smogThe disastrous oil spill in the Gulf of Mexico has reopened the debate over the direction the United States’ energy future is headed.  Now, more than any other time in history, citizens are beginning to understand the necessity to evolve past our love affair with oil.  An economy that is dependent on a non-renewable, quickly fleeting resource can only move towards instability if alternative fuels are not found.  The Congressional Budget Office is beginning to analyze how energy policies and initiatives to reduce greenhouse gas emissions will affect employment in an economy that is trying to pull itself out of a recession.  Democrats are pushing for a comprehensive energy bill that will enhance the production of clean energy technologies, put a price on emitting carbon, reduce greenhouse gases by a significant amount over the next 20 years, and influence entry into a range of new renewable energy industries. Senators John Kerry and Joseph Lieberman are due to present their energy bill in the Senate soon.  This bill, The American Power Act will be hard-pressed for passage without strong republican backing.  The loss of republican Senator Lindsay Graham as a cosponsor of this bill is devastating.  White House spokesman Robert Gibbs said, “the oil spill showed drilling alone would not solve U.S. energy problems and that higher summer fuel prices will heighten consumers’ views that the country must move more aggressively into alternatives.” (Cowan & Gardner, 2010)  If the country decides to aggressively reduce greenhouse gas emissions, this will have many significant implications for employment in our country.

by Nicholas Varilone, Green Economy Post

The Congressional Budget Office has released a brief explaining how moving to reduce greenhouse gas emissions will affect employment in the U.S.  The CBO’s research shows that total employment over the next decade will be slightly lower than if greenhouse gas reduction policies were abandoned. They conclude that the loss of jobs in shrinking industries will be larger than the creation of jobs in new industries.

Employment in several industries will be affected by the adoption of greenhouse gas reduction initiatives.  Below are the key industries that will be affected greatest.

Coal- Employment in the extraction of coal will experience the largest loss, due to the fact that coal produces more greenhouse gases when burned than any other fossil fuel.  A tax on carbon emissions would make coal-fired energy more expensive in the short-run.  The coal industry employs an estimated 100,000 people nationally and a 10% decline in employment in this industry can be expected if GHG policies are enacted.

Oil and Gas Extraction- This industry will see a sharp decline as these fuels become more expensive and demand shifts to new alternative energies.  Employing about 500,000 people this industry stands to decline by 16% by the year 2025

Mining- Mining for other substances other than coal will see a decline in employment due to the industries energy intensive nature, however the percentage decline in employment will be small compared to the coal, oil and natural gas industries.

Alternative Energy- This industry will see a dramatic rise in employment as new technologies are developed concentrating on low-emission outputs.

As the United States moves toward a new more sustainable energy platform, it is important to understand the externalities involved with such a decision.  Policies such as Senator Kerry’s and Lieberman’s American Power Act as well as the proposed H.R.2454 American Clean Energy and Security Act are bound to have effects on employment in this country.  The Congressional Budget Office seems to think that this effect will be relatively small.  The experience of the U.S economy over the past half-century in adjusting to a sustained decline in manufacturing employment provides evidence that the economy can absorb such long-term changes and maintain high levels of employment.

Gauging the potential effects on employment.

Should our country enact stricter greenhouse gas regulations, we will see a marked shift in certain economic sectors in this country.  Proposed programs must make concessions to carbon energy intensive industries so they may alter their practices and remain competitive. If major U.S. trading partners do not implement comparable programs a U.S. greenhouse gas reduction initiative will put domestic firms at a competitive disadvantage.   Industries that are carbon energy intensive either directly or indirectly will see the sharpest decline in employment.  The largest gains in employment will be to the clean energy technology sector as well as most industries that are not energy intensive.

Three independent studies have been conducted to ascertain the impact of greenhouse gas reduction policies on unemployment.   These studies were conducted by Resources for the Future (RFF), The Brookings Institution, and CRA International.

Overview of the RFF Study.

  • Measures the economic effects of a $10 per ton tax on carbon dioxide.
  • Divides economy into 21 different economic sectors and assumes that other countries do not implement similar GHG reduction policies.
  • Tax on carbon dioxide puts domestic firms at a competitive disadvantage resulting in increased unemployment levels.

