Working Paper: NBER ID: w30871
Authors: Gordon H. Hanson
Abstract: Society’s transition toward more sustainable energy sources is well underway. But substantially reducing the use of fossil fuels to generate electricity, to power vehicles, and to manufacture the stuff of everyday life will profoundly disrupt the communities that currently dedicate themselves to carbon-intensive industries. In this paper, I consider the potential for adverse labor market consequences from the energy transition and the suitability of existing policies to counteract them. Top of mind in this discussion is to avoid repeating the painful adjustment to globalization and automation, which in recent decades brought concentrated job loss and long-lasting economic distress to local labor markets that had been specialized in manufacturing. I begin by mapping the spatial distribution of employment in fossil-fuel-intensive activities across US commuting zones from 2000 forward. Then, using the labor market consequences of the post-1980 decline of coal as a backdrop, I discuss policy options for easing adjustment to the energy transition, including letting market forces work, reinforcing the social safety net, and expanding place-based policies.
Keywords: energy transition; labor market; fossil fuels; policy interventions
JEL Codes: J6; Q3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| The energy transition (P28) | job displacement in fossil fuel industries (L71) |
| job displacement in fossil fuel industries (L71) | affecting non-college-educated workers (F66) |
| The decline of coal (L71) | understanding potential labor market disruptions (J63) |
| energy transition without intervention (P28) | entrenched joblessness in affected communities (J68) |
| decline of fossil fuel industries (L71) | negative economic outcomes in regions (R11) |
| lack of successful adjustment mechanisms (D91) | persistent economic distress (E44) |