Accelerating Decarbonization in the United States: Technology, Policy, and Societal Dimensions (2024)

4

Workforce Needs, Opportunities, and Support

ABSTRACT

Investments in clean technologies and infrastructure have the potential not only to address the climate crisis by reducing greenhouse gas emissions but also to create and support millions of jobs in the rapidly growing clean energy economy and stimulate economic growth. The transition to net zero will have uneven impacts across sectors, demographics, and geographies of the U.S. workforce over varying timeframes. Employment impacts will depend on the pathways for decarbonization in specific sectors of the economy and will be influenced by many factors, including technologies utilized, timing/pace of transition, and siting decisions. Job growth is expected to be geographically heterogeneous, and not geographically congruent with fossil losses. New jobs may differ from lost jobs in terms of skills and wages, and new jobs may not be created at the same time as at-risk jobs are being lost. Size, location, and timing of employment growth will be impacted by many factors such as domestic content, worker productivity increases, and siting decisions.

To attract and retain the workforce necessary to accomplish the ambitious goals associated with the transition to a net-zero economy, it is vital to ensure that the clean energy economy generates high-quality, accessible jobs and career paths. Last, action is needed to ensure that the transition enhances the inclusiveness and diversity of the clean energy workforce. This is only possible with the active engagement of all stakeholders in the “workforce development” ecosystem, including governments, employers, and workers. Providing employment options that meet workforce needs is important in maintaining the social contract necessary for accomplishing the coming decades of transition.

The clean energy transition will not be without challenges. There is widespread agreement that historical trends of net fossil fuel job losses will continue and may accelerate, although there is still uncertainty about the timing, geographical distribution, and magnitude of these losses. Policies and programs need to address the losses that will inevitably occur in employment, economic base, and public revenue for workers and communities with close ties to the fossil fuel industry. Historical analyses of large shocks

to local economies display that the existing safety net is ill-equipped to address the scale and scope of these impacts.

INTRODUCTION

The transition to net zero will have uneven impacts across sectors, demographics, and geographies of the U.S. workforce over varying timeframes. Employment impacts will depend on the pathways for decarbonization in specific sectors of the economy and will be influenced by many factors, including technologies utilized, timing/pace of transition, and siting decisions. There is widespread agreement that historical trends of net fossil fuel job losses will continue and may accelerate, although there is still uncertainty about the timing, geographical distribution, and magnitude of these losses (see Chapter 12 for technical details). Job growth is expected to be geographically heterogeneous, and not geographically congruent with fossil losses. New jobs may differ from lost jobs in terms of skills and wages, and new jobs may not be created at the same time as at-risk jobs are being lost. Size, location, and timing of employment growth will be impacted by many factors such as domestic content, worker productivity increases, and siting decisions (Mayfield et al. 2023).

Workforce impacts of the transition to net zero go beyond what we may think of as energy jobs. Upstream materials and supply chain jobs to produce equipment for a net-zero economy will be impacted, as will the way we produce carbon intensive industrial materials such as steel and cement (see Chapter 10 for details). Other jobs directly impacted include internal combustion engine (ICE) vehicle manufacturing and related automotive jobs (such as auto mechanics) as more electric vehicles enter the fleet (see Chapter 9 for details). Additionally, direct energy jobs and indirect manufacturing jobs support ancillary jobs throughout the economy, and these jobs will be impacted, along with communities that rely on tax revenue from affected businesses. Communities whose economies rely heavily on the fossil fuel industry are at risk, and impacts are already unfolding. (See Chapter 13 for discussions of policies directed toward coal communities, and Chapter 5 for details on working effectively with communities throughout the transition.)

The net-zero transition presents opportunities to achieve social objectives in addition to providing significant environmental and economic benefits. Not only does it have the potential to be an engine of economic growth, but it also has the potential to provide high-quality jobs¹ that contribute significantly to social inclusion. However,

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¹ As defined in the first report of this committee, “a high-quality job entails, at a minimum, a safe and secure working environment, family-sustaining wages and comprehensive benefits, regular schedules and hours, and skills-development opportunities that enable wage advancement and career development” (NASEM 2021, p. 45).

this is only possible with the active engagement of all stakeholders in the “workforce development” ecosystem, including governments, educational institutions, employers, and workers. All workers are balancing a series of factors in their employment such as location; wages; working time; safety and working conditions; insurance coverage; the degree of job security; the type of contract; social security coverage; business culture and job design; skill development and career advancement opportunities; and access to paid leave, parental leave, and sick leave (AFL-CIO 2017; Aspen Institute 2022; Congdon et al. 2020; Gammarano 2020; ILO 2020; United Way Worldwide 2012). Providing employment options that meet workforce needs is important in maintaining the social contract necessary for accomplishing the coming decades of transition.

Policy choices can greatly affect the employment impacts of transition. Employment opportunities in clean energy and other net-zero-relevant fields are projected to grow significantly in the next decades as the decarbonization push intensifies, but employers already face hiring, recruitment, and retention challenges. The Inflation Reduction Act (IRA) provisions are expected to ramp up demand for apprenticeships, unions, and other high-road employment pathways, but many state and local workforce and apprenticeship systems lack the capacity and resources to produce sufficient volume of skilled, trained, and well-compensated workers. This chapter discusses the factors that affect employment impacts of a transition and what might be done to maximize benefits and minimize losses for workers and communities. Table 4-1, at the end of the chapter, summarizes all the recommendations in this chapter regarding building the workforce needed to accomplish decarbonization objectives, as well as supporting workers negatively impacted by the transition.

FIRST REPORT RECOMMENDATIONS

The committee’s first report was released in February 2021 and included findings and recommendations on how to advance decarbonization in 2021–2030 while achieving four societal goals: strengthening the U.S. economy, promoting equity and inclusion, supporting communities, businesses, and workers directly impacted by the transition, and maximizing cost effectiveness (NASEM 2021). Each goal is intertwined with the workers who will build and maintain a net-zero economy.

The goal to support communities, businesses, and workers had four sub-goals that inform the recommendations relevant to workforce:

• To provide workers and communities accurate information about how clean energy transitions could impact them and access to viable economic transition strategies;

• To directly address during transition planning risks to “highly vulnerable”² locations where the economic transition to carbon neutrality will exacerbate existing economic disadvantages and health disparities;
• To hold companies accountable for ensuring that fossil fuel energy infrastructures are properly decommissioned and that their long-term environmental impacts are remediated to prevent the creation of persistent environmental contamination and associated health impacts for local populations; and
• To develop strategies to ensure that local, tribal, and state governments are able to replace lost revenue from plant, mine, and other industrial facility closures.

The first report included three overarching recommendations to Congress to understand and address impacts of transition on labor and workforce: (1) establish a 2-year federal National Transition Task Force to assess the vulnerability of labor sectors and communities to the transition; (2) establish a White House–level Office of Equitable Energy Transitions that would establish criteria for funding, sponsor research, and report on equity and transition impacts indicators; and (3) establish an independent National Transition Corporation to ensure coordination and funding to mitigate job losses, deploy and decommission infrastructure, and provide equitable access to economic opportunities and wealth, and to create public energy equity indicators. (See NASEM [2021] for additional details on these recommendations.)

One labor-specific recommendation is aimed to ensure that jobs created in transition will be high-quality jobs and that workers capture maximum benefits from federal funds: Federal grants, loans, tax incentives, and other support for projects should (1) be conditioned on recipients and their contractors meeting strong labor standards (including Davis-Bacon Act prevailing wage requirements and compliance with all labor, safety, environmental, and civil rights statutes); (2) require that federally funded construction and infrastructure project developers sign Project Labor Agreements (PLAs) where relevant; and (3) require recipients of federal incentives to negotiate Community Benefits (or Workforce) Agreements, where relevant. Similarly, a recommendation for domestic content requirements was included to bolster U.S. supply chains and maintain and create upstream jobs in materials, component, and equipment manufacturing.

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² See Table 3.3.1, “Vulnerable Groups in the Context of an Energy Transition,” in NASEM (2021, pp. 126–128) for details; these locations include those disproportionately impacted by transition such as communities that rely on fossil fuel jobs and/or tax revenue (especially rural or disconnected communities), Native American nations, communities with high energy costs, and so on.

On workforce development and training, the first report recommended that Congress establish education and training programs through appropriations to the Department of Energy (DOE) and the National Science Foundation (NSF) to supply the net-zero workforce, with reporting on diversity of participants and job placement success. This included establishing a 10-year GI Bill–type program for anyone seeking a degree in a net-zero area; establishing new and innovative community college, college, and university programs focused on knowledge and skills for a net-zero economy; providing funds for interdisciplinary doctoral and postdoctoral training programs to support decarbonization and energy justice; and supporting doctoral and postdoctoral fellowships in science and engineering, policy, and related areas. The report also recommended that the Department of Homeland Security should eliminate or ease visa restrictions for international students who want to study climate change and clean energy at the undergraduate and graduate levels, where appropriate. Last, to help communities and policy makers understand the current workforce, plan for transition, and evaluate effectiveness of interventions, the report recommended that Congress should pass the Promoting American Energy Jobs Act of 2019 to reestablish the Energy Jobs Strategy Council under DOE, require energy and employment data collection and analysis, and provide a public report on energy and employment in the United States.

Many other recommendations of the first report would have implications for the workforce even if the recommendations themselves do not contain specific workforce components. Examples include actions to expand clean energy, weatherize homes, and revitalize U.S. manufacturing that would create jobs overall, but would reduce demand for fossil fuels and therefore reduce demand for fossil jobs. Also, all workforce impacts will ripple through the economy. These impacts are discussed later in this chapter as well as in the sector-specific chapters.

POLICY PROGRESS SINCE 2021 REPORT

Federal, state, and local policy makers all play important roles in creating a pipeline of workers who can build the clean energy economy, enabling the transition of erstwhile fossil fuel workers to jobs in the clean energy economy, and ensuring that high-quality job creation and retention are an integral part of their climate and clean energy agendas. Many states and cities have forged partnerships with the private sector, unions, utilities, nonprofits, colleges, and other stakeholders to support their workforce development programs. These efforts vary greatly, and many do not go far enough. Chapter 13 provides greater detail regarding subnational actions supporting decarbonization. The following section discusses relevant federal actions since the committee’s first report was published.

