Incentivizing household action: Exploring the behavioral wedge in the 2021 Infrastructure Investment and Jobs Act and the 2022 Inflation Reduction Act

In the 2021 Infrastructure Investment and Jobs Act (IIJA) and the 2022 Inflation Reduction Act (IRA), the United States (US) Congress placed a major bet on the importance of household actions, and the incentives for these actions may yield disproportionately large emissions reductions. Modeling estimates from the Rapid Energy Policy Evaluation and Analysis Toolkit (REPEAT) suggest that the IRA's $331 billion investment can reduce carbon emissions by as much as 42% below a 2005 baseline by 2030, assuming a low-friction economic environment. To evaluate the role of household actions, we use a two-part method: 1) Policy analyses of the IRA and IIJA to identify household incentives; 2) Secondary data analysis of REPEAT's policy models to identify the potential for emissions reductions associated with household action. We find that $39 billion, or 12% of climate and energy funds in the IRA and $4.3 billion or 5.7% of clean energy and power funds in the IIJA, target voluntary household actions, and that these actions contribute 40% of the cumulative emissions reductions under the IRA and IIJA, assuming a mid-range scenario for uptake. The importance of household actions to achieving IRA and IIJA's emissions reduction goals suggests that actual impacts will likely vary by behavioral plasticity, and that program design should reflect social and behavioral science insights.