Chapter 2 described the technological changes required to replace the current fossil fuel-based U.S. energy system with a net-zero carbon energy system. In Chapter 3, four priority social and economic overarching goals are identified to guide and evaluate those changes (Box 3.1). These strategies significantly expand how energy technologies and policies are typically assessed, modeled, and optimized, going beyond technical performance, cost, and reliability. They require more diverse voices and perspectives to be included in energy decision-making and new metrics for evaluating outcomes.
This expansion of the principles against which to measure U.S. energy transitions responds to three broad challenges: (1) the responsibility to ensure that the transition to a carbon-neutral economy benefits all Americans and addresses the harms that it creates; (2) the importance of establishing strong public support for action to decarbonize the economy; and (3) the possibility of leveraging opportunities created by the transition to advance a wide range of U.S. national priorities.
Replacing the systems that provide the United States with carbon-based fuels with carbon-neutral alternatives will require, in a very real sense, a fundamental transition of the U.S. economy. This transition has the potential to bring significant benefits to American families, workers, and businesses that go well beyond addressing climate change. As many parts of the country experienced during the early days of the COVID-19 crisis, for example, reductions in the use of carbon-based fuels will bring significant improvements in air pollution and public health, owing to lower rates of asthma, cardiovascular disease, and other pollution-linked diseases and mortality (Haines, 2017; Thakrar et al., 2020). The switch to clean energy can also advance U.S. economic leadership and competitiveness in global markets (Ladislaw and Barnet, 2019).
Further, the net-zero energy transition can reduce inequities in energy and transportation options that adversely impact significant numbers of Black, Indigenous, and people of color (BIPOC) (Drehobl et al., 2020; Bednar and Reames, 2020; Fleming, 2018), as well as communities experiencing economic decline and environmental injustice and
other low-income and disadvantaged communities (Jessel et al., 2019; Colon, 2016; Shonkoff et al., 2011). However, the committee recognizes that environmental justice communities have concerns and want to ensure that emissions reductions happen in a way that all share in the benefits, such as is required under New York’s Climate Leadership and Community Protection Act (S6599).
This transition may also provide employment opportunities. For example, one study estimates that cross-sector energy efficiency investments could add up to 660,000 more people working for a year (job-year) through 2023, 1.3 million added job-years over the lifetime of the investments, 910 million tons of reduced CO2 emissions, and $120 billion in energy bill savings (Ungar et al., 2020).
At the same time, the United States cannot afford to ignore the difficulty and complexity of navigating one of the most disruptive economic transformations in U.S. history (Smil, 2010; Miller et al., 2013). Even at low levels of adoption, renewable energy is already transforming how electric utilities produce and sell energy, including shifts in business models, markets, prices, regulations, and the location of power production (Blackburn et al., 2014; Burger and Luke, 2017; Funkhouser et al., 2015). Some of the world’s largest technology, finance, energy, and transportation firms have already initiated major changes to their operations that reduce the use of fossil fuels and increase energy efficiency, including Apple, Google, BP, General Motors, Ford, Delta Airlines, and BlackRock (Somini and Penney, 2020). These developments foreshadow
the widespread changes that the transition to low-carbon technologies will bring to all sectors of the economy.
The rapid downsizing of carbon-intensive industries, the rise of low-carbon alternatives, shifts in energy geographies, and the reconfiguration and reorganization of electricity markets will also bring unprecedented change to significant factions of the U.S. workforce (NASEO and EFI, 2020). Throughout the economy, businesses and workers will need to adjust daily routines and work practices to the requirements of low-carbon electricity, energy, and transportation systems. Families and households will also experience significant changes, such as the need to replace gasoline-powered cars and trucks with electric vehicles (McCollum et al., 2018). Far more wide-ranging changes in household energy economics, practices, and behavior may also arise (Dietz et al., 2009)—for example, from distributed energy generation and storage technologies or programs for flexible demand through the active monitoring and regulation of household energy consumption. As these transformations proceed, they will intersect in predictable and unpredictable ways with other important changes in the U.S. economy, such as the damage wrought by COVID-19 (Henry et al., 2020; Sovacool et al., 2020), shifts in global trade (Byrne and Mun, 2003), and the rapid growth of automation, machine learning, and smart systems (Victor, 2019).
Meeting these challenges will require actions on the part of federal, state, and local governments, as well as businesses, workers, other institutions, families, and individuals. More intentional coordination will help the United States and its states, regions, and localities to navigate the complexities and uncertainties of economic transformation at the scales and on the timetables required to successfully combat climate change, to ensure the transformation is inclusive and equitable, and to provide support to businesses, workers, and communities as they face the consequences of change. The energy system, in particular, has a special responsibility to take the lead in transforming the U.S. economic system to replace the burning of fossil fuels with alternative, carbon-neutral and low-pollution means of creating, transporting, and using energy.1
1 In using the phrase “the energy system,” the committee recognizes that energy is, in reality, a complex system-of-systems that encompasses a wide range of technologies and societal, market, and regulatory arrangements responsible for the production and distribution of diverse energy resources, including fuels and electricity, as well as the myriad systems in which energy is used (e.g., buildings, transportation, food, communication, water, manufacturing, and more) for diverse human purposes. As indicated by its role in the economic system, these systems are deeply interconnected in their existing forms, and decarbonization will transform all of them and, in many cases, reconfigure their relationships—for example, via the electrification of vehicles, heat pumps, and other technologies. The reference to these diverse arrangements as the energy system is meant to encourage a comprehensive, integrated approach to decarbonization.
No longer can the United States tolerate delay in making the economic and technological changes necessary to combat climate change.
Because the transition to a low-carbon economy is likely to be disruptive and create uneven distributions of benefits, costs, and risks, U.S. energy policy in the 2020s will need to establish and maintain a strong social contract for decarbonization (see Box 3.2; O’Brien et al., 2009). In the absence of broad support from U.S. families, workers, businesses, and communities, progress is unlikely to proceed at the pace and scale required to achieve a carbon-neutral economy by 2050.
Polls show that, across the political spectrum, a significant majority of Americans support urgent efforts to combat climate change and decarbonize the economy (Leiserowitz et al., 2018; Roberts, 2020; Tyson and Kennedy, 2020). That support is likely to be tested, however, as the United States navigates the complexities of the changes required and the disruptions they bring to people’s lives and livelihoods.
Research has demonstrated a “social gap” between widespread general support for renewable energy technologies yet relatively slow uptake (Dwyer and Bidwell, 2019; Rai and Beck, 2015; Boudet, 2019). Public perception and opposition can be roadblocks to a carbon-neutral transition (Firestone et al., 2017, 2020), especially where public engagement is perfunctory, carried out too late in the process, and where key decisions have already been made. These cases often exacerbate conflict among groups and catalyze opposition to new technologies and infrastructures. The deliberate undermining of public support for climate action through misinformation and the ways that publics are encouraged or discouraged from participating in governance processes can also significantly shape social responses to new technologies (Giordono et al., 2018; Hall et al., 2013). This is particularly relevant in the energy system, where there is often a lack of fairness and unequal distributions of power and resources in decision-making processes (Pezzullo and Cox, 2017; National Research Council, 2008).
There is no silver bullet for sustaining widespread public support for the transition to a carbon-neutral economy. That support will come only from persistent and sustained efforts on the part of civic, policy, labor, and business institutions in the energy system and beyond. A more coordinated, national effort is needed to proactively engage diverse publics and stakeholders (Dwyer and Bidwell 2019; Ashworth et al., 2011); to meaningfully integrate the social and economic dimensions of transitions into energy analysis and policy (Miller et al., 2015); and to work collaboratively with communities (Wyborn et al., 2019) to create a strong clean energy economy that supports a robust
U.S. workforce and distributes the costs, benefits, risks, opportunities, and burdens of decarbonization as fairly and equitably as possible.
