The Economic Benefits and Costs of State and Local Incentives for Clean Energy Projects

Authors

• Timothy J. Bartik, W.E. Upjohn Institute for Employment ResearchFollow
• Gerrit Anderson, W.E. Upjohn Institute for Employment ResearchFollow
• Brian J. Asquith, W.E. Upjohn Institute for Employment ResearchFollow
• Kathleen Bolter, W.E. Upjohn Institute for Employment ResearchFollow
• Kyle Huisman, W.E. Upjohn Institute for Employment ResearchFollow
• Iryna V. Lendel, W.E. Upjohn Institute for Employment ResearchFollow
• Jeremy Morris, W.E. Upjohn Institute of Employment ResearchFollow
• Sevrin Williams, W.E. Upjohn Institute for Employment ResearchFollow

Upjohn Author ORCID Identifier

https://orcid.org/0000-0002-6238-8181

https://orcid.org/0000-0002-5783-5557

https://orcid.org/0000-0001-6716-9415

https://orcid.org/0009-0009-6830-1778

https://orcid.org/0009-0001-0436-1618

https://orcid.org/0009-0004-2146-0054

https://orcid.org/0009-0008-4840-887X

Series

Upjohn Institute Technical Report No. 26-057

DOI

10.17848/tr26-057

Issue Date

June 2026

Abstract

This report evaluates the benefits and costs of investment incentives for 50 large clean energy supply chain manufacturing and infrastructure projects. The findings suggest that these incentives generate modest but typically positive economic returns, with a median benefit-cost ratio of 1.47, meaning benefits exceed costs by 47 percent for the typical project. Returns vary significantly across projects—approximately 70 percent of projects produced net positive benefits over a 20-year period, while 30 percent failed to recover incentive costs. Project performance depends heavily on incentive design and local conditions. Excessively large cash incentives reduce returns, while customized services, strong job multipliers, investment in distressed areas, subdued housing price increases, and effective clawback provisions improve outcomes. Most projects likely depended on incentives to be sited, with a median “but for” probability of siting of 78 percent. Benefits are driven primarily by higher per capita earnings and are moderately progressive, disproportionately benefiting lower- and middle-income households. We note that these projects can pay off for communities, even setting aside any potential environmental or national security benefits.

Sponsorship

Rocky Mountain Institute

Subject Areas

ECONOMIC DEVELOPMENT; Industry studies; Local labor markets; Regional policy and planning; Business and tax incentives; Transportation and infrastructure