Federal Actions

Infrastructure Investment and Jobs Act

The Infrastructure Investment and Jobs Act (IIJA), passed in November 2021, authorizes funding to establish and extend workforce training and development efforts across several new and existing programs. The IIJA could create more than 800,000 jobs at its peak impact in the middle of the decade, reducing unemployment by a few tenths of a percentage point (Zandi and Yaros 2021).

Under DOE, the IIJA established a 21st Century Energy Workforce Advisory Board to provide recommendations to the Secretary of Energy on DOE’s strategy in support of current and future energy sector workforce needs (DOE 2022). The IIJA supports workforce training in many existing and new DOE programs (American-Made Challenges n.d.; ARC 2021; DOE n.d.(c), n.d.(d); DOT Maritime Administration 2023; FTA 2021, 2023, n.d.; NGA 2023):

• The Energy Auditor Training Grant Program was authorized $40 million to establish a competitive grant program for eligible states to train workers to conduct energy audits or surveys of commercial and residential buildings.
• The Building Training and Assessment Centers Program was authorized $10 million to provide grants to institutions of higher education to establish building training and assessment centers that would educate and train building technicians and engineers on how to implement modern building technologies.
• The Career Skills Training Program was authorized $10 million to award grants to pay the federal share of associated career skills training programs under which students concurrently receive classroom instruction and on-the-job training for the purpose of obtaining an industry-related certification to install energy efficient buildings technologies.
• The Industrial Research and Assessment Centers Program was authorized $150 million in cooperative agreements for institutions of higher education, community colleges, trade schools, and union training programs to identify opportunities for optimizing energy efficiency and environmental performance at manufacturing and other industrial facilities, and an additional $400 million in implementation grants to small and medium manufacturers assessed by these institutions to implement suggestions.
• Several other DOE programs had funding authorized through the IIJA for various decarbonization efforts that can be used for workforce development efforts and/or are available to higher education institutions, including Battery Materials

• Processing Grants, Battery Manufacturing and Recycling Grants, and the Electric Drive Vehicle Battery Recycling and 2nd Life Apps Program.
• Some DOE programs require a workforce development plan as part of the application for the program, including Regional Clean Hydrogen Hubs.
• The Energy Champions Leading the Advancement of Sustainable Schools Prize (Energy CLASS Prize) Program offers a prize that can be used to hire and train select school administration and facilities personnel as energy managers.
• Under the Federal Transit Administration, the Low or No Emissions Program was authorized $5.25 billion and the Buses and Bus Facilities Program was authorized $2 billion (5339(b) and (c)). These competitive grants provide funding to state and local governments for the purchase or lease of zero-emission and low-emission transit buses, including acquisition, construction, and leasing of required supporting facilities. Five percent of Low–No competitive grants are required to support workforce development and training, to ensure that diesel mechanics and other transit workers are not left behind in the transition to new technology. More than $3.3 billion of this funding has already been made available as of July 2023 and nearly 25 percent of projects funded for fiscal year 2023 explicitly include workforce elements such as Project Labor Agreements, use of registered apprenticeships, and/or expansion or establishment of workforce training programs.
• Under the Department of Transportation, the IIJA authorized $2.25 billion for the Port Infrastructure Development Program, which includes worker training to support electrification technology.
• The Appalachian Regional Commission, an economic development partnership agency of the federal government and 13 state governments that invests with local, regional, and state partners to transform Appalachian communities, create jobs, and strengthen the regional economy, was authorized $1 billion through the IIJA.
• While not specific to decarbonization, states can use funds from several IIJA formula and grant programs to invest in their infrastructure workforce. Additionally, the IIJA encourages, but does not require, 5-year Human Capital Plans to outline transportation and infrastructure workforce needs.

Creating Helpful Incentives to Produce Semiconductors and Science Act

The CHIPS and Science Act, passed in August 2022, incentivizes domestic semiconductor manufacturing by authorizing investments totaling $280 billion over the next 10 years in science, technology, engineering, and medicine (STEM) programs,

workforce development, and technology research and development (R&D). This includes authorization for $174 billion in investments to support STEM, R&D, and workforce and economic programs primarily at NSF and DOE and smaller amounts to the Economic Development Administration and the National Institute of Standards and Technology (Badlam et al. 2022a). Another $53 billion is focused on semiconductor manufacturing, R&D, and workforce development. Specific funding relevant to the decarbonization workforce includes $200 million to the CHIPS for America Workforce and Education Fund to develop the domestic semiconductor workforce; $2 billion to the Department of Defense for microelectronics research, fabrication, and workforce training; and, under the Department of Commerce (DOC), $2 billion for the National Semiconductor Technology Center to expand workforce training and development opportunities, $2.5 billion for the National Advanced Packaging Manufacturing Program, and funding for the Manufacturing USA Semiconductor Institute for development and deployment of training (U.S. Senate Committee on Commerce, Science, and Transportation 2022). Training under these programs will cover a wide variety of fields necessary for domestic semiconductor production, including materials science, electrical engineering, software development, and factory machine operation (Shivakumar et al. 2022). While workforce development and training are mentioned in regard to several of the funding streams above, it is yet unclear how much of this funding will be directed toward workforce development versus other priorities.

Inflation Reduction Act

The IRA, passed in August 2022, appropriates almost $400 billion for clean energy through more than a dozen federal agencies (Badlam et al. 2022b). This funding flows either through the states, which then distribute funds to local governments, communities, or companies, or directly to private entities and/or individuals (Harvey et al. 2022). Appropriations and incentives from the IRA could create millions of jobs across the United States over the next decade (Mahajan et al. 2022; Pollin et al. 2022a; Shrestha et al. 2022).

For a number of IRA programs, labor standards such as prevailing wage and apprenticeship utilization and domestic content standards (which require certain materials or products be made in the United States) must be met for a project/entity to be eligible for the “bonus” rate. The domestic content standards are intended to shore up domestic supply chains and create upstream jobs in materials and manufacturing. Some programs also have additional bonuses available for projects/facilities located

in certain types of disadvantaged communities, including Energy Communities.³ Additionally, the Justice40 Initiative aims to ensure that 40 percent of IRA benefits go to disadvantaged communities. Other programs require that details or analysis of the proposed project’s potential impact on affected communities be included in the proposal, and some require engagement with those communities.

Harvey et al. (2022) describes several tax credits and deductions under the Department of the Treasury that incorporate labor standards (e.g., Clean Energy PTCs and ITCs, Carbon Oxide Sequestration Credit [45Q], Zero-Emission Nuclear Power PTC [45U], and Clean Hydrogen Production Credit [45V]). To receive the bonus rate on tax credits for eligible clean energy deployment, developers must pay a prevailing wage and employ a percentage of registered apprentices on the project. Additionally, two “bonus” tax credits offer additional incentives: the Low-Income Communities Bonus Credit for projects located in communities with significant poverty (Department of the Treasury 2023), and the Energy Community Tax Credit Bonus for projects located in communities that have lost fossil jobs, where a coal plant has closed, or that are host to a brownfield site (Interagency Working Group on Coal and Power Plant Communities and Economic Revitalization 2023) (see Chapter 6 for more details). The Domestic Content Bonus offers an additional 10 percent if a project uses domestically sourced iron and steel, and an increasing percentage of domestically manufactured goods (20–40 percent in 2023 up to 55 percent for projects beginning construction after 2026) (IRS 2023). A “Direct Pay” option makes the tax credits more accessible for projects that meet these domestic content standards (DOE Solar Energy Technologies Office 2023). The Clean Vehicle Tax Credit (30D) has final assembly and component conditions: the Battery Components Credit requires that by 2024, 50 percent of battery components come from North America, rising to 100 percent by 2029; and the Critical Minerals Credit requires that an increasing percentage of critical minerals within the battery are mined in countries with which the United States has a free trade agreement or are recycled in North America—40 percent by 2024 and 80 percent by 2027 (BGA 2022). The Alternative Fuel Infrastructure Tax Credit (30C) offers additional credit for projects guaranteeing prevailing wage and apprentice labor hours (AFDC n.d.). The Commercial Buildings Energy-Efficient Tax Deduction (179D) requires prevailing

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³ The IRA provides three criteria to define an Energy Community. Meeting any one of these criteria qualifies: (1) An industrial brownfield site, as defined in a prior statute, 42 U.S.C. 9601(39). (2) A county that meets two criteria: i. At any time from 2010 on, it had 0.17 percent or greater direct employment OR 25 percent or greater local tax revenues related to the extraction, processing, transport, or storage of coal, oil, or natural gas AND ii. now has unemployment rate that exceeds U.S. average. (3) A census tract (plus all adjoining census tracts) where i. a coal mine closed in 2000 or later, OR ii. a coal plant closed in 2010 or later.

wage and apprenticeship utilization, and the New Energy Efficient Home Tax Credit (45L) requires prevailing wage for multi-family buildings (DOE n.d.(a), n.d.(b)).

Under DOE, the extension and expansion of the Advanced Energy Project Credit (48c) offers a bonus credit of 30 percent (compared to base credit of 6 percent) if prevailing wage and apprenticeship utilization standards are met. Additionally, $4 billion is reserved for manufacturing investments to boost job growth and economic opportunities in Energy Communities. The Advanced Industrial Facilities Deployment Program application requires measuring benefits to the local community, and the Energy Infrastructure Reinvestment Program application requires analysis of how the project will engage with and affect associated communities. The Advanced Technology Vehicles Manufacturing Program and the Domestic Manufacturing Conversion Grants require prevailing wage for construction work. The Transmission Line and Intertie Incentives requires prevailing wage. Under the U.S. Department of Agriculture, the Assistance for Rural Electric Cooperatives and Electric Loans for Rural Electric Energy require prevailing wage.