Generating sustained public support requires a multipronged approach, including public engagement to discover and embed community preferences in decision-making and a concerted effort to communicate the necessities, costs, benefits, and remedies of policy actions (Steg et al., 2015). It also needs to facilitate inquiry and dialogue about what those policies might mean for specific communities and how to apply policies equitably and effectively in different contexts (Kimura and Kinchy 2019), while systematically dismantling misinformation to minimize confusion and polarization (Farrell et al., 2019). Technology and infrastructure needs (as discussed in Chapter 2) toward deep decarbonization goals necessarily involve heterogeneous costs and benefits across communities and regions in the United States.
Inevitably, public support for necessary policy actions (see Chapter 4) will vary across U.S. regions based on perceptions of costs and benefits (Howe et al., 2015). Importantly, such perceptions are mediated through cognitive ideologies (e.g., individualistic versus egalitarian; Leiserowitz et al., 2013) and values (e.g., egoistic versus altruistic, Steg et al., 2015), which are relatively stable. Generating long-term public support will entail understanding those values and incorporating them into implementation to design strategies that are sensitive and responsive to local and contextual factors (Haggerty et al., 2018, Steg et al., 2015). Relatedly, to be effective, implementation strategies should take an integrated approach, anticipating barriers and challenges that communities and individuals might face with particular technologies or behaviors and crafting solutions that not only address immediate costs and benefits but also pay attention to ongoing informational and maintenance needs.
Achieving these goals will be arduous, but critical, and can only be accomplished through a deep commitment to working with relevant networks of trusted organizations and institutions and genuinely engaging communities in decision making (Berkes, 2009). The importance of public engagement is even higher in the early phases of the transition in order to establish a foundation of longer-term trust, cooperation, and transparency, without which broader and deeper scale-up actions necessary beyond 2030 could be crippled.
At the same time, it will be extremely important to prevent misinformation from continuing to exacerbate confusion, mistrust, and already polarized worldviews of the future of the energy system, thereby weakening public support for necessary policy actions (Farrell, 2019). Two things in particular could go a long way in taming the dangers of misinformation. First, financial disclosure and transparency requirements
should be expanded and tightened to preclude proliferation of misinformation under the veil of secrecy and intractable affiliations (Farrell et al., 2019). Second, creating new forms of social interaction that bridge disconnected information-sharing systems has the potential to enable the cross-flow of information and building of linkages across diverse communities and value systems (Lewandowsky et al., 2017), thus helping rebuild a more foundational basis of trust.
Evidence strongly shows that, especially during times of significant technological change, robust public engagement using these kinds of strategies can deliver significant benefits with respect to both designing technological futures that effectively meet the needs of the public and strengthening public support for processes of change (Narrasimhan et al., 2018), especially where such engagement facilitates a bidirectional dialogue that connects national policy making with local communities (Devine-Wright, 2011; Petrova, 2013). This is particularly true where technological changes have substantial impacts on matters that are meaningful to members of the public (e.g., siting of new energy facilities near neighborhoods, the kinds of cars or light bulbs that are available to buy, energy costs, or the availability of alternative transportation modes) and where public engagement is carried out upstream, significantly in advance of proposed technological changes, and in a manner that allows for public input to make meaningful contributions to technology design or adoption (Wilsdon and Willis, 2004; Wiersma and Devine-Wright, 2014). Well-designed public engagement, including younger populations, also has the potential to significantly improve public literacy and learning on matters of concern, as well as more inclusive and constructive public decisions (Tierney and Hibbard, 2002; Bice and Fischer, 2020; McLaren Loring, 2007).
In light of these findings, it will be important for the United States to invest in innovative approaches to strengthen public engagement and participation in the design and deliberation of decarbonization pathways. These should include high-profile regional public dialogues and listening sessions organized by clusters of federal agencies in collaboration with state/regional governments and industry participation to discuss decarbonization pathways and goals and open conversations about questions of justice and inequality confronting communities in the context of decarbonization. It will also be important to set standards and resources for public participation in decarbonization planning processes by requiring a role for representatives of disadvantaged populations—low-income and communities of color—in advisory boards and other influential bodies to enable them to participate in meaningful ways. Standards should also mandate best practices in social impact assessment (Vanclay, 2003; Esteves et al., 2012), many of which have been neglected as federal project review has tilted heavily to focus solely on environmental criteria (Burdge, 2002).
Over the past decade, an increasingly broad coalition of groups has advocated that a low-carbon transition must be a “just transition”: redressing the harms caused by the transition to a carbon-neutral economy in ways that ensure viable and thriving futures for the individuals, families, and communities whose lives and livelihoods have been disrupted (see Box 3.3; Carley and Konisky, 2020; Henry et al., 2020; Newell and Mulvaney, 2013; Sovacool et al., 2020). Similar to other movements, such as Black Lives Matter, that have highlighted persistent forms of injustice and economic insecurity in the U.S. economy and society, calls for a just energy transition highlight the importance of building a social contract for decarbonization that recognizes the ways that pathways differentially affect communities and using the resulting insights to design policies that create better, fairer, and more equitable outcomes. To address these concerns, a number of cities and states have already taken the lead in developing new approaches for evaluating and assessing the social and economic dimensions of pathways to decarbonization (e.g., City of Providence, 2019; California Energy Commission, 2018), which supplement more traditional methods for assessing the cost, reliability, and carbon footprint of new energy technologies and systems.
Over the next three decades, as U.S. cities, states, and companies move toward a carbon-neutral economy, they will make myriad decisions about how to reshape U.S. energy systems. Deep decarbonization offers a rare opportunity to deploy large-scale innovation in the energy system to advance an array of key U.S. national goals and objectives. In the 20th century, the electrification of cities, industry, and rural communities and the creation of world-leading automobile, oil, and gas industries played key roles in transforming America into a global economic and military power. Today, as described below, if the United States can leverage and sustain existing widespread public support for climate action and mobilize it in favor of the coordinated set of policy actions described in Chapter 4, the country has a similar opportunity not only to help minimize impacts of climate change but also to leverage deep decarbonization to strengthen U.S. economic leadership, reduce inequalities, and create a fairer and more just society.
On the other hand, failure to appropriately envision, evaluate, and integrate the social and economic implications of decarbonization into decision-making about pathways—and the attendant failure to secure a robust social contract with all segments of the American public that can overcome persistent and diverse efforts to undermine public will—poses stark risks to both the timing and achievement of deep decarbonization goals. These risks include erosion of popular and political support for both decarbonization as a goal and for specific policies and pathways to achieving it, higher costs, increased entrenchment of social division and inequality, persistent legacy threats to public and environmental health, and lost opportunities for systemic innovation to enhance near-term and long-term U.S. competitiveness.
TABLE 3.3.1 Vulnerable Groups in the Context of an Energy Transition
|Stakeholder||Concerns in a Just Energy Transition|
|Coal, oil, and gas workers; power-plant workers; and other participants in fossil fuel-dependent economic activities, including manufacturing, operations and maintenance, and service industry jobs, e.g., in automobile parts or repairs or gas stations.|
|Residents in places impacted by fossil fuel and renewable energy supply chains, the siting of energy facilities, and/or the decommissioning of legacy fossil-dependent facilities, including fenceline communities||
|Native American nations and rural communities whose economies, tax revenues, or lands are currently dependent on or impacted by coal and oil and gas development or potentially impacted by future renewable energy development||
|Clean energy industry workers and workers in the energy efficiency industry||
|Communities facing high energy costs and burdens that contribute to perpetuating or exacerbating poverty||
TABLE 3.3.2 Just Transition Proposals and Proponents
|Proposal||Proponents/Authors||Key Themes||Notable Recommendations|
|The National Economic Transition Platform (2020)||Just Transition Fund and coalition||Community-based, reclamation, infrastructure, bankruptcies, access to federal resources, workforce development, restorative economic development.|
|Just Transition Platform (2020)||European Union (EU)||Development, reskilling, and environmental rehabilitation; social and economic effects of the transition, focusing on the regions, industries, and workers who will face the greatest challenges.||The Just Transition Platform aims to assist EU countries and regions to unlock the support available through the Just Transition Mechanism. This platform will provide a single access point for support and knowledge related to the just transition.