Overview of the Brookings Institution Study

  • Analyzes the economic effects of an 83% carbon dioxide reduction by the year 2050
  • Divides the economy into 12 industries and accesses the effect on employment a cap on emitting carbon dioxide will have by 2050
  • Uses the estimates of a 20% decrease by 2020, a 40% decrease by 2040 and an 83% decrease by 2050

Overview of the CRA International Study

  • This study focuses on the economic effects HR 2454 the American Clean Energy and Security act will have on reducing GHG emissions.
  • Divides the economy into 9 industries and assumes other countries satisfy the obligations of the Kyoto Protocol
  • Study projects that in 2050, total aggregate employment remains 1.1 percent below the baseline amount for that year.  The long-term reduction in aggregate employment is reflected in the study’s projections of changes in employment by industry.

These studies reflect different methodologies and access different policies, however their conclusions can be compared.  Due to the uncertainties involved in these studies such as the unknown cost of future technologies as well as industries ability to alter production methods, these studies may not be all inclusive.

This approach does allow us, however to understand how the implementation of greenhouse gas reduction programs will impact the economy.  In terms of employment it is interesting to notice that the industries that are most directly involved in emitting greenhouse gases may not lose the most employees in the economy.  The service industry employs many more people than the traditional fossil fuel industry.  From an absolute standpoint we will see more employment lost in the service industry than in the fossil fuel industry, however the fossil fuel industry will have the largest percentage loss of employment.  Despite conflicting methodologies these studies conclude that the losses in employment outweigh the gains, at least for the next decade or so.

The Congressional Budget Office concludes that the immediate impact of developing GHG reduction policies will have a negative effect on employment in this country.  While this may be true in the short run, I believe in the long run instituting these policies will have an incredibly positive effect on our country.  Moving away from fossil fuels will allow our economy to stabilize itself by not relying on foreign oil, a commodity that has destabilized many economies in the past.  Furthermore the benefits from cleaner air, and a cleaner environment will far outweigh the short run loss in employment in this country.   The most important benefit to the economy will be the widespread investment and development of cutting edge alternative energy technologies in the next decade.

The studies that the Congressional Budget Office has used to access the effects on employment leave too many variables to chance and in my opinion are inconclusive at best.  I believe that the widespread dissemination of alternative energy technologies in the following years will not only improve employment in this country, but will issue in a new age of prosperity in the United States.  When faced by insurmountable odds our economy has shown the capability to pull itself out of the deepest holes, much as it did at the onset of WWII.  The United States has the production capacity as well as the determined work force to transform itself into the world’s first “green” industry powerhouse.  Lets go get it.

© 2010, Nicholas Varilone. All rights reserved. Do not republish.

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Author: Nicholas Varilone (6 Articles)

I am a graduate of Michigan State University with a Bachelor's of Arts in Economics. I am currently pursuing a specialization in Environmental and Natural Resource Economics and will be applying to the graduate program in Environmental Economics at Michigan State University. I am an avid outdoorsman and conservationist. I am mostly interested in studying the impact we are having on global climate change. I have extensive knowledge in cost benefit analysis of government environmental programs. I am a member of MSU's student sustainability organization as well as the MSU chapter of the Sierra Club's Beyond Coal Campaign. Email: nicholas.varilone@gmail.com. On Facebook.

  • Josh Maynard

    Admittedly shortsighted from not having read the studies themselves, it seems ludicrous to think employment would go down if new markets or competitors are created. If that’s the case, we should increase employment by getting rid of the AFL, UPS and the CHX. Sarcasm aside, it is blatantly obvious that the omission of these competing organizations provide less jobs and business than when combined with their competitors in that market. Competition drives business. If new renewable energy markets will decrease jobs overall, then we should get rid of UPS because more FedEx jobs would be created, we should get rid of the AFL because it is stifling NFL jobs, and the CHX is hurting the NYSE. In no market does competition decrease jobs. Competition is the foundation of modern day economics.