September 2, 2026
The Inflation Reduction Act of 2022 marked a major expansion of federal support for clean energy projects such as electric vehicle manufacturing, alternative fuels, and solar and wind farms. As companies announced new projects across the country, state and local governments also offered billions of dollars in their own incentives to attract that investment.
While some projects have since been scaled back or canceled, a central question remains: do these state and local incentives generate enough jobs and economic activity to justify their cost? A team of Upjohn researchers—Timothy Bartik, Gerrit Anderson, Brian Asquith, Kathleen Bolter, Kyle Huisman, Iryna Lendel, Jeremy Morris, and Sevrin Williams—finds that, for most projects, the answer is yes.
Analyzing 50 clean energy projects over a 20-year horizon, the researchers estimate a median benefit-cost ratio of 1.47. In other words, for every dollar in incentives, the typical project is expected to generate nearly $1.50 in additional income for state residents per dollar invested, comparable to returns from more traditional economic development projects like subsidizing factories or transportation infrastructure. And although this analysis focuses exclusively on economic benefits, clean energy projects may have additional benefits for the environment and national security.
But the results vary substantially. Fifteen of the 50 examined projects have benefit-cost ratios less than 1, meaning that their costs exceed their estimated benefits. At the other end of the spectrum, 13 projects generate at least $3 in benefits for every $1 of incentives. Returns depend on the project’s location, the size and design of the incentive package, the use of clawbacks for failures to meet project milestones, and the number of additional downstream jobs.
The size of the subsidy is particularly important. As incentives rise, more jobs must be created for the project to pay off. Benefit-cost ratios generally fall as subsidies per job-year rise, the researchers find. At the median subsidy of about $33,000 per job-year, the typical benefit-cost ratio is around 2. As subsidies exceed approximately $100,000 per job-year, benefits tend to fall below costs.
The findings suggest that policymakers can use incentive packages for clean energy projects to generate economic benefits for local communities if they limit incentive costs per promised job, emphasize services such as job training and infrastructure over cash incentives, target economically distressed communities, and allow housing supply to expand with growth.
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