IRA appropriations for workforce development include the following: under DOE, $200 million for State-Based Home Energy Efficiency Contractor Training Grants to provide state energy offices with grants for the training of contractors to carry out energy efficiency upgrades in residential and commercial buildings (Sec. 50123, DOE n.d.(e)); and under the Environmental Protection Agency, $1 billion for the Clean Heavy-Duty Vehicle Program, with $400 million set aside for communities located in nonattainment areas, for grants and rebates for up to 100 percent of costs for clean heavy-duty vehicles (e.g., school buses and garbage trucks) as well as associated maintenance, workforce training, and planning (Sec. 60101, EPA 2023). The IRA also appropriates funding for multiple programs including youth, national service, pre-apprenticeship, and apprenticeship programs related to climate resilience and mitigation; however, these are not decarbonization activities and are out of scope for this report.

Executive Orders

• Executive Order (EO) 14005: Ensuring the Future Is Made in All of America: Increases domestic content requirements on federal procurement (EO 14005 2021).
• EO 14008: Tackling the Climate Crisis at Home and Abroad: Calls for an all-of-government approach to “create well-paying union jobs to build a modern and sustainable infrastructure, deliver an equitable, clean energy future, and put the United States on a path to achieve net-zero emissions, economy-wide, by no later than 2050” (EO 14008 2021).

• EO 14025: Worker Organizing and Empowerment: Established the Task Force on Worker Organizing and Empowerment to identify ways the federal government could fully utilize its authority to encourage worker organizing and collective bargaining (EO 14025 2021). On February 7, 2022, the task force released its report, detailing nearly 70 recommendations for revising labor laws and regulations (White House 2022).
• EO 14052: Implementation of the Infrastructure Investment and Jobs Act: Emphasizes the importance of high labor standards, including prevailing wages and the free and fair chance to join a union in the implementation of the Infrastructure Investment and Jobs Act (EO 14052 2021).
• EO 14063: Use of Project Labor Agreements for Federal Construction Projects: Requires PLAs on large federally contracted construction projects (EO 14063 2022).

Other Legislation

In December 2022, the congressional appropriations omnibus passed with a provision for a 1-year extension on funding for the Trade Adjustment Assistance (TAA), the 60-plus-year federal program to support workers whose employment is impacted by trade (P.L. 117-328). However, the omnibus language did not include the necessary authorizing language to extend administering TAA, and thus the program is still under termination provisions at time of writing (DOL 2022, 2023). If reauthorized, TAA could be strengthened in several ways to better serve workers through this transition; see Recommendation 4-3 below.

CURRENT ENERGY EMPLOYMENT AND TRENDS

In 2022, more than 8.1 million U.S. workers were employed in the energy workforce, including professional, construction, utility, operations, and production occupations associated with energy infrastructure, production, and use and the manufacturing of motor vehicles. More than 40 percent of total energy jobs in 2022 were in net-zero emissions–aligned areas (DOE 2023). Net-zero emissions–aligned jobs are those related

to renewable energy, grid technologies and storage; traditional electricity transmission and non-fossil distribution; nuclear energy; a subset of energy efficiency; biofuels; and plug-in hybrid, fully electric, and hydrogen fuel cell vehicles and components.

Some concerns exist in the energy workforce today that will need to be addressed for a successful transition to a net-zero energy system. As detailed in the following sections, these concerns include

• Hiring challenges across energy jobs, particularly in manufacturing and construction;
• Job quality issues of new clean energy jobs;
• Diversity and inclusion;
• Deindustrialization and decline in U.S. manufacturing and domestic supply chain capacity; and
• Skills gaps.

A primary concern is whether the United States has a skilled workforce willing and capable to produce, install, and operate the materials, products, equipment, and infrastructure needed for a net-zero economy. A Deloitte study found that 80 percent of the needed skills for the short- and medium-term transition already exist in the workforce (Deloitte 2022). This means that most workers already on the job today wouldn’t need complete retraining to remain in their jobs or find new work, but rather upskilling through micro-credentials or on-the-job training. A 2020 report from the University of California, Berkeley, Center for Labor Research and Education, found that “[t]he vast majority of the jobs that will be involved in work to lower greenhouse gas emissions across the economy are in traditional occupations where specific ‘low carbon’ knowledge and skills are only one component of a broader occupational skill set” (Zabin et al. 2020). In other words, it is more about greening existing jobs than creating a whole set of new jobs.

However, the 2023 U.S. Energy and Employment Report documents hiring difficulty in every industry across types of energy jobs (although it does not provide averages across all industries) and documents an increase in employers reporting hiring difficulties from 72 percent in 2016 to 88 percent in 2022 (BW Research 2016; DOE 2023). The problem appears to be most pervasive for motor vehicles employers, where 94 percent of respondents report hiring difficulties, followed by the energy efficiency industry (~92 percent), electric power generation (~87 percent), fuels (85 percent), and electricity transmission, distribution, and storage (~83 percent) (DOE 2023). As demand increases for workers in the non-fossil sector, wages are expected to increase to reflect these needs. Wages can help incentivize the supply of workers, but these adjustments can be sluggish. Moreover, higher wages are often passed through to consumers in

the form of higher product prices. Investing in training and skill development today can minimize these skill gaps and wage pressure.

Fossil Trends

As discussed in Chapter 12, there are clear trends across the three fossil fuels: Coal production continues to decline, while natural gas and oil production have not only avoided declines but in fact have increased in the past decade to meet both domestic needs and provide strategic energy security internationally. Employment in fossil fuel extraction has been declining, impacting geographic areas with concentrated fossil jobs.

Over the past 40 years, coal employment has experienced major contractions: the first occurred in the 1980s, when oil prices fell from their 1970s highs and caused a major reduction in coal demand (Black et al. 2005); the second came in the 2010s, as natural gas and renewable energy increasingly supplanted coal in generating electricity (Fell and Kaffine 2018). These previous contractions have been shocks to the system, leaving workers and communities in the lurch (see Chapter 12 for details). Oil refineries in California are starting to close as the state aims to be carbon neutral by 2045, spurring conversation about “unplanned transition” versus a “just transition” (Gerdes 2020; Martin 2022). Another big question is the extent to which new and growing jobs will require similar or transferable skills that fossil fuel workers have. Resources for the Future found that, exempting technical skills, the skills necessary for disappearing fossil fuel jobs do not align with the skills needed for fast-growing occupations at similar pay rates, many of which require skills in customer service or management (Greenspon and Raimi 2022). See the section “Supporting Workers Impacted by Labor Disruptions Associated with the Net-Zero Transition” for a more in-depth discussion of the policy options for transition-related job loss.

Renewable Trends

As noted above, net-zero emissions–aligned jobs made up more than 40 percent of total energy jobs in 2022 and are the top growth areas in energy jobs (DOE 2023). Generally, workers in clean energy earn higher than the national average: while the mean hourly wage of all workers nationally was $23.86 in 2016, workers in clean energy production, energy efficiency, and environmental management earned $28.41, $25.90, and $27.45, respectively (Muro et al. 2019). There are examples of clean energy investments creating high-quality jobs, spurring economic recovery, and growing the clean economy (Boom 2021).

However, there are concerns about the quality of jobs in clean energy, especially when compared to fossil jobs being lost (BGA 2021; Shrestha et al. 2022). Clean energy jobs look good compared to the national average because the economy overall has many low-wage, no-benefits service jobs (BGA 2021). Many incumbent energy jobs that will be lost tend to be high wage, with benefits, and high rates of unionization, and the clean energy jobs being created do not always provide the same array of benefits. Job quality may be of particular concern for solar photovoltaic installation jobs, as solar projects generally rely on short-term workforces retained through temp agencies or subcontractors. These firms, which are known for unfair hiring practices and minimal transparency, offer jobs with low wages, minimal benefits, limited training, and no job security (Gurley 2022; Harris 2022). These short-term jobs do not typically lead to long-term work or cultivate transferable job skills for a career (Gurley 2022). Without effective policies, the transition to a low-carbon economy could reduce the quality of jobs in the energy sector. Box 4-1 describes the role of apprenticeships and pre-apprenticeships in supporting high-quality jobs.

The IRA has attempted to address this issue by tying better labor standards to various tax credits, which is one approach. A stronger approach would require new labor laws. The Protecting the Right to Organize (PRO) Act, which passed the House in the 117th Congress and has since been reintroduced in the 118th, includes several provisions to make it easy for workers to join unions.⁴ One of them is a policy that would override right-to-work laws that currently exist in 27 states (NCSL 2023). While state right-to-work laws do not prohibit workers from joining a union, they provide workers the option not to pay union dues that collectively help pay for the costs of bargaining and negotiating contracts. With fewer workers paying dues, unions have found it difficult to sustain themselves. The Economic Policy Institute (Gould and Kimball 2015) has estimated that right-to-work laws have led to a 3.1 percent decline in wages for both union and non-union workers after accounting for differences in labor market characteristics, cost of living, and demographics. The PRO Act would also allow independent contractors and gig workers the right to collectively bargain.

In addition to job quality concerns, there are also diversity concerns in the clean energy workforce; a 2021 analysis found that about 61 percent of clean energy workers were white (non-Hispanic), whereas Black, Hispanic/Latinx, and women workers were all less represented in clean energy than across the rest of the economy (E2 2021). In 2022, Black workers held only 9 percent of jobs in wind technology and energy efficiency and

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⁴ H.R.842—117th Congress (2021–2022). Protecting the Right to Organize Act of 2021. https://www.congress.gov/bill/117th-congress/house-bill/842. H.R.20—118th Congress (2023–2024). Richard L. Trumka Protecting the Right to Organize Act of 2023. https://www.congress.gov/bill/118th-congress/house-bill/20.

only 8 percent in solar technology jobs; women held 27 percent of energy efficiency jobs, 31 percent of solar jobs, and 33 percent of wind technology jobs (DOE 2023). Despite improvements in recent years—more than half of clean energy jobs added in 2022 went to women—the participation rate of women and Black workers remains well below the national workforce average, highlighting the persistence of these disparities (DOE 2023). There is also evidence of discrepancies in roles and career progression among employees across race and gender. In the solar industry, for example, Black workers are less likely to hold management-, director-, and president-level positions than White workers, and women are less likely to hold these positions than men (IREC 2021).

