Comments to Inform the Interagency Working Group on Coal and Power Plant Communities and Economic Revitalization

The United States and the world are faced with an enormous challenge and an enormous opportunity to move our energy system and economy to net-zero emissions in the decades ahead. Achieving this goal will require major investments but are essential to ensure a healthy environment and thriving economy for generations to come. A large body of evidence from the field of energy and environmental economics has determined that investments to reduce emissions will result in major benefits, not just in terms of preventing the worst impacts of climate change (e.g., Bressler, 2021; Rennert et al., 2021), but also avoiding millions of premature deaths associated with “conventional” air pollution from the combustion of fossil fuels (e.g., Vandyck et al., 2018; Reis et al., 2022).

Although the transition to towards a net-zero future is unlikely to eliminate fossil fuel use in the decades ahead, such a transition results in a substantial decrease in the production and consumption of coal, oil, and natural gas under virtually all scenarios produced by the Intergovernmental Panel on Climate Change (IPCC), international energy companies, and public institutions that produce long-term energy projections (IPCC, 2022; Raimi et al., 2022a; Rogelj et al., 2018). This reduction in fossil fuels will likely create economic challenges for regions in the US and around the world that depend heavily on coal, oil, and natural gas to support local employment, economic activity, and public services.

At Resources for the Future (RFF), we are building a body of work that will help inform policymakers as they work with communities to ensure that our transition to a net-zero economy leaves no one behind.

2.1 Geographic Scope

One key question facing the IWG is how to identify which communities are, or are likely to become, affected by the transition to a net-zero future. To that end, the IWG issued an initial report to the President that defined energy communities using the Bureau of Labor Statistics’ metro and non-metro areas (Interagency Working Group on Coal and Power Plant Communities and Economic Revitalization, 2021). This approach provides a useful “first cut” at identifying energy communities, but in some cases provides an overly broad view. For example, most of Nevada, Montana, Utah, and Kansas are identified as energy communities, despite the fact that energy production in those states is concentrated in a small number of counties. For example, the IWG identifies almost all of Alaska as being “vulnerable to impacts from coal-specific job losses,” despite the fact that the state has just one operating coal mine (which, in 2020, produced 0.2 percent of the nation’s coal) and small coal-fired power plants located in just two of the state’s 20 boroughs (EIA, 2021).

To better target federal resources, our research suggests on the county level (or their equivalents such as boroughs in Alaska and parishes Louisiana). By focusing on this smaller geographic unit, the IWG will be able to more easily identify specific communities that require robust partnership in building economic resilience. Data on employment, energy production, environmental burdens, climate risks, and much more are readily available at the county-level, which will allow the IWG to develop robust analytical tools to target resources. Existing resources from RFF and the peer-reviewed literature offer data and analysis at the county level that can support the IWG as it seeks to identify locations for targeted support (Carley et al., 2018; Snyder, 2018; Raimi, 2021a, 2021b, 2021c).

What’s more, counties are well-defined geographies that have established governance structures and mechanisms to engage with other governmental and non-governmental entities such as cities, community colleges, and community-based organizations. Counties engage regularly with states and the federal government and have existing systems through which funds could flow and be administered.

Our research also finds that it will be also important to consider multi-county regions. For example, oil production on the North Slope of Alaska relies heavily on workers who fly in from other parts of the state (and country). Similarly, a coal-fired power plant may draw in workers from adjacent counties. Because of these geographic spillovers, I would encourage the IWG to focus on analysis at the county-level, but also allow resources to flow to nearby counties that will be affected by shifts in the energy system in adjacent counties. Data on commuting zones are available from the U.S. Department of Agriculture’s (USDA) Economic Research Service (USDA, 2012), and engagement with local experts can help inform federal efforts to understand the economic geography of energy communities.

2.2 Metrics to Consider

There are a large number of metrics that could be useful when considering how to support energy communities. The IWG’s initial report utilized data on the number of employees in each region directly involved in fossil fuels to identify regions that may be affected by the energy transition. A focus on jobs is appropriate for numerous reasons: employment is a defining feature of life for many Americans, data are readily available, and the potential for a decline in energy-related employment would have major impacts on local communities.