Just Transition Mechanism (JTM) is a key tool to ensure that the transition toward a climate-neutral economy happens in a fair way, leaving no one behind. It provides targeted support to help mobilize at least €150 billion over the period 2021–2027 in the most affected regions, to alleviate the socioeconomic impact of the transition.
The committee recommends four social and economic criteria for evaluating pathways to a carbon-neutral economy and informing the decisions that will need to be made over the next several decades, to bring about a just transition. These four criteria are:
- strengthening the U.S. economy;
- promoting equity and inclusion;
- supporting communities, businesses, and workers impacted by the energy transition; and
- ensuring cost-effectiveness.
Each of these criteria reflects an important plank in the U.S. social contract for deep decarbonization because they address the critically important question: To what ends, beyond carbon-neutrality, should the United States pursue deep decarbonization?
These four considerations, described below, are not necessarily comprehensive. The transition to a carbon-neutral economy will bring both significant benefits and challenges for U.S. national security that require extensive analyses that are beyond the scope of this committee. Examples include the implications for the fueling and powering of U.S. defense systems and military operations, critical material and equipment supply chains, emergent vulnerabilities to disruption owing to climate change, and impacts of regional and global alliances. The transition to a carbon-neutral economy will significantly reduce U.S. health and environmental risks, especially in communities that have historically suffered from higher levels of air pollution owing to the combustion of carbon-based fuels. A full assessment of these benefits and considerations is also beyond the scope of this interim report.
As discussed further in Chapter 4, navigating the coming transition successfully will also require strengthening the capacity of energy regulatory and governance institutions to address the complex and interdependent choices these institutions will face in the coming decades and bolstering processes to strengthen the participation of diverse voices and put them on more equal footing with traditional energy stakeholders. Transition policies will require extensive and new forms of coordination across sectors (e.g., between electricity and transportation), across jurisdictions (e.g., between cities and suburbs and their rural neighbors), among utilities (e.g., within regional markets), and between the public and private sectors (e.g., between utilities and cities). These and other relevant considerations should also be part of any comprehensive approach to decarbonization policy and planning.
The committee recognizes that the U.S. Congress and President, state legislatures and governors, city councils and mayors, energy company and utility boards of directors and chief executive officers, civic and business leaders, tribal leaders, and ordinary Americans will bring diverse values and perspectives to choices about how to achieve a carbon-neutral economy. Their decisions will also be shaped by a variety of local and regional considerations such as the differential availability of low-carbon energy resources such as wind and sunlight, the needs of local and regional economies, the configuration of local and regional transportation systems, and the local and regional legacies of carbon-based energy. It is essential that this diversity of values, perspectives, needs, and contexts be given due weight and influence in transition planning and policy.
Approaches that weigh one of these criteria very heavily while neglecting the others are neither desirable nor are likely to be sustainable or secure public support over a multidecade period. This perspective renders inadmissible policy proposals that focus, for example, only on cost minimization and effectiveness while neglecting distributional effects, as well as instruments that singularly prioritize industrial competitiveness while disregarding cost-effectiveness or the needs of communities impacted by the transition. Pragmatic approaches to decarbonization will achieve balance across all four criteria detailed below.
The first criterion is that deep decarbonization pathways should strengthen the U.S. economy by accelerating innovation, advancing U.S. competitiveness in the global economy, and creating high-quality jobs, in relation to a clean energy future. Assessing success in creation of high-quality jobs will require development of the definition for “high-quality jobs” as discussed in Chapter 1. Ensuring that decarbonization advances the U.S. economy and benefits U.S. firms and workers will help maintain the social contract for deep decarbonization.
In the United States, the energy transition is expected to generate public and private investments in new energy technologies and infrastructure worth several trillion dollars (IRENA, 2019). Worldwide, total investment by 2050 in the energy system is estimated at $110 trillion (IRENA, 2019). A significant fraction of these investments is already committed, in the form of targets set by companies, countries, states, and cities. BlackRock has announced, for example, that it intends to put the low-carbon energy transition at the center of its $7 trillion investment portfolio (Coumarianos and Norton, 2020). The European Union has pledged to reduce net carbon emissions to zero by 2050, with an anticipated $1 trillion in public investments in clean energy in the next
decade (Krukowska and Chrysoloras, 2019; Vetter, 2020). Numerous companies, cities, and states in the United States have made similar commitments, including several of the largest U.S. electric utilities (Porter and Hardin, 2020). Volkswagen has indicated its commitment to increase production of electric cars for the masses (Ewing, 2019).
These commitments and investments present a unique opportunity for American businesses and workers to participate in the creation of an entirely new industry and global infrastructure for clean energy comparable to the creation and growth of the oil, gas, and automobile industries over the past 150 years, including the potential to ensure that the benefits of the clean energy economy are equitably shared among all Americans. Missing this opportunity would create enormous economic headwinds for the United States deep into the 21st century.
Energy systems are deeply embedded in our economy and enable it to operate. It is a significant employer and a critical infrastructure that supports all economic activity. In fact, according to Energy Entrepreneurs (E2) latest report, the clean energy workforce in the United States reached 3.3 million jobs by the start of 2020, and it continues to grow for the fifth straight year (Energy Entrepreneurs, 2020). New energy infrastructure will require industrial products, manufactured goods, business services, and new jobs in construction and operations. Better coordination and planning will be required to ensure that U.S. deep decarbonization pathways recognize these linkages between energy and the U.S. economy and leverage them to promote U.S. leadership in the development and manufacturing of new energy technologies, to provide low-cost, reliable, and clean energy to U.S. businesses, and to grow significant new energy industries and associated high-quality jobs.
Clean Energy Contributions to U.S. Innovation, Competitiveness, and Jobs
The committee defines the objectives of leveraging investments in the energy transition to strengthen the U.S. economy in terms of four goals:
Goal 1: Deep decarbonization policy in the 2020s should lay the groundwork for ensuring that the United States has access to growing, reliable, low-cost, clean energy supplies as an essential foundation for a sustainable, resilient, diversified, equitable, and growing economy throughout the 21st century. A thriving, sustainable 21st century U.S. economy requires a secure and abundant supply of low-cost, clean energy. Achieving this goal will require significant investments in clean energy innovation, including strategies for development and widespread deployment of new clean energy technologies and significantly reducing their costs over time.
There are many options available and pathways to meet carbon neutrality in the U.S. economy by 2050, as well as significant variability in regional needs and contexts. A key facet of this goal is also to create flexibility in the options available to the United States for achieving deep decarbonization targets.
Goal 2: Clean energy transitions should accelerate and leverage U.S. strengths in innovation. The United States is a world leader in innovation. Key clean energy technologies have been invented and pioneered in the United States, and the United States leads the world in research investments in clean energy and in the development of a number of future technologies that are likely to play a significant role in achieving deep decarbonization. The United States currently struggles, however, to leverage its leadership in clean energy research and innovation into leadership in clean energy markets and supply chains. U.S. policy should find ways to ensure that the United States maintains its leadership in the discovery, invention, and development of innovative clean energy technologies, while also leveraging that innovation to ensure that the United States is positioned to manufacture and supply the technologies necessary to create a vibrant clean energy infrastructure as a basis for a thriving economy.
Goal 3: Clean energy transitions should enhance and leverage the global competitiveness of U.S. firms. Global markets for clean energy technologies and services are expanding rapidly and are expected to continue to do so for the next several decades at very high annual rates of growth. This growth presents a significant opportunity for U.S. companies, if the United States is able to establish globally competitive industries in key technology markets. U.S. policy should make sure that U.S. companies are positioned to successfully compete in global clean energy markets and do so in ways that are able to be sustained and resilient in the face of future global shocks.
