New Research from Hafstead and Williams on Jobs and Environmental Regulations

WASHINGTON, DC⁠—Environmental policy debates often center around jobs. Many believe that regulations kill jobs. Others believe that regulations create new jobs and promote a greener, healthier economy. But there is a sharp disconnect between this political debate and the limited research available. Now, Resources for the Future (RFF) has released a new working paper and blog post discussing what existing research shows about jobs and environmental regulations, and why research frequently falls short in evaluating this key concern.

The new study is “Jobs and Environmental Regulation.” The authors are Marc Hafstead, RFF fellow and Director of the Carbon Pricing Initiative; and Roberton Williams of RFF, the University of Maryland, the Climate Leadership Council, and the National Bureau of Economic Research. According to the authors’ description of their work: “We evaluate a range of environmental regulations in both the short- and long-run to develop a set of key stylized facts related to jobs and environmental regulations and to identify the key questions that current models can’t yet answer well.”

The authors list six key takeaway lessons for policy:

1. One should be very cautious about relying on empirical job estimates or simulation modeling of job effects when making policy decisions.
2. The effects of environmental policy on overall employment are likely to be small, especially in the long run.
3. Environmental policy can cause substantial job reallocation: fewer jobs in some industries and more jobs in others.
4. For a given reduction in emissions, emissions pricing has a lower overall cost and leads to higher long-run employment than intensity standards (e.g., clean energy or renewable portfolio standards).
5. The scope and scale of environmental policy is an important determinant of short-term labor market effects (on unemployment, etc.) but is less important for long-term effects.
6. Preannouncements and phase-ins can substantially reduce short-term labor market effects, by allowing more time for the necessary reallocation to occur.

They conclude, “Economists have started to bridge the gap between policymakers and academic research on the question of jobs and regulation, but there is clearly more work that needs to be done.”