Critical Minerals and Mining Trends

Critical minerals are necessary in producing wind turbines, solar panels, electric vehicles, smart home devices, sensors and digital controls, batteries, and myriad other technologies that will support decarbonization. While U.S. mining and geological engineering employment is expected to grow more slowly than all U.S. occupations over the next decade, about 500 openings are projected each year on average, mostly stemming from the need to replace workers who transfer to different occupations or exit the labor force, such as to retire (BLS 2022). A 2013 National Research Council study on emerging workforce trends in the domestic energy and mining industries named a wide array of challenges, including aging and retiring workforce and faculty; a decrease in mining, mineral engineering, and economic geology programs; negative perceptions with respect to the nature of the work; and foreign competition for U.S. talent (NRC 2013). Workforce challenges persist owing not only to these factors but also to the physically demanding nature and often remote locations of these jobs (Sicurella 2021). More than 200,000 of today’s domestic mining workforce will be retiring and need replacement by 2029; however, in 2021, just over 300 degrees in mining and mineral engineering were awarded in the United States, far from the rate needed to maintain the workforce, much less meet expected growth in demand for domestically sourced or processed critical minerals (Data USA n.d.; Hale 2023; Society for Mining, Metallurgy, and Exploration 2014). DOC (2019) made recommendations aimed at several key goals for growing the critical minerals workforce: (1) bolster education in mining engineering, geology, and other fields related to critical minerals mining and manufacturing; (2) promote interdisciplinary collaboration among material science, computer science, and related disciplines to modernize the minerals supply sector industry and make the field more attractive to new talent; (3) implement personnel and management reform to ensure appropriate human capital to support exploration and development of critical minerals on federal lands; and (4) facilitate sustained interaction with critical mineral stakeholders and the general public.

Manufacturing Jobs

As discussed in Chapter 10, manufacturing the equipment and building out the infrastructure needed to create a net-zero economy will be a key part of the transition, and there are opportunities to create and maintain high-quality jobs as well as global competitiveness if done well. Several current trends in manufacturing could be barriers to implementing a transition to net zero and need to be addressed, including the disappearance of the manufacturing wage premium, deindustrialization and offshoring of plants, and persistent hiring difficulties.

Manufacturing jobs once provided a key path for middle-class growth and prosperity (Barrett and Bivens 2021); however, the manufacturing wage premium has disappeared in recent years, contributing to the increase in overall wage inequality and potentially adding to the decline of U.S. manufacturing (Bayard et al. 2022). Over the past 20 years, more than 5 million U.S. manufacturing jobs have disappeared and nearly 70,000 factories have closed (Scott et al. 2022). The U.S. economy shifted toward lower-wage, service-sector jobs with fewer benefits and lower rates of unionization than manufacturing jobs, resulting in lower average wages for all workers without a 4-year degree (Scott et al. 2022). This decline has disproportionally impacted workers and families of color (Scott et al. 2022; Taylor 2016).

For many manufacturing companies that remain in the United States, workforce challenges are negatively impacting operations and growth. In the National Association of Manufacturers 2021 Manufacturers’ Outlook Survey, nearly 45 percent of respondents reported having to turn down business opportunities owing to insufficient staff (NAM 2021). In the same survey, about 71 percent of respondents noted that staffing shortages also have negative impacts on the timeliness of product deliveries and on production processes (NAM 2021). The figure is a bit higher among respondents of the 2022 Workforce Institute survey, which found that labor shortages impacted production demands for 84 percent of manufacturers; for 76 percent of these respondents, the impact on their bottom line was considered “moderate” or “severe” (Workforce Institute 2022).

The millions of middle-income American workers currently employed in the automotive industry still earn average wages that are higher than the national averages (Walter et al. 2020), but these averages obscure a more nuanced reality. While unionized, full-time workers continue to earn high wages with benefits and enjoy decent working conditions, not all workers have access to these benefits. Weakened labor standards in U.S. manufacturing have eroded job opportunities and job quality in the sector (and across the entire economy) (Cutcher-Gershenfeld et al. 2015). As a result, real earnings have been declining for all autoworkers (Ruckelshaus and Leberstein 2014). Most automotive manufacturing jobs created since 2009 have been non-union or temporary (Ruckelshaus and Leberstein 2014; Walter et al. 2020). While previously the majority of autoworkers were employed in assembly, auto parts workers now account for 72 percent of jobs in the sector, where they are more likely to be temporary and earn significantly less than assembly workers (Ruckelshaus and Leberstein 2014).

EMPLOYMENT IMPLICATIONS IN A NET-ZERO TRANSITION

Analyses by Rhodium Group, REPEAT, Energy Innovation, and Chapters 6–12 of this report conclude that recent legislation is likely to move the nation much or a majority of the way to a net-zero trajectory. While there are no comprehensive peer-reviewed jobs analyses of recent legislation, major job gains are projected: Energy Innovation found that the provisions in the IRA could create 1.4 to 1.5 million new jobs in 2030 concentrated in the manufacturing, construction, and service industries (Mahajan et al. 2022). Energy Futures Initiative found that the IRA could create 1.46 million more jobs than a BAU scenario, and construction, manufacturing, and the electric utility sector would be key sectors for growth (Foster et al. 2023). Political Economy Research Institute (PERI) and the BlueGreen Alliance (BGA) found that robust application of the IRA’s strong labor standards could create more than 9 million jobs throughout the economy over the next decade—an average of nearly 1 million jobs each year (Pollin et al. 2022a). A World Resources Institute (WRI) study found that federal policies relying on a combination of tax credits for low-carbon technologies (as included in the IRA) and infrastructure investments (as included in the IIJA) could generate an additional 900,000 net jobs by 2035, compared to a reference scenario without these laws (Shrestha et al. 2022). This does not account for the additional economic benefits generated by incentivizing domestic manufacturing of clean energy technologies and their supply chains. When domestic manufacturing is factored in, then an additional 3.1 million net jobs are created in 2035 compared to a 2035 reference scenario (Shrestha et al. 2022).

Studies of employment along potential paths to net zero offer a useful upper bound even if they do not specifically include recent legislation:

• Mayfield et al. (2023) modeled employment impacts of the Princeton Net-Zero America scenarios, finding that a transition to net zero in 2050 supports an annual average job creation of approximately 3 million direct jobs during the first decade, and approximately 4–8 million direct jobs during the 2040s. This study does not include energy efficiency or vehicles jobs. The study provides separate results for different technologies, regions, and individual states; estimates training, education, and experience requirements for jobs that are created; and estimates policies that would maximize employment benefits (Mayfield et al. 2023).
• The WRI study mentioned above also concluded that a net-zero emissions scenario would result in 2.3 million more net jobs (direct, indirect, and induced) than the reference case between 2020 and 2035; new clean energy jobs would be concentrated in construction of buildings and electricity (Shrestha et al. 2022).

• The Decarb America Research Initiative found that decarbonizing the U.S. economy would create a net increase of more than 2 million jobs economy-wide (includes direct, indirect, and induced) by midcentury. This study focuses on electricity generation and includes vehicles but excludes oil/petroleum (Chan et al. 2022).
• The Sustainable Development Solutions Network (SDSN) developed the America’s Zero Carbon Action Plan, which found that a transition to net zero by 2050 would generate about 2.5 million direct and indirect jobs per year compared to a reference case, and over 4 million jobs per year if induced jobs are included. The authors concluded that many industrial jobs would be created in the Appalachian region and Midwest (SDSN 2020).

Studies looking at global net-zero transition reported similar findings to U.S.-focused studies regarding large net gains in employment. However, gross job losses would also be substantial. A 2022 study from the McKinsey Global Institute found that the transition would have uneven effects on sectors, geographies, and communities, especially at the beginning (Krishnan et al. 2022). It also found that shifts in employment would likely be substantially higher in a disorderly transition. The report notes that economic impacts should be considered in perspective with job dislocations from other trends—including automation, remote work, and e-commerce—which could lead to considerably more losses than the global transition to net zero. A 2022 study from Deloitte found that 13 million jobs in the United States are vulnerable to climate change impacts or transition effects. While the U.S. share is lower than other regions of the world, unmanaged transition increases the risk to these jobs, while proactive policy decisions through the 2020s can create a job dividend more than 30 years earlier than a passive transition (Deloitte 2022). A 2021 IEA report highlights the benefits of managing transition impacts, enabling companies to find qualified workers, using existing practices to center people in transition, supporting long-term engagement and strong social dialogue, and using detailed energy employment data (Cozzi and Motherway 2021).

Thus, both domestic and international analyses broadly agree that net increases in jobs are likely, together with contractions of fossil jobs. Fossil job contractions are concentrated in a few regions, while the job increases are likely more dispersed. Moreover, fossil contractions generally occur after 2030, except for coal jobs, which have been declining for decades (see Chapter 12 for details). An illustrative example is Mayfield et al. (2023), originally produced as part of Princeton University’s Net-Zero America Project. Mayfield et al. find that from 2020 to 2030, employment stays constant or grows in most states except coal-producing states in the Appalachian basin, where employment slightly declines but rebounds in the 2030s. By 2050, energy jobs grow both as a fraction of

total jobs in the economy and in most states, but this growth happens in boom-bust cycles. The largest interim job losses occur in rural states with large upstream fossil fuel industries, like West Virginia. Employment and wage losses in fossil fuels are offset in aggregate by growth in low carbon sectors. These results are broadly consistent with the conclusions of the literature in this area and offer granular insights about how decarbonization impacts employment by resource sector, geography, and timing. A detailed look at this study illustrates the level of geographic, temporal, and sectoral heterogeneity expected in employment during the net-zero transition.

Figures 4-1 and 4-2 depict results from Mayfield et al. (2023) on total annual employment in energy jobs and employment by resource sector, respectively, for each U.S. state. The following discussion further explains the results shown in these two figures.