Goal 4: Clean energy transitions should grow the U.S. workforce through the creation of new, high-skilled, high-wage jobs. The U.S. energy industry is a major employer, and this position of importance in the U.S. workforce will continue into the future as the United States revamps the energy system to meet deep decarbonization targets. The U.S. Bureau of Labor Statistics, in its Occupational Outlook Handbook, also notes that wind turbine service technicians and solar photovoltaic installers are forecasted to be the first and third, respectively, fastest growing occupations between 2019 and 2029 (U.S. Bureau of Labor Statistics, 2020). However, the transition from the existing U.S. energy workforce to the energy workforce of the future will pose significant challenges for U.S. energy workers, their families, and communities dependent on their incomes, and requires careful consideration of individual, household, and community transition planning. The United States is no stranger to the economic challenges posed by disruptive innovation, but going forward it must do significantly better at cushioning the impacts and maximizing economic benefits of rapid
technological changes and anticipating and proactively addressing the transition needs, especially for industries most impacted, of communities and regions. The future of the U.S. energy workforce is critically dependent on U.S. leadership in the clean energy economy and on ensuring that the emerging clean energy economy supports high-quality jobs.
How Deep Decarbonization Innovation Strengthens the U.S. Economy
Beginning in World War II, the United States learned the importance of public and private investments into research, development, demonstration, and deployment of technologies as well as the necessity of having a well-educated workforce that could be deployed in factories and laboratories across the nation. Innovation is a crucial engine for technology discovery and development, as well as for long-term reductions in technology costs and improvements in quality. Innovation is also an important engine for entrepreneurship, especially in tech-heavy sectors and, thus, fundamentally linked to the potential for long-term job creation in the U.S. economy and the ability for the economy to successfully navigate disruptive technology transitions. Last, innovation is a necessary, albeit not sufficient, condition for U.S. competitiveness in a global economy in which innovation is now understood as the foundation for long-term economic security and in which all countries now invest heavily.
Decarbonization requires significant new innovation (Chu and Majumdar, 2012; IEA, 2020b). Many of the technologies necessary for the initial pursuit of deep decarbonization strategies are already established industries and several have already significantly fallen in costs (Wiser and Bolinger, 2019). The U.S. Department of Energy (DOE) Sunshot program, for example, helped bring about reductions in solar energy costs by 80 percent from 2010 to 2020, with the goal of further cost reductions of another 50 percent by 2030 (DOE-SETO, 2020). Further cost reductions in solar and wind would continue to accelerate adoption of low-carbon technologies and significantly reduce the overall costs of a transition. Future cost reductions are also essential in other core low-carbon technologies, for example, lithium-ion batteries, to achieve cost-effective decarbonization pathways. At the same time, there is not a one-size-fits-all decarbonization pathway, especially in the 2035–2050 time period. It is important to keep a wide array of options open, which will include significant needs for innovation in an array of potential low-carbon technology domains, for example, hydrogen, direct air capture of carbon dioxide, and vehicle-to-grid technologies (IEA, 2020a). Innovation in these domains will help ensure that the United States has the flexibility to respond quickly to rapid changes in energy markets, climate change impacts, and technological trajectories as it pursues deep decarbonization.
It is important to note both historical and current trends in federal investments in research and development (R&D) and how federal investments compare to other countries. Federal government R&D peaked in 1964 at 1.9 percent of GDP but has steadily declined since to just 0.6 percent of GDP in 2017. In that same time period, private R&D investments rose from 0.9 percent of GDP in 1964 to 1.95 percent of GDP in 2017 (Boroush, 2020; CRS, 2020). Working synergistically, public and private investments in R&D led to the birth and growth of large numbers of vibrant new U.S. industries that led the world in computers, data, information, pharmaceuticals, communication, nuclear energy, satellites, space exploration, GPS, solar, and aviation, among many others (Ruttan, 2006; Jenkins et al., 2010; Nemet, 2019; Gordon, 2016). The information revolution was led by the United States, for example, leading to the creation of whole new industries initially dominated by American firms and, still today, with major American firms at their apex.
Today, while the United States is the largest R&D investor globally in aggregate (soon to be surpassed by China if recent trends continue), it has fallen to 10th in terms of R&D intensity (R&D investments as a percentage of GDP). In terms of the average annual growth rate of domestic R&D expenditures, the United States ranks 6th, at 4.3 percent per year, compared with China at 17.3 percent per year and South Korea at 9.8 percent per year (Boroush, 2020). This relative decline in rates of new investment in R&D have created challenges for U.S. firms and the economy as a whole in maintaining their competitiveness in global markets. The U.S. first-mover advantage in many technologies, such as information technology and artificial intelligence, has since eroded owing to a strong challenge from China in particular (Allison, 2019), which has concentrated public investments in key technologies in order to secure long-term market advantages. Some economists argue that the incremental gains in productivity from the IT revolution are diminishing fast and will not sustain the United States as a major source of economic growth in the future, especially with rising economic inequality (Gordon, 2016).
The United States was a leader in developing clean energy technologies like wind and solar, but has ceded much of that leadership to other countries as these technologies have matured and become cost-competitive (Lewis, 2014; Platzer, 2012)—for example, in the solar industry, where Chinese firms today hold most of the leading positions. The lack of sustained policy signals to industry (Nemet et al., 2017), such as a national clean energy standard or a feed-in tariff, along with inconsistent incentives such as the intermittent production tax credit for wind technologies, have failed to create the markets necessary to support robust domestic manufacturing. This disturbing trend puts the United States at risk of losing out in the global clean energy industries. Alternatively, coherent, long-term policies to support the transition to a carbon-neutral
economy can be leveraged to regain global leadership and competitiveness in clean energy technology, modernize and transform the U.S. manufacturing base, and create a new generation of clean energy jobs (Lester and Hart, 2012).
The United States is well positioned for economic growth in a low-carbon, resilient economy. The nation has a strong tradition of entrepreneurship and innovation, the two key ingredients for disruptive growth (e.g., Schumpeter, 1934). Owing to its strong commitment to public education, it has long had an educated and well-trained workforce. The nation has ample land, so should not face physical constraints on green energy infrastructure. It has abundant supplies of every type of major low-carbon energy resource, although these are differentially distributed across the nation. The United States can thus count on sufficient amounts of energy in a secure, carbon-neutral future and is poised to exploit renewable energy resources much more pervasively than it has in the past. This will be especially true if the United States can secure a significant share of domestic and global markets for the clean energy technologies that will be necessary to achieve a carbon-neutral U.S. energy infrastructure by 2050.
The renewable energy industry and energy efficiency industry are both high-growth sectors of the U.S. economy, and both are likely to continue to grow significantly under the scenarios laid out in Chapter 2 for transitioning the U.S. economy to carbon neutrality. Many trends in these industries are strong, in terms of the growth of high-quality jobs, but caution needs to be taken to guard against inappropriate treatment of workers, especially in the context of anti-competitive Chinese policies that have undermined profitability for decades in the renewable energy industry (Wu, 2019). Some criticisms and concerns that have been raised focus on the responsibility the clean energy industry has with respect to its workforce, including low wages for workers, lack of training and skills development programs, lack of access to career pathways, use of temporary workers without benefits, inadequate protection for health and safety, exploitative business models, and misclassification of workers (Mulvaney, 2014; Newell and Mulvaney, 2013). States such as California have worked to address this criticism by making a commitment to ensure that all state residents thrive in a carbon-neutral energy transition and by developing a framework to implement their ambitious plans (Roth, 2020; Zabin, 2020). Policies in Chapter 4 address these concerns regarding polices related to incentives for community benefits and good wages. However, recent research has demonstrated the ability of innovative programs to successfully integrate equity considerations into greenhouse gas reduction efforts and leverage tracking and feedback to ensure high-quality jobs are part and parcel of the transition, thus demonstrating that the “jobs versus environment” debate is a false choice and getting both is possible (Zabin, 2020). Ultimately, an important goal of the journey in the United States to a carbon-neutral economy should be to develop a
comprehensive, integrated approach to a clean energy transition that ensures that the U.S. energy workforce is larger, better compensated, and more secure, overall, in 2050, than it is today.
