Green Industrial Policies and Climate Policy Support: The Impact of the Inflation Reduction Act on Public Support in Energy Communities

Abstract

Climate change and global warming are critical challenges, with the United States being a leading emitter of greenhouse gases. Seeking to reconcile environmental and economic concerns, the Inflation Reduction Act prioritizes clean energy investments in disadvantaged communities heavily reliant on fossil fuels – energy communities – to bolster economic opportunities there, while tackling climate change. Public acceptance of climate policies is vital, as public support is crucial for reducing greenhouse gas emissions. This research examines the impact of green industrial policies on climate policy support, focusing on job creation, using the IRA as a case study. It explores whether clean energy investments under the IRA, particularly in energy communities, enhance support for climate policies, by creating jobs. The research question is: Do green industrial policies positively influence climate policy support through economic factors, like job creation? The main hypothesis is that the IRA has positively impacted climate policies in energy communities in the Unites States. These communities received favourable tax conditions for green energy investments, leading to increased employment opportunities. The study employs a difference-in-differences (DiD) method, comparing energy communities (treatment group) with non- energy communities (control group). The results indicate that the IRA’s implementation is associated with a significant decrease in unemployment rates, especially in energy communities, where baselines unemployment rates were higher than in non-energy communities. Additionally, prior to the IRA, energy communities exhibited lower support for climate policies. Post-IRA implementation, these communities saw a significant increase in climate policy support, aligning with the initial hypothesis. This research highlights how economic incentives in green industrial policies can foster support for climate initiatives, emphasizing the importance of job creation in this context. Effective climate policies should incorporate economic considerations to foster broader support for climate action and move towards a greener future.