Fossil Fuels (see also Chapter 12). Coal is the smallest fossil fuel sector in terms of current employment. Coal employment has been declining for the past 3 decades and is projected to continue to decline by half in 2030 and by more than 80 percent by 2050, even in the reference scenario of Mayfield et al. (2023). Coal employment is clustered geographically in the Appalachian and Powder River basins, and coal mining is a dominant industry in some communities. Employment in coal-fired power generation is also spread across 45 states.

Oil is the largest fossil fuel sector in terms of employment and is spread across all states, with some clustering in areas that produce oil and in areas with major industry concentration. The reference scenario of Mayfield et al. (2023) shows a 40 percent decline in oil sector employment by 2050, and the net-zero scenarios show 60–90 percent declines, largely influenced by the rate of transportation electrification and the level of future exports. In areas like North Dakota, the oil sector employs a large share of the labor force through midcentury.

Natural gas employment is influenced by rate of heating electrification, renewable siting constraints, and natural gas exports, leading to vastly different potential pathways. Natural gas employment declines over both the short and long term in both the reference and net-zero scenarios in Mayfield et al. (2023): in the reference scenario, employment declines steadily by 15 percent between 2020 and 2050. However, in the net-zero scenarios, natural gas employment declines 15–30 percent by 2030 and 50–80 percent by 2050. Most of the decline is upstream; employment in the gas-fueled electric power industry only slightly declines as carbon capture and storage (CCS) technology expands.

Low-Carbon Sectors. The solar sector rapidly scales up in the net-zero scenarios studied by Mayfield et al. (2023), with utility-scale solar capacity increasing 10-fold by 2030 and 20- to 120-fold by 2050, as domestic manufacturing share of related components

multiplies 2 to 4 times by 2030 and 3 to 18 times by 2050. By 2030, the solar sector has the highest employment of all resource sectors. Solar jobs are spread across the United States with a concentration in the southern half of the United States, and solar employment increases from 250,000–500,000 jobs currently to 700,000–2,500,000 jobs in 2050.

The wind sector experiences a rapid expansion, increasing capacity 2- to 4-fold by 2030 and 6- to 27-fold by 2050, as domestic manufacturing share of related components multiplies 4 to 10 times by 2030 and 4 to 46 times by 2050. Wind resources increase employment mid-continent, and manufacturing increases employment across the East, Midwest, and Great Lakes. Wind has the potential to mitigate job losses from fossil fuels in some areas, such as Wyoming. Nationwide, wind employment increases from 100,000–150,000 currently to 350,000–2,200,000 jobs in 2050. Depending on the proportion of domestic content (materials and goods made in the United States) used in offshore wind energy development and construction, Stefek et al. (2022) estimate that from 2024 to 2030, the offshore wind energy industry will need an annual average of between 15,000 (25 percent domestic content) and 58,000 full-time workers (100 percent domestic content). As most of these new offshore wind jobs are expected to be added in the manufacturing and supply chain sectors (as well as project development, installation, ports and vessels, operations, and maintenance), realizing this job growth depends on the construction of new manufacturing and supply chain facilities within the United States.

In these scenarios, the electric grid undergoes a 2×–4× infrastructure expansion, and employment related to transmission increases in all states and nearly doubles in the largest states like Texas and California. Electric grid employment increases from 450,000–600,000 currently to 1,100,000–3,500,000 jobs in 2050.

Nuclear is a relatively small sector in terms of employment today, and its fate depends on constraints that the nation places on it and other technologies. For example, the 100 percent renewables scenario in Mayfield et al. (2023) assumes that the public will prohibit nuclear electricity. As a result, nuclear employment declines by 20–40 percent by 2030 and approximately 95 percent by 2050. In the scenario in which renewable deployment is constrained beneath the maximum historic rate—for example, because of public pressure on deployment—both nuclear deployment and employment would expand by 10×. In the least-constrained scenario, shown in Figure 4-2, operations and slow decommissioning provide steady employment from 2020 to 2040. Thus, across the full range of scenarios, today’s nuclear employment of 50,000 could either decline almost entirely or increase to 500,000 by 2050.

Biomass is another small sector today that could see growth and transformation from corn ethanol production to advanced biofuels from woody, non-woody, and

other feedstocks. Biomass has the potential to provide concentrated benefits to rural communities owing to colocation of farming activities. In the scenario depicted in Figure 4-2, biomass employment increases from an average of 80,000–90,000 per year in the 2020s to 160,000–220,000 per year in the 2050s.

Carbon dioxide capture, transport, and sequestration or use currently employs few people, but is expected to increase to substantial levels in all scenarios in Mayfield et al. (2023) that permit geologic sequestration. However, in the Princeton America studies, much of this is CO₂ captured from biomass late in the transition. In scenarios where carbon capture infrastructure gets built, employment increases in areas with existing natural gas pipeline infrastructure, extending from the mid-continent to the East coast. While skills for carbon dioxide jobs are similar to natural gas jobs, employment in this sector is predicted to remain much smaller than declines in the natural gas workforce. Carbon dioxide employment could increase to 60,000–110,000 in 2050. Note that direct air capture, geothermal energy, and hydropower were not included in this analysis, as the models did not show significant new capacity. As previously mentioned, many factors affect potential capacity and jobs impacts and these technologies may warrant additional study.

The Mayfield study focuses on energy supply and thus excludes vehicles and energy efficiency, which are the largest current sectors of energy employment (DOE 2023), and both likely to see changes owing to the transition. As the United States shifts from ICE vehicles to battery electric vehicles (BEVs), employment in the U.S. automotive sector could increase by more than 150,000 jobs in 2030—if U.S. BEV purchases rise to 50 percent by 2030, the United States produces the same share of the battery supply chain as it currently does ICE components, and the U.S.-assembled market share increases 10 percentage points (to 60 percent) (Barrett and Bivens 2021). If these conditions are not met, the U.S. auto sector could lose roughly 75,000 jobs by 2030. Modeling a transition to net zero, a WRI study found that by 2035 there is a loss of 2 million net jobs (direct, indirect, and induced) associated with ICE vehicle manufacturing, maintenance, and sales (Shrestha et al. 2022). However, increasing the share of domestic battery manufacturing from 25 percent (base model assumption) to 50 percent leads to an additional 850,000 jobs, and increasing to 75 percent leads to 1.7 million jobs gained, countering 87 percent of losses. The domestic content and manufacturing requirements to harness bonus rates for tax credits included in the IRA will support realizing the job gains projected in WRI’s scenario. The WRI study also reports an increase of 3.6 million jobs from EV charging infrastructure deployment (Shrestha et al. 2022). Similarly, the Decarb America report finds that EVs could generate hundreds of thousands of jobs with a domestic supply chain (Chan et al. 2022). Employment in energy efficiency activities such as weatherization, building retrofits, electrification,

and industrial energy efficiency will be critical in transition to net zero. The WRI net-zero scenario found that the largest job gains are in construction of buildings and electricity infrastructure and that the majority of construction jobs are well-paying (Shrestha et al. 2022). The Decarb America report finds that energy efficiency jobs drive gains in the first decade of transition as infrastructure is built out (Chan et al. 2022). The SDSN study found that investments in energy efficiency would generate approximately 800,000 new jobs per year (SDSN 2020).

While most net-zero studies include manufacturing jobs to produce equipment and infrastructure needed for the net-zero economy, most do not address specifically job impacts of transition on the industrial sector. The SDSN report finds that effective industrial policies could increase total job creation by up to about 10 percent, and reports that in their modeling, many industrial jobs are created in the Appalachian and Midwest regions (SDSN 2020).

Findings and Recommendations Regarding Attracting and Retaining the Workforce Needed to Accomplish the Transition

SUPPORTING WORKERS IMPACTED BY LABOR DISRUPTIONS ASSOCIATED WITH THE NET-ZERO TRANSITION

All published analyses of the impact of current climate and energy policy on employment broadly predict continued fossil fuel job losses but differ on details. Some baseline scenarios also predict declines in fossil employment even without the new policies in the IRA, IIJA, and CHIPS (e.g., Mayfield et al. 2023). For example, IEA’s Stated Policies Scenario (STEPS) predicts that demand for fossil fuels would have declined or remained constant through 2040 (Raimi 2021). Fossil jobs at risk include coal, oil, and natural gas jobs in upstream mining and drilling, refining and transporting, energy generation, and use in the transportation sector (including ICE vehicle manufacturing) as well as downstream supply chain and related jobs (such as auto mechanics). Mayfield et al. (2023) found that mining sector (i.e., oil, gas, coal upstream activities) jobs comprise a declining portion of jobs over time. Raimi (2021, p. 2) uses IEA’s Sustainable Development Scenario as the basis for its analysis and found that “because coal has the highest carbon content and can be substituted easily in the power sector (where most coal is used), these communities will be the first to face a transition due to climate policy,” and oil and natural gas would follow behind.

Geography of Job Losses

Nationally, fossil fuel jobs account for less than 1 percent of total employment. However, this is highly regionally variable, and in some communities, 10–20 percent of

employment is directly involved in fossil fuels (Raimi et al. 2022). Just 10 states contain 73 percent of oil, coal, and natural gas production (Foster et al. 2020). Raimi et al. (2022) associates these geographic hot spots with four regions: Intermountain West, Texas, Appalachia, and the Gulf Coast. As shown in Chapter 12, certain types of fossil jobs are geographically concentrated (fossil fuel mining and extraction), some are dispersed but can be clustered (fossil fuel power plant generation), and others are widely dispersed across the country (gas station workers, auto mechanics).

Job losses in industries like ICE vehicle manufacturing will be more concentrated in areas that have vehicle manufacturing, like the Great Lakes and industrial Northeast. Other job losses will be more widely dispersed, such as in communities with coal-fired power plants, ICE parts manufacturers, auto mechanics, and so on. Other attributes of geography such as low economic diversity, isolation, and lack of training opportunities create risk for communities and workers.