The second criterion to evaluate the design of clean energy transitions is that clean energy transitions should help to create future U.S. energy systems that are more just, equitable, and inclusive. This requires careful attention to ensure that both the processes through which decisions about energy transitions are made and the outcomes of clean energy transitions are more inclusive of the full array of voices of workers and communities with stakes in the future of U.S. energy and that these diverse communities are treated fairly and equitably.
Defining Equity and Inclusion for Clean Energy Transitions
The committee defines just, equitable, and inclusive transitions in terms of three key normative goals:
Goal 1: The benefits of clean energy should be distributed broadly and equitably, and likewise its burdens, risks, and costs. Clean energy systems will create a variety of benefits, including access to clean energy sources, opportunities for business and investment, cleaner environments, new jobs, and more. They will also create a variety of new costs, risks, and burdens associated with, for example, paying for the transition, the siting of new facilities and factories, payments for energy and energy services, purchase of new equipment (e.g., heat pumps or cars), decline in fossil-fuel industry jobs, and exposure to hazardous materials. Careful attention should be paid to who reaps these benefits and pays these costs and whether they are fairly and equitably distributed across groups and across the country. This will require advancing robust frameworks for assessing the equity implications of clean energy policies and development. Several federal and state policy frameworks already mandate analysis of equity dimensions of government decision making. Additionally, some local policy frameworks such as in the City of Minneapolis’ Climate Action Plan, call for reporting to include monitoring progress annually, inclusive of equity indicators (City of Minneapolis, 2013). These range from considering environmental justice risks in permitting and environmental review (Ramos and Pires, 2013) to designing implementation of grant programs to prioritize access for disadvantaged groups (CPUC, 2019). Although not at the scale needed for net-zero policy, these programs provide important lessons for developing federal equity standards and rules.
Goal 2: The voices and perspectives of current and historically marginalized groups should be clearly and effectively included in and integrated into clean energy planning and decision making. Ensuring meaningful public participation by those most affected is not just a matter of ethics. It is critical to ensuring that policies are well designed to address equity and work for all Americans, as well as to upholding the U.S. commitment to democratic decision making that is open to and inclusive of all voices. Without attention to equity, the policies and implementation will not garner sustained public support and may face significant opposition or backlash. It has been seen in countries like France that policies that did not sufficiently address economic equity led to widespread protests (Williamson, 2018). Similarly, policies designed without appropriate input from diverse communities may fall short of long-term carbon neutrality goals. For example, California’s Assembly Bill (AB 32) was less inclusive of environmental justice groups, and new companion legislation (AB 617) was designed to overcome the shortcomings and empower communities for addressing local environmental issues (Fowlie et al., 2020). Many important sources of carbon dioxide emissions in the U.S. economy are widely distributed across all communities, including buildings, equipment, and automobiles in the possession of households and businesses in low-income, indigenous, and rural communities and communities of color and people with disabilities, many of which will struggle to transition to carbon neutrality without policies that support and reflect their distinct needs and contexts.
Significant and sustained efforts will be required to strengthen and expand public participation in energy decision making in order to counter both misinformation and efforts to hamper public engagement in climate policy that threaten the social contract for deep decarbonization (Bush, 2019; Whitehouse, 2015). Policy and financial commitments will be needed to ensure not only that decision-making processes that shape the future of energy are transparent to and inclusive of the voices of diverse communities but also that these communities have the resources and are able to develop the capacity to participate effectively. This has been a significant emphasis in recent proposed federal law (e.g., the Environmental Justice for All and Climate Equity Acts). In developing appropriate policies to support enhanced participation in energy decision making, the United States should be guided by the experience of U.S. environmental and climate justice organizations who, despite being significantly underfunded (Taylor, 2014), have worked to represent many of these communities, win public participation rules that ensure that their communities have the resources and capacity to participate meaningfully in decision making, and strengthen public education and accountability. Scholars have recommended building on President Bill Clinton’s Environmental Justice Order to incorporate climate and energy justice communities and organizations (White-Newsome, 2016). According to the National Economic Transition Platform (Just Transition Fund, 2020), a priority is to “build the capacity of
local community-based leaders and organizations and facilitate community-driven planning processes and on-going program development and implementation. This is achievable through training and mentorship programs, grant funding to directly support salaries and materials needed for planning and program implementation, support from resource experts, and other technical assistance.”
Partnerships with civil society organizations and philanthropic foundations have helped governments significantly strengthen public support for multi-billion-dollar investments toward the creation of a carbon neutral economy, improved health, and greater equality (see, e.g., State of California, 2020). Valuable insights can also be drawn from international experiences, such as the work of the United Nations to enshrine the principle of free, prior, and informed consent (UN FAO, 2016) as a key right of indigenous communities where decisions impact those communities or their lands (Dunlap, 2017; Mercer et al., 2020; Papillon and Rodon, 2017). Given the need to sustain a strong social contract for deep decarbonization, it is critical for policy makers and philanthropic actors to continue to work together to strengthen public participation and climate equity by scaling up support to organizations representing environmental justice communities (Lerza, 2011) and strengthen support for public participation in energy and economic transformation (Renn et al., 2020). Additionally, it is vital that philanthropic organizations prioritize addressing both the severe racial justice and equity disparities in their funding of climate non-governmental organizations (NGOs) (Baptista and Perovich, 2020), and the diversity of their board and staff advisors (Taylor, 2014), as the public sector-philanthropic partnerships become more prevalent as one tool to hold governments accountable for their contributions to equitable outcomes (Ferris and Williams, 2012). Best practices from successful public sector-philanthropy partners are needed to be replicated and scaled (Ferris and Williams, 2012), especially when it comes to equitable funding.
Goal 3: Clean energy transitions should reduce or eliminate economic inequalities and insecurities exacerbated by U.S. energy systems. All families and businesses consume and pay for energy, in some form. For most, energy bills are an ordinary cost of living and doing business in a modern society. Low- and moderate-income communities and businesses, however, often confront high financial burdens from energy costs that undermine economic security, force trade-offs between energy, food, and other basic necessities, recurrently threaten shutoffs of energy services that pose health risks during extreme heat and cold events, and create stresses that undermine productivity and well-being (Carley and Konisky, 2020; Finley-Brook and Holloman, 2016; Jessel et al., 2019; Madlener, 2020). Negative feedback can further reinforce the linkages between energy and poverty—for example, by limiting the ability of low-income communities to invest in energy efficiency improvements or
higher quality products—thus perpetuating higher energy costs and so reducing the ability to pay for energy. These communities also bear a disproportionate burden of environmental and health risks associated with energy systems, across the life cycle from extraction, generation, and distribution to end-of-life and legacy infrastructure risks (Bullard, 2015; Bednar and Reames, 2020; Liévanos, 2018). None of this is necessary. Environmental justice mapping and screening tools and reporting exist that can be used to identify the communities most affected by sources of pollution and where people are often vulnerable to the effects of pollution. Currently environmental justice screening and mapping tools are outdated and are not sufficiently enforceable.
Furthermore, strategies for innovative clean energy transitions are positioned to reduce energy burdens and create solutions that are economically generative for these communities—for example, through opening up ownership, investment, and employment opportunities in clean energy to low- and moderate-income communities and enhancing the value of energy for low-income users. This will be particularly important as the country pursues decarbonization initiatives that extensively implicate infrastructure in low-income communities—for example, in improving energy efficiency and electrifying energy end uses in residential and commercial buildings, as well as electrifying vehicles. All of these are likely to impose significant costs on low-income communities (or to risk failing to achieve decarbonization goals), unless explicit attention is paid in policy design to this challenge (Miller et al., 2015). A number of cities and states have developed innovative policies for directing new revenues from decarbonization investments into projects to benefit low-income communities. Examples include the following:
- The state of California established an economy-wide cap-and-trade program to reduce greenhouse gas (GHG) emissions, which provides revenues to the state from the sale of GHG emission allowances. A significant portion of the proceeds from these auctions are invested in underserved communities. In 2019, for example, these revenues provided more than $1 billion for new projects implemented in disadvantaged communities and low-income communities and households. Cumulatively, $5.3 billion in projects have been implemented since the start of the program, with 57 percent of those investments benefiting priority populations. The funds have been used to “expand low-carbon transportation options, place affordable housing adjacent to transit and job centers, decrease the risk of catastrophic wildfires, and improve water-use efficiency,” as well as research, planning support, work training, and technical assistance to local community groups (State of California, 2020). It should be noted that while funds have been distributed to priority populations, the extent to which improvements have been made is unclear, and criteria pollutant hot spots may still be present.
