either because of relatively high share of fossil-fuel employment and high unemployment, or recent coal closures. Directing clean-energy investment to these areas fits the logic of place-based industrial policy. Many already possess energy-related expertise, and a share of the workers leaving fossil-fuel industries have skills that can transfer to parts of the green economy (Vona et al. 2018, Lim et al. 2023).

The policy worked through tax credits. Wind and solar plants could claim either an Investment Tax Credit (ITC), based on upfront capital costs, or a Production Tax Credit (PTC), based on electricity generated over time. For new plants opening in an Energy Community, the ITC increased from 30% to 40% while the PTC increased from $27.50 to $30.25 per megawatt hour. This corresponded to a one-third increase in the investment credit but only a 10% increase in the production credit. This asymmetry might explain the different effects that the policy had on solar compared to wind.

To assess the impacts of the IRA’s Energy Community Bonus, we combine several data sources. To track investment, we use the Clean Investment Monitor, which records solar and wind projects at the census-tract level. To measure labour demand, we use Lightcast vacancy data and count postings that mention solar- or wind-specific terms. For politics, we use county-level election results through 2024 and survey evidence on support for energy-transition policies. We compare Energy Communities counties with non-Energy Communities counties before and after the IRA, allowing Energy Community status to change over time as local unemployment evolved.

Fact 1: Solar investment reacts sharply to incentives

Solar investment responded strongly. The Energy Community bonus raised the probability that a designated census tract received solar investment in a given quarter by 0.14 percentage points. Because projects of this scale are rare, this modest absolute increase represents a 144% rise relative to the estimated counterfactual without the bonus.

The strength of this response reflects the size of the incentive for individual projects. The average solar plant in our data has a nameplate capacity of 127 megawatts and a capital cost of around $145 million. For a plant of that size, the Energy Community bonus is worth roughly $15 million, creating a powerful incentive to locate in eligible communities. Solar investment rose soon after the IRA passed and the effect grew during the two years we observe.

Wind investment did not respond. A likely explanation is that the same place-based provision created very different incentives across technologies. Solar developers often prefer the Investment Tax Credit because solar projects require substantial upfront capital relative to their output. Wind developers, by contrast, typically prefer the Production Tax Credit, which rewards electricity generation over time. Because the Energy Community designation increased the Investment Tax Credit much more in proportional terms than the Production Tax Credit, it provided a substantially stronger incentive for solar than for wind development.

Figure 1 Effect of Energy Community designation on solar investment

Note: Difference-in-differences event-study estimates of the likelihood of a census tract receiving any solar investment, with 95% confidence intervals. Period 0 denotes the quarter prior to which designation begins. 
Source: Keuzenkamp et al. (2025).

Fact 2: The labour market response was weak

Did jobs follow solar investment? Only weakly. Solar-related vacancies rose by about 29% relative to the counterfactual, but the estimate is only marginally statistically significant. We find no effect on wind vacancies or on aggregate employment.

The limited labour market response is consistent with the technology. Utility-scale solar is capital-intensive. It can generate substantial temporary construction activity, but it creates few permanent local jobs (Fabra et al. 2024). Moreover, spatially targeted incentives tend to be taken up disproportionately by capital-intensive activities (Sakabe and LaPoint 2021). Thus, a large investment response produced only a modest increase in local labour demand. For policymakers hoping to revive left-behind areas, the distinction between investment and employment is crucial: attracting capital does not automatically generate jobs.

Fact 3: Political opinions and voting did not change

Turning to politics, we find no effect of Energy Community designation on either presidential or congressional election results. Nor do we find an effect on stated support for energy-transition policies in survey data. Through the 2024 election, the policy did not measurably shift either voting patterns or public opinion.

The weak employment response may help explain this political null result: investment arrived, but the broad local employment gains that might have helped build a political constituency did not. In 2025, Congress sharply accelerated the phase-out of the wind and solar credits, ending eligibility for most new projects years ahead of the IRA’s original schedule (Latham & Watkins 2025). 

How effective was the policy?

Was the policy worth it? It depends on the yardstick. As a climate policy, the Energy Community bonus has been highly effective. Back-of-the-envelope calculations suggest that the cost per ton of carbon abated is well below the social cost of carbon and compares favourably with several other US climate policies, including electric vehicle subsidies. These calculations require strong assumptions, so they should be interpreted as indicative rather than definitive.

As a regional job creation policy, the picture is less favourable. The cost per additional vacancy created is high relative to more conventional place-based labour market programs. The policy did not create broad local employment gains during the period we study. In short, the Energy Community Bonus succeeded in attracting clean-energy investment to places the market might otherwise have bypassed, but did not generate broad local employment gains.

What this means for future policy

If the aim of a place-based policy is to revive local labour markets, the activities it promotes must generate substantial employment. That criterion helps explain why regional policy has traditionally often promoted manufacturing. Yet, automation and rising skill intensity have eroded manufacturing’s capacity to generate employment for the masses (Rodrik 2016, Rodrik 2022).

The implication for green industrial policy is straightforward. Labour intensity is central to whether investment in left-behind places translates into employment. Where employment gains do materialise, political support and policy durability may follow. 

Source : VOXeu