The Costs of Job Loss for Workers

Job loss, especially in fossil sectors, is likely to be extremely costly to an individual/household. Evidence from researchers examining mass layoffs in a variety of contexts show that earnings losses for affected workers are large and persistent—about 20 percent below their forecasted earnings trajectory up to 20 years later, the sum of which amounts to around $110,000–$140,000 in earnings losses for someone making $50,000 annually (von Wachter et al. 2009). Job loss may also come with loss of health insurance and retirement benefits, and may even produce direct health effects (Sullivan and von Wachter 2009). Even if there is an overall increase in jobs nationally through the transition, aggregate outcomes do not reflect individual experiences, and those individuals/households who will experience a major disruption need to be directly supported.

Outside of the fossil sectors directly affected, there are likely to be effects in other industries and communities that directly and indirectly support and/or benefit from fossil fuels and services. These include, but are not limited to, non-tradeable goods and services in a local community, such as restaurants, construction, nursing homes, and so on. Loss of a major local employer may also cause a contraction in the local tax base, which is often a primary source of public-school funding. The effects of job loss can also impact families and children in myriad ways. For example, Stevens and Schaller (2009) and Oreopoulos et al. (2008) provide evidence that parental layoffs have a causal effect on their children’s test scores and their subsequent adult earnings.

These combined effects have the potential to significantly erode the social fabric that connects communities, and policy makers need to think carefully about

potential solutions to minimize these impacts. Economic gains from getting people back to work are partly the present and future gains to the income of workers. However, the broader social gains can include stronger families, a better network of informal job connections, a decline in state-level spending on Medicaid and welfare payments, reduced drug use and crime, and other benefits. Recent evidence suggests that large disruptions in U.S. manufacturing, primarily owing to expansion of international trade with China, causally led to increases in “deaths of despair” from fatal drug overdoses and enrollment in Social Security Disability Insurance (SSDI) (Pierce and Schott 2020).

At the same time, the existing federal and state policies designed to mitigate these costs, such as unemployment insurance (UI), are insufficient to compensate for these foregone earnings and other job-related benefits. The federal-state UI system helps many people who have lost their jobs by temporarily replacing a part of their wages. Workers in most states are eligible for up to 26 weeks of benefits from the regular state-funded unemployment compensation program, although 10 states provide fewer weeks, and 2 provide more. On average, UI benefits replace about 40 percent of a worker’s pre-layoff wages, but they vary substantially by state. When accounting for the time-limited nature of UI income and the non-wage benefits that are part of the compensation package for many workers (benefits like employer-provided health insurance and retirement contributions), the true pay replacement rate is much lower (EPI n.d.). In the process of searching for jobs, many workers are likely to exhaust UI benefits. Research suggests that upon exhaustion of UI, families’ consumption falls, and the incidence of poverty rises (CBO 2004; Ganong and Noel 2019; Gruber 1997). There are also risks of dropping out of the labor force altogether, which have even larger fiscal costs described below. These effects are particularly large for single-earner families with children.

Lessons from Past Experience

The scale of the labor force transition away from fossil production is likely to be unprecedented in nature, but it may be helpful to look at past experiences to learn about likely impacts as well as potential solutions. There are at least two major upheavals in the past 40 years that may be helpful in this regard: the early 1980s and 2010s decline in coal production in the Eastern United States and the more recent and widespread erosion of manufacturing employment associated with trade exposure to Chinese import competition.

Hanson (2023) considers the consequences of the post-1980 decline of coal in order to see how the safety net might address job loss from the energy transition. During the past 40 years, coal mining has had two major contractions. The first occurred in

the 1980s, when oil prices fell from their 1970s highs and caused a major reduction in coal demand (Black et al. 2005); the second came in the 2010s, as natural gas and renewable energy increasingly supplanted coal in generating electricity (Fell and Kaffine 2018). Following the first shock, employment and earnings fell precipitously in coal counties, which then saw sharp increases in uptake of government transfers across a wide set of programs, such as Social Security Disability Insurance (Black et al. 2002, 2003; Jacobsen and Parker 2016; Pierce and Schott 2020). At the time, some analysts worried that monetary support for coal communities was insufficient, while others raised concerns that government assistance would create a culture of welfare dependence. Hanson (2023) shows how regions exposed to the four-decade coal bust have seen long-run reductions in earnings and employment rates, increases in government income assistance, expanded Medicare and Medicaid usage, and substantial decreases in population, especially among younger workers.

More recently, evidence has emerged as to the devastating impact that China’s accession to the World Trade Organization and associated import competition has had on U.S. manufacturing (Acemoglu et al. 2016; Alden 2016; Autor et al. 2013; Pierce and Schott 2016). Rising imports from China caused higher unemployment, lower labor force participation, and reduced wages in local labor markets that contained import-competing manufacturing industries—ultimately responsible for nearly a quarter of the decline in U.S. manufacturing employment (Autor et al. 2013). Between 600,000 and 1 million U.S. manufacturing jobs disappeared between 1990 and 2007 (Autor et al. 2013).

Conventional views suggested that labor markets would adjust to these forces—workers who lost jobs from trade competition or coal decline would move to industries or labor markets less exposed to trade or coal. The initial decrease in labor demand and a corresponding increase in labor supply from a newly available set of workers may depress wages, but the effect of these shocks should ultimately be diffuse. However, increasing evidence demonstrates that these adjustments are highly heterogeneous and incomplete (Autor et al. 2021), with only modest migration from affected areas, mostly by foreign-born workers and younger native-born adults (ages 25–39). Expansions in import competition led to many localized recessions: displaced workers spent less on restaurants, entertainment, home renovations, childcare, and other services, pushing the economy into a downward spiral of further job losses and spending cuts.

Currently, the United States has targeted transition assistance programs to help with the disruptive costs of job displacement for some affected workers. The largest and most well-known of these programs is TAA, a federal transfer program established under the 1962 Trade Expansion Act that provides assistance to workers “who lose their jobs or whose hours of work and wages are reduced as a result of increased imports or shifts in production out of the United States.” In fiscal year 2010, nearly $1 billion in

annual cash transfers were appropriated to subsidize an estimated 230,000 qualified workers to enroll in retraining programs after trade-related layoffs.

Hyman (2022) provides a comprehensive evaluation of the TAA program using detailed longitudinal microdata on workers’ employment and earnings histories. He finds that TAA-approved workers have $50,000 greater cumulative earnings 10 years after the fact—driven by both higher incomes and greater labor force participation. Overall, this program includes many of the interventions described in the following section “Policy Tools and Mitigation of Impacts”: extended UI benefits and active labor market programs, such as intensive job training. More recently, part of TAA has been further experimenting with wage insurance programs that have also shown promise (Hyman et al. 2021, 2023).

The picture that emerges from these historical experiences is bleak: large shocks to local economies have led to a collapse in local labor markets where gradual outmigration ultimately left behind a population that is disproportionately old, sick, and poor (Hanson 2023). The existing safety net was and is ill-equipped to address the scale and scope of these impacts.

Policy Tools and Mitigation of Impacts

What can be done to mitigate some of the transitional costs to the workforce and communities in light of the concerns listed above? Myriad policy tools are available that research and practice have shown to be effective at minimizing costs to affected workers and communities while also being cost effective from the standpoint of government expenditures. Key to these suggestions is minimizing labor force exit and/or preventing an increase in the number of long-term unemployed.⁵ Policies that incorporate transparency and certainty in the timing of impacts, described in more detail below, are also likely to aid the workforce transition.

Extending and Potentially Reforming Unemployment
Insurance Benefits in Fossil Communities

There has been a long-standing concern that extending the duration and increasing the benefits of UI will induce workers to delay seeking new jobs and thereby elevate unemployment rates and prolong economic recovery. Yet, extensive literature now

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⁵ The following discussion is based on congressional testimony from von Wachter (2011) and recent work by Hanson (2023).

suggests that extending UI prevents large declines in individual and/or local consumption for the substantial number of workers at risk of exhausting their benefits (Ganong and Noel 2019; Kovalski and Sheiner 2022). If this is the case, not all of the disemployment effects of UI generosity represent a distortion but may be a sign that UI helps to alleviate credit constraints that prevent individuals from self-insuring against unemployment shocks (i.e., UI benefits provide a form of social insurance). Relatedly, UI extensions can also provide a degree of demand stabilization for local economies.

Extensions in UI duration can also prevent individuals who are at risk of dropping out of the labor force entirely from entering more costly (and permanent) government programs such as SSDI or claiming Social Security benefits early. Therefore, these extensions could imply cost savings for the Social Security trust fund that need to be incorporated into calculations of the budgetary effect of UI extensions (von Wachter 2011).⁶

Recessions and local economic shocks also tend to lead to early retirement from the labor force, especially for less educated men (Autor et al. 2012; Yagan 2019). For example, von Wachter (2007) shows that in past U.S. recessions, a 5-point rise in state unemployment rates is causally related to a 5 percentage point reduction in the employment-population ratio of 60- to 64-year-old high-school graduates. The majority of these workers do not return to the labor force and are likely to claim SSDI (if eligible) or Social Security benefits early. Extensions in UI durations may prevent some of these workers from dropping out of the labor force completely.

Most extensions to UI occur at the state level. There appears to be scope to further tune UI benefits to local economic conditions. Because job loss caused by the energy transition is likely to be highly concentrated in specific local labor markets, state-level triggers may be too crude to help the regions that will suffer high levels of worker displacement, entailing larger than necessary fiscal expenditures. Criteria like those provided to define Energy Communities in the IRA could similarly be used to target social assistance and workforce support programs and policies described below.⁷

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⁶ With a monthly job finding rate of 10 percent (i.e., the job finding rate suggested by Hall [2005] at the trough of the 1982 recession), an extension of benefits by 6 months would imply that about half of the individuals looking for a job upon benefit expiration would find a job.