However, or research finds that additional metrics are essential to understanding the economic landscape of energy communities. One simple and easily-measurable metric is the scale of energy activity that occurs in a given county. For example, geocoded data are easily available from the U.S. Energy Information Administration (EIA) on the location and scale of U.S. coal production, power plants, oil refining, natural gas processing, and other fossil fuel activities. Oil and natural gas production data may be gathered at the county level through state government websites, and has been aggregated at the county-level in recent work by RFF and in the peer-reviewed literature (Raimi, 2021c; Upton and Yu, 2021).

Directly measuring fossil fuel activity in a given county provides an essential understanding of the role that fossil fuels play in that county’s economy. While employees may live outside of the county where energy activity takes place, energy activity data provides a more reliable view of where extraction, processing, and consumption of these fuels take place. This understanding is essential because—unlike employment—the local tax base associated with energy activities corresponds directly to where those facilities are located. For example, oil workers on Alaska’s North Slope mostly live elsewhere, while property tax revenues generated by oil production on the North Slope supports communities across the North Slope Borough (Raimi, 2015).

Other metrics that are important to consider include the baseline socioeconomic and environmental conditions in a given community, along with existing government capacity. These metrics can provide additional information to the IWG to help assess which communities may require additional support to access grants, adapt to the impacts of climate change, or address a legacy of environmental racism. Socioeconomic and environmental data are readily available through federal sources, including the White House’s Council on Environmental Quality beta version of its Climate and Economic Justice Screening Tool (White House Council on Environmental Quality, 2022). Information on local government capacity has historically been more difficult to measure with precision, but recent research on local government programs and capacity offer new tools (Headwaters Economics, 2022; Helmke-Long et al., 2022).

In general, our research suggests a focus on the following metrics: employment, energy activity, and baseline socioeconomic/environmental conditions at the county level. I would also encourage the IWG to take a flexible approach and rely on their own expertise, in consultation with external experts and stakeholders, especially local experts in energy communities. There is no single metric, algorithm, or formula that will be able to precisely identify the types and scale of interventions that different energy communities will need to become more economically resilient.

Declining natural resource production can have substantial negative long-term effects for workers and communities. In the US, recent decades have seen declines in the economics of forests, coal, and other resource-related sectors in certain regions which have resulted in a wide range of negative economic and social impacts (Eichman et al., 2010; Betz et al., 2015; Weber, 2020; Ferris and Frank, 2021).

To date, most policy efforts and scholarship on the strategies needed to support energy communities have focused exclusively or primarily on coal (e.g., Candelaria et al., 2019; Cecire, 2019; Colorado Department of Labor and Employment, 2020; Furnaro et al., 2021; Interagency Working Group on Coal and Power Plant Communities and Economic Revitalization, 2021). This approach is understandable for several reasons: coal production and use have already declined dramatically in the United States (EIA, 2021), coal is the most carbon-intensive fuel source (EPA, 2021), and it has a variety of substitutes in the electric power sector, where most coal is used.

However, one of the important lessons from the decline of coal, and many coal communities, in the United States, is that policies and programs providing economic, job training, capacity-building, and other assistance after a downturn has occurred will face many challenges. Indeed, a consistent theme from the research community is that proactive planning and investment are essential components of any strategy that builds long-term economic resilience (e.g., Haggerty et al., 2018; Look et al., 2021; National Academies of Science, Engineering, and Medicine, 2021; Roemer et al., 2021).

Declining natural resource production can have substantial negative long-term effects for workers and communities. In the US, recent decades have seen declines in the economics of forests, coal, and other resource-related sectors in certain regions which have resulted in a wide range of negative economic and social impacts (Eichman et al., 2010; Betz et al., 2015; Weber, 2020; Ferris and Frank, 2021).

To date, most policy efforts and scholarship on the strategies needed to support energy communities have focused exclusively or primarily on coal (e.g., Candelaria et al., 2019; Cecire, 2019; Colorado Department of Labor and Employment, 2020; Furnaro et al., 2021; Interagency Working Group on Coal and Power Plant Communities and Economic Revitalization, 2021). This approach is understandable for several reasons: coal production and use have already declined dramatically in the United States (EIA, 2021), coal is the most carbon-intensive fuel source (EPA, 2021), and it has a variety of substitutes in the electric power sector, where most coal is used.

However, one of the important lessons from the decline of coal, and many coal communities, in the United States, is that policies and programs providing economic, job training, capacity-building, and other assistance after a downturn has occurred will face many challenges. Indeed, a consistent theme from the research community is that proactive planning and investment are essential components of any strategy that builds long-term economic resilience (e.g., Haggerty et al., 2018; Look et al., 2021; National Academies of Science, Engineering, and Medicine, 2021; Roemer et al., 2021).