- In 2018, voters in the City of Portland, Oregon, approved a ballot measure to establish the City’s Clean Energy Community Benefits Fund. Through this program, large companies contribute 1 percent of their revenues to a locally managed fund to support local clean energy, energy efficiency, and climate-justice projects. The program has been anticipated to generate $44 million to $61 million a year for grants to support jobs in clean energy sectors for underserved and energy-burdened communities in the Portland area. The fund is guided by a diverse advisory board that includes the communities bearing the greatest burden, as well as business and policy leaders (City of Portland, 2020).
- The Philadelphia Energy Authority (PEA) was created in 2010 to address energy affordability and sustainability issues. The PEA views energy as a tool for impact and promotes economic development, creates jobs, alleviates poverty, and supports efforts to improve public health. The Philadelphia Energy Campaign, which was launched in 2016, includes an investment in energy efficiency and clean energy projects of $1 billion over 10 years and focuses on municipal buildings, K-12 schools, affordable housing, and small businesses. The campaign, through 2019, has seen some early successes including $136 million in active projects and 1,301 new jobs. Other important outcomes of PEA’s initiative include plans for the country’s largest solar project, which will cover about 22 percent of the city government’s electricity use, and a multifamily affordable housing pilot project aimed at generating 15 to 30 percent energy savings for renters and supports building owners investing in energy efficiency and smart grid technologies. Another new PEA program is the Solarize Philly program, which received a DOE Bright Solar Futures award and is the country’s first program that provides vocational training for high school students to become solar installers. Through 2020, the large program involves a total of 700 solar contracts, a total capacity of 3 MW, an investment of $11 million in efficient and clean energy, added 52 new jobs, and has 6,500 households signed up. These efforts contribute to meeting the city’s climate commitments of 100 percent renewable electricity by 2030 and reducing carbon emissions by 80 percent by 2050 (NASEM, 2019).
Rationale for Just, Equitable, and Inclusive Energy Futures
The rationale for ensuring that clean energy futures are just, equitable, and inclusive is grounded in a set of philosophical, pragmatic, and aspirational commitments.
Philosophical foundations of just transitions: The energy system is implicated in a range of historical, present, and potential future forms of injustice and inequality that should be redressed, anticipated, and proactively avoided in socially responsible transitions
to carbon-neutral futures. All too frequently, local communities fail to derive meaningful benefits from energy infrastructures built in or near them, and they can experience significant negative health or environmental impacts (Bridge et al., 2018; Dao, 2020). These challenges are experienced throughout energy supply chains, from resource extraction to refineries and pipelines to power plants and transmission lines.
Energy systems as currently constituted often create financial, psychological, and other burdens on low-income communities that exacerbate poverty, inequality, and economic insecurity via a wide variety of mechanisms. Low-income communities also often suffer from lower quality energy infrastructures—for example, less reliable, less efficient, as was clearly demonstrated in Puerto Rico after Hurricane Maria, when low-income, rural, and remote communities suffered significantly longer electricity system outages (Jessel et al., 2019). And these communities are also less frequently able to take advantage of energy programs designed to incentivize energy infrastructure and efficiency upgrades, again for a variety of reasons, including that these programs may require up-front capital costs that low-income households and communities are not able to pay or because their houses are not up to code and thus ineligible. Many such communities also face growing risks from climate change, caused by energy system carbon emissions, which they cannot effectively respond to using only their own resources. These burdens often disproportionately fall on and compound other difficulties faced by communities of color, indigenous communities, low-income and rural communities, people with disabilities, immigrant communities, and other disadvantaged or marginalized groups (Shonkoff et al., 2011; Colon, 2016). From an ethical perspective, this uneven distribution of costs, risks, and benefits—and the unequal power of these communities to self-determination in energy decision-making and to influence energy choices to create fairer and more equitable outcomes—is unjustified and presents a significant opportunity to leverage a clean energy transition to create more just futures for these communities.
Public support for rapid decarbonization: Decarbonization is likely to be among the largest and most significant social, economic, and infrastructural transformations in human history. Public support for such transformation will require securing broad and inclusive agreements across diverse communities with deep stakes in both the present and future of energy systems. Clear knowledge, recognition, and acknowledgement will be essential regarding who has been poorly served by energy systems in the past and present, who will be impacted negatively by energy systems in the future, who will pay for clean energy technologies, who will benefit from them, who has ownership and control over energy systems, and whose voices are given space, recognition, and influence in energy planning and decision-making. Failure has the potential to leave diverse communities either unengaged or in active opposition, undermining commitment to the scale and pace of change required to address rapidly escalating climate risks.
Aspirational foundations of a good society: Energy has been essential to multiple, historical transformations that have significantly improved the human condition. If well designed, the adoption of clean energy technologies and the associated energy systems reconfigurations that it will bring about present a similar opportunity to advance social and technological change in ways that continue to improve wellbeing and thriving.
In a number of ways, renewable energy technologies are well positioned to make future energy systems less damaging—for example, by helping to undo the extensive environmental and health consequences wrought by the burning of carbon-based fuels for energy, on local to global scales. The broad distribution of solar and wind resources, combined with the low and still falling cost of technologies to capture them, means that many countries and communities will have the potential to own and generate their own energy in the future rather than be dependent on others for critical economic infrastructures and supplies, and concentration of industry, and the associated power and wealth that come with it, will be more difficult.
Low-carbon energy technologies are not a panacea, however, and the potential benefits of a low-carbon energy transition will not come automatically. Rather, they will result only from a purposeful effort to design tomorrow’s energy systems—and the societies built on them—in ways that contribute to diverse human goals for sustainability, resilience, and thriving.
To accomplish this goal will require significant improvements in research into the social drivers, dynamics, and outcomes of energy transitions and into the relationships between energy systems and human systems, as well as the improved integration of this knowledge into energy planning and system design and implementation. U.S. federal agencies and national laboratories should therefore invest substantially in growing the national capacity to understand the human and social dimensions of energy systems and to assess, visualize, and model their dynamics and structures.
This research should pay special attention to considerations of equity and inequality in existing and future energy systems design and operations. Significant new investments will be needed to analyze and assess the complex dynamic relationships between energy and economic insecurity and the differential implications of energy transitions and systems for a wide variety of communities disadvantaged by existing energy systems and policies; to measure the social and economic outcomes of transition plans and their distribution across different groups; to develop strategies and frameworks for improving the inclusiveness of energy decision making, including especially through improving the effectiveness of community engagement and participation methods; to develop effective strategies of knowledge and policy co-production with diverse communities for the energy system to enhance the relevance
and impact of research for communities and decision makers; and to ensure the effectiveness and accountability of strategies for leveraging energy innovation to enhance community economic and social wellbeing and sustainability.
Policies and practices in the transition to a low-carbon economy and energy systems should provide significant support for communities, businesses, and workers throughout the United States who will be harmed by and face difficulties as a result of the transition to a carbon-neutral economy. As discussed in the opening of this chapter, the scale and depth of economic transformation anticipated in the economy is large, with the potential to impact a wide swath of communities, businesses, and workers across the nation, in the energy and transportation sectors, and more broadly, who will need considerable help navigating the transition successfully.
Given the implied scale of investment—financial and otherwise—this transformation has the potential to foster sustainable development at multiple scales. Yet, without careful attention to the distribution of costs and benefits, the energy and economic transformation will create, perpetuate, and perhaps even exacerbate highly uneven impacts, with diverse communities bearing concentrated risks and harms, including rural, low-income, communities of color, and other disadvantaged communities (Morello-Frosch et al., 2009). Although systematic research on vulnerabilities to transition impacts is in its infancy in the United States (Carley et al., 2018b; Cha, 2020, 2017; Power et al., 2015), it is widely acknowledged that the impacts of energy system changes will vary geographically and may also be stratified along racial or socioeconomic axes.