⁷ The IRA provides three criteria to define an Energy Community. Meeting any one of these criteria qualifies: (1) An industrial brownfield site, as defined in a prior statute, 42 U.S.C. 9601(39). (2) A county that meets two criteria: i. at any time from 2010 on, it had 0.17 percent or greater direct employment OR 25 percent or greater local tax revenues related to the extraction, processing, transport, or storage of coal, oil, or natural gas AND ii. now has unemployment rate that exceeds U.S. average. (3) A census tract (plus all adjoining census tracts) where i. a coal mine closed in 2000 or later, OR ii. a coal plant closed in 2010 or later.

Transition Assistance Programs

As noted above, the largest and most well-known program to alleviate the disruptive costs of job displacement is TAA. While TAA contains several program components, its primary benefit is coverage of training costs for every year a qualified worker is retraining, up to a statutory maximum of 3 years. Median annual coverage from 2001 to 2016 was $7,500/recipient-year, including up to 2 years for “basic” retraining, and an additional year for “remedial” training (if deemed necessary) or “completion” training for workers who are close to completing a credentialed curriculum but have exhausted basic benefits.

To receive TAA benefits, workers (or their surrogates) must file petitions at the Department of Labor (DOL) within 1 year of their trade-related separation from a given employer, at which point a DOL investigator is tasked with determining whether applicants were laid off by companies whose decline in sales was owing to increased imports or outsourcing. Once workers are approved for TAA, state career centers (e.g., American Job Centers, One-Stop Career Centers) guide workers to potential training program matches based on prior experience, with workers having the final say over where to train. Once enrolled, training subsidies and regular Trade Readjustment Allowance (TRA) payments are administered through local state career centers, where workers recoup paychecks. Recipients are also entitled to expanded UI benefits while training (TRAs), conditional on providing regular proof of training enrollment (Hyman 2022, p. 7). Extended UI is available for up to 3 years, including the standard initial 26-week UI duration.

Wage Insurance Program

Because UI reimburses only a modest fraction of the long-run earnings losses associated with job displacement, some have suggested wage insurance systems to counteract these effects (LaLonde 2007). Wage insurance provides a temporary subsidy covering a portion of the wage decline to workers whose reemployment wages are lower than their predisplacement wages. Proponents argue that wage insurance not only financially compensates workers facing wage reductions after job displacement but also incentivizes job search, shortens unemployment durations, and supports workers for whom job training may be less effective (Kletzer and Litan 2001). By reducing what employers need to initially pay to attract and hire a displaced worker, the wage insurance benefit can help employers and employees find a match and provide a financial bridge to the worker until he or she is able to command a higher salary without the subsidy, thanks to on-the-job training and experience.

Since 2002, the TAA program has included a wage insurance program available to workers aged 50 and over who were laid off in a trade-related displacement (known as Alternative or Reemployment TAA). This national program is the largest and longest-running wage insurance program in the world. Hyman et al. (2021, 2023) uses the age-eligibility cutoffs in this program to explore the causal effect of these policies on employment and earnings trajectories of trade-affected workers in the United States. While all TAA-certified workers had access to training and extended UI payments (see above for a more detailed discussion of TAA), only those over age 50 had the additional option of receiving wage insurance.

The authors find that workers eligible for wage insurance are 25 percent more likely to be employed in the years just after displacement, and their earnings are a sustained 20 percent higher, relative to similar workers who are not eligible for the program. Most of these differences in earnings are accounted for by the higher probability of employment, rather than job quality improvements, suggesting that these programs can be effective in getting displaced workers back into the labor force and out from the long-term unemployed. The magnitudes of the earnings effects are large enough for this program to “pay for itself,” through both increased government revenue associated with higher income tax revenue per participant as well as lower social expenditures in the form of UI or Supplemental Security Income/SSDI.

Active Labor Market Programs to Prevent Long-Term Unemployment

An increasing amount of evidence suggests that active labor market programs can be successful in helping displaced and disadvantaged workers to find employment in new occupations and at wage rates that are higher than they otherwise would have commanded. Many workers displaced by the energy transition will need to retool their skills for new occupations. A better equipped local workforce may help a region to rebound more quickly from the loss of key export industries. Research and past experience have demonstrated at least three types of programs that are able to achieve lasting increases in employment while potentially saving money for the UI system: (1) retraining programs, (2) job search assistance, and (3) reemployment bonuses.

Evidence from recent randomized control trials shows that specific types of job training programs yield high returns: raising wages for low-wage workers and sometimes paying for themselves within 5 years (Katz et al. 2022). These programs provide training in sector-specific skills demanded by local employers, who sometimes help to define the training, and offer wrap-around services regarding career readiness,

career counseling, job placement, and post-placement job advancement. There is also evidence from other countries that well-designed, sectoral training programs have improved individual employment outcomes (Card et al. 2018).

Even though there are clear success stories regarding training, there are also concerns about scaling and implementation (Kanengiser and Schaberg 2022). Employers’ wariness to participate in these programs (i.e., by guaranteeing to hire certain numbers of qualified graduates) is a common problem. Another problem may stem from the dizzying number of agencies (i.e., Workforce Development Boards) involved in administering these programs, with jurisdictional boundaries that bear little relation to the geographic structure of local labor markets and often do not align with the regional structure of local economic development agencies (Hanson 2023). There are also relatively low enrollment rates for training programs from eligible employees. Participants may fear that the opportunity costs from program participation may exceed any future gains in productivity or workforce advancement. People are often not paid during the time it takes to train, and when they do receive stipends, they are unlikely to cover the cost of living. Drop-out rates can also be high (Heckman et al. 2000). Gazmararian (2022) found that in places like southwest Pennsylvania where there were layoffs in the coal industry, economic decline persisted despite the presence of long-running development programs like the POWER Initiative through the Appalachian Regional Commission or the Assistance for Coal Communities program by the Economic Development Administration.

Other forms of training include community and 4-year colleges. “In community colleges, job-specific training often takes the form of certificate programs. These are practical courses of study of less than 2 years in length, which target specific occupations such as construction, manufacturing, repair, transportation, and other vocational trades” (Hanson 2023, p. 20). Prior research finds that when local economic conditions deteriorate, enrollment in certificate programs tends to rise. These effects are largest for programs that provide certification in industries where employment is expanding, suggesting that workers are using the programs to move between occupations in response to changing economic conditions (Acton 2021; Foote and Grosz 2020). However, most community colleges are geared to prepare students for entry into 4-year colleges and universities and allocate substantially fewer resources to certificate programs (Schanzenbach and Turner 2022). Goolsbee et al. (2019) develop a detailed proposal for expanding the training capacity of community colleges, as part of a broader agenda to increase and strengthen education of the U.S. workforce.

Federal financial aid can also play a vital role in assisting displaced workers in updating or modifying their skills via higher education. However, in many states the UI system does not continue to pay benefits when individuals enroll in school. Policies enacted

in the American Recovery and Reinvestment Act of 2009 have led to reforms in several states that continue payment of UI benefits for workers obtaining certain types of training for up to 26 weeks. It is worthwhile to consider further initiatives to encourage efforts by UI recipients to obtain retraining (von Wachter 2011).

For some workers, a long period of time may elapse before they find a new job. These workers may have lost motivation, hope, or a realistic view of what wages to expect in the labor market. If targeted to workers most likely to exhaust UI benefits, bonuses that pay workers for finding a new job can reconnect long-term unemployed workers to the labor force, raising employment and reducing the cost for the UI system (von Wachter 2011). Evidence on “reemployment bonus experiments” suggests that short-term subsidies raise employment (e.g., Meyer 1995) but may only be cost effective if targeted to workers most likely to exhaust their benefits (DOL 1995; O’Leary et al. 2005). This sort of exit strategy built into the UI system may be particularly useful for older laid-off workers who face strong wage penalties and low employment rates (von Wachter 2011). It may also help to address concerns regarding the effect of extending UI benefits on the employment rate itself.

Prevention of Layoffs Through Work-Sharing Programs

One way to reduce the costs of the decarbonization of the workforce is to slow the pace of job destruction by using work-sharing programs (also known as “short-time compensation”). For example, the cost of UI benefits for a typical worker is a small fraction of the total earnings lost owing to a layoff over the remainder of the individual’s working life (Kovalski and Sheiner 2022). If the same benefits were paid during employment to avoid job loss, this would substantially reduce the cost to workers. These programs would prevent the decline in spending power associated with layoffs, avoid dislocation and long-lasting earnings losses of laid-off workers, and may be cost-effective from society’s point of view (von Wachter 2011).

Such a system of work-sharing has already been instituted in 17 states.⁸ However, the current system may have to be extended and publicized to have a visible impact on forecasted job destruction in fossil communities and to have a substantial impact on employment (von Wachter 2021). At the same time, these benefits to the workforce

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⁸ See DOL (1997) for an overview of short-time compensation programs in different states. The German experience is the most cited example of a successful implementation of a work sharing program (see Möller [2010] for a discussion).

have to be considered against the ongoing social costs of fossil-intensive production that these compensation programs would ostensibly support.

A Safety Net for Workers Not Yet in the Workforce

The impact of decarbonization on the families and young individuals who remain in affected communities may also be worth considering. First, the current system of financial aid for college could be used to help prevent children of low-income background or of families who experienced a job loss from dropping out of college (von Wachter 2011). Research has documented a robust correlation of parental income with college attendance, especially of lower-income individuals, and this relationship appears to have strengthened over time (Deming and Dynarski 2009). Financial aid can be an important buffer against labor market shocks affecting parental income or students’ own ability to work while in school. Another concern is that many resources available especially for lower-income students are currently provided at the state level, such as subsidized community colleges or merit scholarships. If decarbonization and the resulting fiscal implications impact state budgets, these resources may be at risk.

Migration Subsidies

Conventional views of labor markets suggest myriad ways that communities could adjust to a major change in economic landscape. One potential adjustment is through worker migration, moving to higher opportunity areas in search of gainful employment. In reality, however, migration has been relatively sluggish to respond in communities affected by trade or coal shocks, and this sluggishness has increased over time (Raimi 2022). When workers without a college degree lose their jobs, few choose to move elsewhere, even when local market conditions are poor. As a result, the proportion of the working-age population that have jobs (i.e., the employment to population ratio) has fallen significantly in affected communities. One potential explanation for this pattern is that families prefer to stay in their communities for other reasons, such as affordability or proximity to family and jobs. An alternative explanation is that they do not move to high-opportunity areas because of barriers that prevent them from making such moves.

