Credit: Kailin Graham and Christopher Knittel, MIT Center for Energy & Environmental Policy Research
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Which US counties are most vulnerable in the energy transition?
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As the world moves away from fossil fuels, there is growing recognition of the need to support workers in carbon-intensive industries — and for policy to bolster a just transition.
The 2022 U.S. Inflation Reduction Act targets aid to Americans whose jobs are at risk when fossil fuel-based industries are phased out, but a new study shows that the act may not do enough for the most vulnerable.
According to research co-authored by a professor of applied economics at MIT Sloan, because of the way the act is structured, it misses nearly half of America’s most carbon-intensive communities while encompassing areas that aren’t particularly vulnerable to the shift away from fossil fuels.
“This is potentially a billion-dollar oversight, with the IRA at risk of funneling clean investment away from the regions that desperately need to move away from fossil fuels,” write Knittel and co-author Kailin Graham, a graduate researcher at the MIT Center for Energy and Environmental Policy Research, in a paper published last week.
Explore an interactive map of U.S. employment impacts by county
In addition to the most widely known fossil fuel-producing counties in West Texas, Appalachia, Wyoming, Montana, Oklahoma, the Gulf Coast, and elsewhere, counties in Nevada and the Great Plains that are reliant on heavy manufacturing stand to be impacted by the transition to clean energy. For example, recent decades have seen a rise of the heavy equipment, machinery, and industrial metal manufacturing sectors in the Great Plains.
“While these industries have not been the focus of existing efforts to quantitatively assess employment vulnerability … we find many of them to be as carbon intensive as neighboring fossil fuel extraction communities, if not more so,” the authors write. “There are communities that are highly reliant on fossil fuels where unemployment impacts may not yet have been felt.”
In discussing the research, Knittel said he doesn’t want to come down too hard on the Inflation Reduction Act, hailed as the single largest investment in climate and energy in American history. He would, however, like to see future climate change relief include areas at risk of high unemployment, not just ones that have already experienced it. “There’s a need to be more proactive in attracting investment before bad things happen,” he said.
A broader assessment of carbon-dependent counties
The act allocates extra subsidies and tax incentives to so-called energy communities across the U.S.
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By definition, an energy community either has a coal plant that recently shut down or a significant share of its workforce employed in oil, natural gas, or coal, with an unemployment rate higher than the national average (which was 5.4% in 2021). Employment in currently operating coal-fired power plants is not counted toward the government’s criteria — meaning communities with such plants qualify only after jobs have been lost.
In their analysis, Graham and Knittel identified many carbon-dependent counties, such as manufacturing and steelmaking communities in the Midwest, that don’t qualify as energy communities under either of the two definitions. “They don’t have coal plants, and they’re not taking fossil fuels out of the ground, but they’re still dependent on those fossil fuels further down the supply chain,” Graham said.
Decarbonizing is projected to raise the price of energy for steel plants, for instance, as they shift from natural gas to more expensive hydrogen. “Those communities are at risk of having disruptions, even though they don’t fit under the IRA definition of an energy community,” Knittel said. Such disruptions can affect local tax revenues and cause spillover effects in adjacent industries.
What’s more, “previous studies have shown that transition efforts need to begin before closures have impacted a region, not just afterward,” Knittel said. “That’s the problem with requiring an unemployment rate higher than 5.4%.”
A better tool for identifying vulnerable regions
To better assess which communities will be hardest hit by the transition to clean energy, Graham and Knittel created a new metric of employment vulnerability called an “employment carbon footprint.”
Using publicly available data, they measured the carbon intensity of U.S. jobs across the entire country within eight major sectors: agriculture, manufacturing, commercial, construction, coal mining, oil and gas extraction, other mining, and fossil fuel-based power generation. These sectors account for 86% of total U.S. employment and 94% of U.S. carbon emissions outside of transportation.
While the Inflation Reduction Act targets areas that have relied largely on fossil fuel industries for employment and tax revenues for the past 15 years, Graham and Knittel considered how those industries’ reach has extended to virtually every aspect of a community.
“We use economics to divide up the carbon content along the value chain,” Graham said, noting that it’s a complex process that takes into account the effects of both fossil fuel consumption and fossil fuel production.
Think about a county populated with oil rigs: There’s the carbon cost of drilling, plus the cost of transporting the oil to a refinery in another county. Then the gasoline is transported to yet more locations, where it’s sold to consumers. Even retailers in commercial spaces aren’t immune. “A shopping mall buys electricity, so there’s carbon in those jobs too,” Knittel said.
Using their findings, the researchers developed a map of the U.S. that uses shades of orange and blue to indicate where employment carbon footprints are above or below, respectively, the national average. Regions of North Dakota, Texas, and Wyoming, for instance, are shaded a deep brown because they are the most likely to experience economic shocks in a post-fossil fuel future. Areas shaded blue are much less vulnerable.
Graham developed a web-based tool, called Employment Vulnerability to the Energy Transition, that enables users to overlay other information on the map, such as population, median income, poverty, unemployment rates, and education levels. This allows government officials and local and state advocates to understand how community reliance on fossil fuels might overlap with other socioeconomic and demographic factors so they can target transition policy and allocate funds to the most vulnerable populations, the authors write.
Policy adjustments
How might future climate change legislation address employment vulnerability? One option is to drop the unemployment requirement altogether or have two classes of energy communities: those that have already met the disruption challenges and those that are likely to. Another option is to offer extra subsidies in areas where unemployment is rising.
The Inflation Reduction Act’s approach is “pretty draconian in the sense that you either qualify or you don’t qualify,” Knittel said. “It doesn’t have to be so binary.”