In addition, the energy transition necessarily means shifting investment among sectors and industrial activities with direct implications for workers and businesses. Deep decarbonization will result in direct changes to the oil, gas, and coal industries; electric utilities; air, truck, and rail transport; and automobile manufacturing, sales, service, and fueling. It will also require significant changes to the industries that supply parts and equipment, financing, and other support for energy and transportation sectors. Throughout the economy, the disruption of investment and markets for fossil-fuel technologies intersects growing trends in automation and data systems in ways that may amplify losses and challenges for particular groups of workers and businesses, an intersection sometimes referred to as Industry 4.0 (IndustriALL Global Union, 2019).
In areas that host energy infrastructure, both in a concentrated (e.g., coal mines or oil refineries) and more distributed form (e.g., gas stations, grids, or pipelines), as well as
corresponding manufacturing facilities, the abandonment or adoption of particular energy technologies and policies directly affect how people support themselves, access healthy environments, and receive essential public services. Experts observe a spiraling fiscal crisis emerging in coal-dependent communities (Morris et al., 2020), which could be replicated in other hot spots absent policy reform. Therefore, deliberate efforts will be required to address the social and economic ruptures created by the energy transition and to secure positive development outcomes in communities and regions.
In many resource-dependent regions, there is a noted temporal and spatial mismatch between jobs lost and jobs created (Power et al., 2015). Here reference is made both to “hot spots” of lost jobs and economic opportunity along supply chains or in sectors made obsolete by the transition to decarbonized energy, such as disruptions to the coal and oil and gas industries and in automobile manufacturing, servicing, and repair owing to the replacement of internal combustion engines with electric motors, as well as to those neighborhoods, cities and towns, and regions that have hosted or will host the industrial-scale facilities associated with manufacturing, generation and storage, and transmission and distribution of low-carbon energy resources. Failure to address these challenges by supporting communities that are confronting them, in an anticipatory and forward-looking manner, has the potential to create new landscapes of economic decline not unlike those of past U.S. industrial transformations and to degrade public support for decarbonization policies.
Ensuring a strong social contract for the transition to a carbon-neutral economy will require identifying the private income and public revenue streams that are lost owing to energy system transformation and generating strategies to replace them. Historically, the nation has benefited financially from its generous fossil fuel mineral endowment, much of which resides on public lands. Many states’ public revenues have similarly benefited from the development of energy-resource endowments. In the context of a low-carbon economy, by contrast states’ budgetary dependence on revenues from fossil-fuel development revenue for public services and infrastructure acts as a direct barrier to generating the social and political capital necessary to enact systemic change, at least not at the pace demanded for net zero by 2050 (Haggerty, 2018; Mayer, 2018; Haggerty and Haggerty, 2015).
Public policy interventions can help support groups impacted by energy transitions through a variety of mechanisms. Strategies for making policies successful and overcome barriers to success can include, for example, providing direct planning, financial and technical support to affected groups, incentivizing private sector investments,
setting rules for markets, and building the capacity of local institutions and communities. Fundamentally, transition support strategies comprise a portfolio of activities focused on identifying and reducing barriers to the ability for workers, business owners, and host communities to pursue self-determined pathways toward sustainable economic activity and new occupational and community identities (e.g., Cha et al., 2019).
When energy infrastructure enables sustainable development in places that host it, it provides dependable sources of private income locally through jobs and other direct payments to individuals, such as leases and royalty payments. More broadly, linking energy systems to sustainable development at local and regional scales hinges on securing public revenue through appropriate taxation that is adequate in timing, amount and form to (1) mitigate any negative impacts of development, (2) encourage the maintenance and stewardship of local environments and services, and (3) encourage long-term economic diversification or other buffers of possible downturns in energy development. Energy system investments can also promote sustainable development through positive synergies between energy development and critical local systems of hard and soft infrastructure. Last, connecting energy system investments to sustainable development means identifying opportunities to leverage and connect across the many nodes in a system to build the capacity of discrete groups and settlements through collective action and investment.
Supporting workers and communities during the transition to a low-carbon energy system involves four goals.
Goal 1: Workers and communities should have accurate information about how clean energy transitions could impact them and should have access to viable economic transition strategies. Uncertainty is a persistent barrier to proactive transition responses by workers and communities. Labor and community leaders report that more information from industry is critical to catalyzing active preparation for lost jobs and other local impacts; however, what public information does exist from elected politicians and facility and mine owners often conveys unfounded optimism or is deliberately obscure. Local government leaders and staff in small, resource-dependent economies (and neighborhoods) tend to lack capacity to generate accurate projections of lost public revenue and its associated social and economic impacts, another circumstance that impedes preparing for transitions (Haggerty et al., 2018; Sanzillo, 2017). Those workers, families, and communities that currently depend directly on fossil fuel-centered activities need a clear message about when and how job losses will occur if they are to be expected to respond in a proactive way.
It is critical to address job losses directly. The isolated nature of coal and other fossil fuel facilities means that they often play an outsized role in local employment.
For example, in Pennsylvania’s Greene County, direct employment in coal mining constituted 14 percent of sector employment in 2011. This suggests the importance of offering exit ramps such as early retirement and meaningful job opportunities through retraining and reskilling the fossil fuel workforce—and the importance of the role of labor organizations in advocating for these programs (IndustriALL Global Union, 2019). Policy makers also need to be clear-eyed about the limited opportunities to replace one type of job with another in any given place and the challenges jobs-retraining programs have faced in the past. As one analysis puts it: “The differences in skills and training requirements between these jobs lost [in the coal industry] and jobs gained [in a future clean energy industry] imply the potential for considerable friction in employment in affected communities” (Blue Green Alliance, 2015). In such cases, mobility vouchers (Moretti, 2012) may be practical and realistic responses to transition impact for some workers while frank discussions about rightsizing (though controversial) could benefit local governments. In other geographies, relocation by workers is simply not an option and/or local government services cannot be cut further without drastic consequences such as the loss of public safety resources, libraries, and even basic sanitation. In many cases, sustainable economic development for resource-dependent regions depends on thinking beyond directly replacing one kind of energy employment for another to economic diversification strategies broadly, which is not simple given the dominance of metropolitan regions in the current economy (Goetz et al., 2018). One such example includes jobs in the solar industry, which are growing and outpacing coal jobs (Popovich, 2017); however, coal workers and solar panel workers require different skill sets and there is not necessarily an easy and direct transition. Policy programs and financial incentives that encourage renewable energy development, such as solar, are needed to support the developing market, which includes training workers for jobs in a clean energy economy (Cha, 2017).
Goal 2: Risks to “highly vulnerable” locations where the economic transition to carbon neutrality will exacerbate existing economic disadvantages and health disparities should be directly addressed in transition planning. The association of persistent rural poverty with coal mining in Appalachia is a clear and long-standing example of the risk that dependence on natural resource development can pose for the health and well-being of remote, isolated communities (Lobao et al., 2016; Perdue and Pavela, 2012). So, too, are the issues in fence-line communities or segregated urban neighborhoods dominated by industrial facilities such as power plants and refineries—in these geographies it may not be employment losses, but rather the costs of legacy pollution that compound socioeconomic disadvantages (Cusick, 2020; Plumer et al., 2020). Native American populations experience especially troubling rates of poverty and poor health outcomes as baseline conditions, and these challenges are
exacerbated in communities where toxic legacies and job losses from the collapse of energy development also occur. Asking Native American populations to relocate for new jobs conflicts with tribal sovereignty and cultural survival strategies (Wilkinson, 2004). The level of dependence on fossil fuel activity in tribal economies is severe: In one example, the Hopi nation, coal revenues provide 80 percent of the revenues to tribal government (Sanzillo, 2017), and the loss of revenues from the closure of the Navajo Generating Station will severely impact both the Hopi and Navajo nations over the long term, despite efforts by plant owners to address this challenge (Storrow, 2020). A basic goal of any just transition platform is to identify and mitigate these at-risk populations through programs dedicated and tailored to their particular concerns and needs.