Economists and policy makers have recently proposed migration subsidies or vouchers as one possible solution to overcome some of these barriers. There is some precedent, as the U.S. government spends approximately $20 billion each year on the Housing Choice Voucher Program, which provides rental assistance to low-income families with a goal of expanding residential choice and giving low-income families access to

higher-opportunity areas. Evidence as to the effectiveness of these vouchers is promising, although it mostly comes from experimental evidence tied to families currently living in public housing, rather than economically distressed communities. For example, the Department of Housing and Urban Development designed the Moving to Opportunity (MTO) experiment to determine whether providing low-income families assistance in moving to better neighborhoods could improve their economic and health outcomes (HUD n.d.). The MTO experiment was conducted between 1994 and 1998 in five large U.S. cities. Approximately 4,600 families living in high-poverty public housing projects were randomly assigned to one of three groups: an experimental voucher group that was offered a subsidized housing voucher that came with a requirement to move to a census tract with a poverty rate below 10 percent, a Section 8 voucher group that was offered a standard housing voucher with no additional contingencies, and a control group that was not offered a voucher (but retained access to public housing).

Researchers found that the experimental voucher group in the MTO experiment experienced improved mental health, physical health, and subjective well-being of adults as well as family safety (Katz et al. 2001). More recently, researchers have shown how these vouchers had long-run effects on children’s outcomes; moving a child to a low-poverty area when young (at age 8 on average) using a subsidized voucher like the MTO experimental voucher increases the child’s total lifetime earnings by about $302,000 (Chetty et al. 2015). The additional tax revenue generated from these earnings increases would itself offset the incremental cost of the subsidized voucher relative to providing public housing.

Place-Based Policies

An alternative to addressing job loss by targeting individuals is to target exposed regions through “place-based” policies, which condition assistance on the state of the local economy. This is a general term that is meant to include policies such as tax incentives to recruit or to retain companies, subsidized lending for real estate development, and technical assistance to local business (Bartik 2020; place-based policies are also discussed in Chapters 5 and 13). Because decarbonization is likely to reduce the economic vibrancy of regions currently specialized in fossil fuels, the role of place-based policies would be to help communities develop a new economic base and replace the well-paying jobs that have been lost (Hanson 2023). Research has shown that large, place-based policies (e.g., Tennessee Valley Authority) can have long-lived effects on regional specialization (Bianchi and Giorcelli 2022; Kline and Moretti 2014), which suggests that they have the potential to catalyze local investments in individuals (labor) and businesses (capital).

Examples from past policy successes and failures reveal several challenges associated with design and implementation. If the approach is not careful, these programs may intensify zero-sum tax competition among regions to attract firms (Kim 2021) or be manipulated by elected officials for political gain (Slattery 2020). Relatedly, policy implementation tends to be badly fragmented across state and federal agencies, which often fail to coordinate their efforts and instead frequently design incentive structures that cause them to work at cross purposes (Hanson 2023).⁹

Place-Based Policies: Business Tax Incentives

A common approach to incentivizing new business and capital is to provide tax incentives to a large company in return for promised investments in new productive capacity, the expansion of existing operations, or the creation of R&D facilities (Slattery 2020). The hope is that if the company breaks ground, it will attract upstream industry suppliers and downstream industry buyers, potentially generating industry agglomeration that could raise regional employment, productivity, and wages. There is a range of evidence suggesting that policies targeting specific industries in various regions succeeded in expanding regional output and/or productivity in the target area well beyond the duration of the policies (Bianchi and Giorcelli 2022; Freedman 2017; Garin and Rothbaum 2020; Greenstone et al. 2010). It is unclear whether business tax incentives simply move targets from one location to another (at substantial taxpayer expense) or truly expand aggregate output nationally. That being said, place-based tax incentives may also be justified from an equity perspective by transferring resources to communities in which needy households are clustered (Gaubert et al. 2021).

While some place-based policies such as business tax incentives can be useful in stimulating new capital deployment within a region (e.g., new or expanding businesses), there are also policies that may be helpful in raising the productivity of incumbent businesses. For example, “in economically distressed regions, local entrepreneurs may have difficulty securing loans to launch a new business while owners of existing firms may face challenges in financing business improvements or expansions” (Hanson 2023, p. 30).

The decline of a region’s existing industrial base may reduce housing values and associated equity, stifling business formation (Davis and Haltiwanger 2019). In the

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⁹ “In the United States, the practice of local economic development tends to be organized around five major areas: business retention and recruitment, workforce development, financial and technical assistance to small business, infrastructure development, and financial incentives to invest in low-income areas (Bartik 2020). . . . These areas tend to be managed by different bureaucracies, funded from different sources, and guided by different and often conflicting incentives” (Hanson 2023, pp. 27–28).

aftermath of localized economic downturns, there may be cause to subsidize services to businesses that have a demonstrated interest in expanding local employment.

Hanson (2023) highlights several existing government programs intended to provide a wide range of support to small- and medium-size businesses. The Small Business Administration guarantees loans to qualifying small businesses and runs more than 900 Small Business Development Centers, often housed in community colleges or universities. These centers provide technical assistance and consulting services to local firms. The Economic Development Administration funds similar business services through its grants to colleges and universities. The Manufacturing Extension Program run by the National Institute of Standards and Technology is specific to industrial production and helps companies upgrade their technology through a national network of centers. In theory, expanded versions of these programs could help regions adversely affected by the energy transition, although evidence as to the efficacy and cost-effectiveness of these programs remains limited. Learning more about how well these programs work, ideally through gold-standard, randomized controlled trials should be a high priority.¹⁰

Place-Based Policies: Fossil Retirement Subsidies

Another potential place-based policy to help mitigate some of the devastating impacts to fossil communities are place-based transfers designed to incentivize the closure of fossil facilities such as coal-fired power plants. While closing a facility would lead to job loss for affected workers, there are at least two reasons why these policies can be helpful. First, some of these facility retirement subsidies can be earmarked for worker transition assistance.¹¹ Second, subsidies can be designed in a way that provides important information as to the timing of the shutdown that allows not only affected workers but also affected communities to begin planning.¹² For example, Germany has been experimenting with reverse auctions, as a type of subsidy, to compensate early retirement of hard coal and small-scale lignite power plants. A reverse auction is a type of auction in

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¹⁰ There is evidence from developing countries about the impact of these wraparound consulting services (Bloom et al. 2013, 2020; Iacovone et al. 2022). For example, Hanson (2023) describes a variety of randomized control trials that show how supplying consulting services to medium-size businesses in developing countries leads to long-lasting improvements in economic performance.

¹¹ Colorado has recently required that regulated utilities submit a workforce transition plan and authorizes “rate recovery” for the expenses. As a consequence, the utility has a financial incentive to attend to impacted communities and encourage workforce development, in order to recoup the costs from closing down a coal plant early (Righetti et al. 2021).

¹² The U.S. Worker Adjustment and Retraining Notification Act (WARN) has a similar mandate, requiring most employers with 100 or more employees to provide 60-day advance notification of planned closings and mass layoffs of employees. However, 60 days is not a sufficient length of time for workers or communities to plan for workforce transitions.

which sellers (i.e., coal facilities) bid for the prices at which they are willing to retire their plants. At the end of the auction, the seller with the lowest amount wins the auction and receives the payment, and a closure date for the facility is announced publicly. After the fifth round of auctions, the German government can force compulsory power plant closures without financial compensation. By providing both “carrots” in the form of higher maximum bids early in the auction rounds and “sticks” in the form of compulsory closures without compensation at the end of the auction rounds, Germany has provided strong incentives for retirement. Box 4-2 expands on the lessons policy makers can take away from Germany’s experience with coal phaseout.

Summary: Policy Tools and Mitigation of Impacts

The transitional costs associated with reallocating the workforce away from the fossil sector will likely impose substantial and lasting costs on affected workers and communities in terms of earnings, health, and strain on their families. Displaced workers earn significantly less than similar workers who have not been displaced, even years after the separation occurred (Jacobson et al. 1993; von Wachter et al. 2011). Over the past several decades, import competition from China (Autor et al. 2013), the automation of manufacturing production (Autor and Dorn 2013), and the shift in electricity generation away from coal (Black et al. 2005) have caused locally concentrated job loss in the United States (Richardson and Anderson 2021), which has led to lasting declines in employment rates, earnings, and social conditions in the local labor markets that were exposed to these shocks. Younger and more educated workers were most likely to migrate away from these regions, but for the older and less-educated workers left behind, localized distress has persisted for decades beyond the actual displacement events (Hanson 2023). Without significant changes to the existing safety net and transition assistance, the transition from fossil fuels seems likely to repeat the now familiar story of industry decline and regional hardship.

Manufacturing support and training programs can help catalyze job creation and job alternatives for displaced workers. However, these programs do not address the concerns raised by existing research on the fate of displaced workers and communities in the recent past. Research and prior policy experiments suggest cost-effective ways to alleviate the burden for these workers. For example, a well-designed and well-funded transition assistance program (see Recommendation 4-3) may offer the best hope for reducing the harms to displaced workers who find the transition to new jobs difficult for one reason or another. Each of the policy options described will require an act of Congress. In many cases, changes in policy to address these challenges need to be paired with making necessary administrative data and program information available to allow researchers to give better assessments of the full costs and benefits of these future programs.

CONCLUDING FINDINGS AND RECOMMENDATIONS

Table 4-1 summarizes all the recommendations in this chapter regarding building the workforce needed to accomplish decarbonization objectives, as well as supporting workers negatively impacted by the transition.

SUMMARY OF RECOMMENDATIONS ON WORKFORCE NEEDS, OPPORTUNITIES, AND SUPPORT

TABLE 4-1 Summary of Recommendations on Workforce Needs, Opportunities, and Support

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