To that end, our research highlights the importance investing not only in energy communities facing economic challenges today, but also those that will face challenges tomorrow. This includes oil- and natural-gas producing regions that may be less competitive in the years and decades ahead. Although more research is needed to better quantify the US regions where oil and gas production will be more or less resilient under different policy, technology, and economic scenarios, the regions with the lowest costs of production, best access to markets, and lowest environmental impact are likely to be most economically viable in a transition to a net-zero economy.

One approach to inform the IWG would be to undertake and/or commission research to better understand which oil- and natural gas-producing regions of the US are likely to be most economically successful. Following that work, the IWG could partner with and invest in regions that research suggests will be less competitive. These proactive actions can help diversify local economies, train local workforces, remediate environmental damage, and stabilize local public finances before a downturn occurs.

In recent months, the IWG and multiple federal agencies have made considerable efforts to connect with and learn from their partners in energy communities. These efforts have included town halls, listening sessions, webinars sharing access to resources, and other outreach to ensure that energy communities are aware of the opportunities available to them through the federal government.

Our research suggests that this type of proactive engagement and two-way communication is a central component to fostering effective partnerships between federal and local governments. This finding indicates that continuation and, to the extent possible, enhancement of this outreach will play an important role in any successful engagement strategy for the IWG. The transition to a net-zero energy system will affect every community in the United States. Ensuring that federal policymakers are aware of the challenges and opportunities that exist at the local level will be critical to informing federal policy.

Importantly, many communities where fossil energy activities occur at large scale have some measure of skepticism as to the capacity of the federal government to be a constructive partner in multiple policy domains. In climate policymaking, for example, political science scholars have referred to the recent era as one of “contested federalism,” where strong disagreements often emerge between the federal government and certain states (Rabe, 2011). Tribal communities, some of which are major energy producers, may also be skeptical of federal engagement following a long history of mismanagement and neglect on energy and environmental issues (e.g., Smith and Frehner, 2010; GAO, 2015; Ali, 2021).

Overcoming this skepticism will be a major challenge and will likely require years, if not decades, of sustained engagement with local communities. If carried out effectively over an extended period of time, the IWG’s outreach efforts can help build trust to enable fruitful information sharing and collaboration.

As noted above, there is a widespread appreciation for the importance of employment in a transition to a net-zero future. Policymakers and scholars have examined this issue extensively, and it is appropriate that the IWG continues its emphasis on programs that help ensure high quality jobs for workers in energy communities. However, workforce training alone will be insufficient to enable energy workers and communities to thrive in a net-zero future. A recent analysis led by RFF and the Environmental Defense Fund

(Look et al., 2021) identified a suite of policy areas that are likely to be needed to ensure an equitable outcome for today’s energy sector, reproduced in the figure below:

In addition to these critical areas of focus, I would highlight the importance of public revenues from fossil energy infrastructure in energy communities. In a recent analysis, Raimi et al. (2022b) estimated that fossil fuels generate roughly $138 billion annually for governments in the United States, and that these revenues play an outsized role in supporting public services in numerous states, including Wyoming, North Dakota, Alaska, New Mexico, West Virgina, Montana, Texas, Oklahoma, and others. Related work from other scholars highlights how important these revenue sources are for cities, counties, and schools (Weber et al., 2016; Newell and Raimi, 2018; Morris et al., 2021).

Currently, there is no publicly available research that comprehensively assesses local-level reliance on energy revenues. We at RFF are carrying out research to help fill this gap, but additional research will be needed to provide a more comprehensive picture of how energy supports local public services across the US.

Thank you for the opportunity to comment on the critical work of the IWG. Confronting the challenge of climate change is one of, if not the, most important issue facing the US and the world. As technological innovation, public policies, and private investment push the global energy system towards a net-zero future, well-designed and sustained policy efforts can ensure that this transition is equitable for those who are most directly affected. We congratulate the IWG on its work to date and wish it every success as it seeks to ensure that energy communities will continue to thrive in this future.

In the months and years ahead, we at RFF will remain committed to providing rigorous analysis that helps enable decision-makers to ensure our nation and our world are built upon a foundation of a healthy environment and a thriving economy. We will continue to work on issues of interest to the IWG, and will remain eager to support the IWG in any way we can.