Goal 3: Companies should be held 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. Fossil fuel infrastructures are ubiquitous across the U.S. landscape, including wells, pipelines, refineries, storage facilities, and more. Widespread “orphaning” of these infrastructures has the potential to leave many communities facing complex and persistent environmental and health risks from contamination, leakage, and disposal of hazardous materials and equipment. The risks of abandonment without remediation arise with the potential for bankruptcies in the oil, gas, and coal industry associated with decarbonization (Macey and Salovaara, 2019; Walsh, 2017; Walsh and Haggerty, 2017). In the nuclear industry, up-front payments are required into a public investment fund to cover risks of disasters and of decommissioning (NRC, 2019), which could potentially serve as a model for making sure that money is available for decommissioning and remediation of stranded fossil fuel assets. There are also new Economic Development Administration (EDA) nuclear funding options for planning that do not state a sunset for closed plants or a required closure date for open plants to access funds. In FY 2020, $15 million was appropriated to EDA to support communities impacted by nuclear plant closures (EDA, 2020). Eligible affected communities have the opportunity to access these resources and funding in addition to opportunities to consider alternative uses for sites once a nuclear plant decommissioning is complete through other federal programs (EDA, 2019). However, the Price-Anderson Act limits total liability, and power plant owners pay an annual premium per reactor site for $450 million in private insurance for offsite liability coverage, meaning that any large-scale accidents would not be covered by the industry (NRC, 2019). Remediation can provide an important source of local employment (Northern Plains Resource Council, 2018) and in some cases, where appropriate and safe, abandoned facilities
may be available for other uses (e.g., as has happened in the case of redevelopment of closed military bases).
States (through their environmental permitting agencies for entities that operate these fossil-fuel development, production, delivery and/or power generation facilities and through their public utility commissions that oversee utility activities, such as integrated resource plans) can play a more active role in requiring such remediation efforts. Similarly, the Federal Energy Regulatory Commission (FERC) could also address such issues with regard to gas-pipeline abandonments. In New Mexico, the Energy Transition Act (ETA) protects consumers and reduces electricity costs as the state moves away from coal and transitions to renewables. The ETA leverages securitization to, in part, provide economic development investment to lessen the local impacts of shutting down a large coal-fired power plant. In the case of PNM’s San Juan Generating Station, this mechanism provides over $40 million to assist plant employees, mine workers, and others with severance pay and job training, among other support.
Goal 4: Strategies should be developed to ensure that local, tribal, and state governments are able to replace lost revenue from plant, mine, and other industrial facility closures. As mentioned, local government funding often depends heavily on fossil fuel facilities or extractive activities in areas that host mines and power plants. Outdated fiscal policy plagues resource-dependent regions—tax and expenditure limits adopted during the tax revolt (at both local and state levels) mean that counties cannot grow themselves out of fiscal crisis and that, after decades of extracting valuable natural resources or generating valuable public electricity, they have little to no public funds in reserve to assist with transition. Addressing revenue shortfalls is essential to avoiding further erosion of these communities. One way to redirect revenue would be to require holding back a portion of total federal mineral revenue (which includes bonus payments, rentals, royalties, fines and penalties) and investing it in a permanent endowment from which transition investments can be made.
Reforming and redirecting how fossil fuel revenue is generated and allocated at the national scale will help the United States accomplish three important priorities: (1) weaning the nation off its dependence on fossil fuel for public revenue; (2) establishing a new source of public finance for low-carbon energy infrastructure; and (3) generating funding that is adequate in amount and form to create a realistic source of support for places and businesses affected by transition (Haggerty et al., 2018). Establishing adequate and accessible funds for transition support offers a key signal that the nation honors and respects the contributions of fossil fuels to two centuries of national prosperity.
Over the past decade, reductions in coal use in the United States for both industrial use and electricity generation have given rise to a spate of bankruptcies in the industry, closure of mines, and significant decreases in the jobs and resources provided by the industry to the communities in which it operates. The coal industry is modest in size, compared to the U.S. economy, but its concentration in local geographies—for example, in Kentucky and in the Powder River Basin in Wyoming—have contributed to the outsized impact of the industry’s decline in those places. The oil and gas industry also has clear areas where it is concentrated, geographically, although these are more widely scattered across diverse regions of the United States, and oil and gas infrastructure is more widely distributed in different parts of the country, meaning that the impacts of declining oil and gas production through the transition to a carbon neutral economy will be more widely felt across the country over the next three decades, especially when combined with declines in the manufacturing of internal combustion engine parts and automobiles. These industries are a much larger fraction of the U.S. economy than coal and provide significant employment, tax revenues, capital expenditures, and infrastructure investments that benefit many regions of the U.S. economy and a large fraction of American communities.
While future energy systems should also provide extensive future benefits to U.S. workers and communities, as well as the U.S. economy, as described above, this transformation is likely to create uneven distributions of costs to different communities. Unless addressed through effective support programs, these costs will include both direct job losses and losses to public revenues, indirect job losses and declines in general business revenues in impacted communities that lose major industries, threats to community and worker identities and happiness, persistent geographies of economic decline, and resentment, anger, and perhaps even opposition to decarbonization.
The kinds of challenges confronting workers, families, communities, and businesses in communities impacted severely by the transition result from both market and policy failures. The Business Roundtable has argued that workers and communities deserve appropriate consideration as stakeholders in business decision making, and thus might expect assistance in economic transitions from declining industries (Gelles and Yaffe-Bellany, 2019).
Most businesses still operate, however, according to decision-making logics that reward and consider only the interests and voices of shareholders, paying little regard to the needs of workers and communities and even at times operating in ways that degrade worker and community capabilities to plan for and execute transition
planning. This approach is compounded by market and policy failures that currently undermine the contribution of energy infrastructure to local or regional development opportunities: (1) a persistent scalar mismatch in decision making, where local communities have little input about energy futures, either in corporate decision making or regulatory decision making; (2) fiscal policies that trade incentives to industry against the long-term ability for communities to benefit, coupled to business practices that routinely seek to secure special tax deals; and (3) a failure of both business and policy to anticipate and plan for the end-of-life stage of major industrial systems.
Ensuring that policy and its implementation deliberately link system designs and regional and local priorities makes sense for two fundamental reasons. The first is that new energy infrastructure is more likely to win public support when proposed projects have demonstrable social and economic benefits in host areas (Boudet, 2019)—thereby reducing, although hardly eliminating, costly delays and resistance to unpopular projects. It is important that, as early as possible, the stages of new energy infrastructure include decommissioning plans so that the public has faith that their communities will not be left paying for or living with infrastructure when it becomes obsolete. The second is that without policy reform, the energy infrastructure transitions associated with the transition to a carbon neutral economy will exacerbate development challenges rather than benefits in many places that host energy projects. Local planning would also be significantly enhanced by the inclusion of capacity building for workforce and community transitions within corporate social responsibility and sustainability metrics for the sectors of the economy facing major economic transformations, including oil and gas, automobile manufacturing, and the financial sector. Encouraging affected communities and workforces to acknowledge and take seriously the challenges posed by decarbonization could help significantly improve success rates, especially if launched well before facility closures.
The United States has built the world’s largest and most successful energy and automobile industries and infrastructures. The transformation of these economic sectors will leave a historic legacy of challenges for communities that have benefited historically from the exploitation of carbon-based fuels. The geographically concentrated wealth generated by carbon mining are difficult to replicate in the more distributed solar, wind, and battery industries. This has the potential to significantly reduce inequalities driven by that concentration of wealth, but it will also create disruptive effects in communities facing that decline that for most places will not be able to be replaced on a one-to-one basis. It may also raise questions about how to equitably share the costs and burdens of diverse assets that are stranded as carbon-based infrastructures are closed. Diverse policy rules that have further benefited those communities will, in turn, compound harms, for example, state laws that pay
communities higher rates for transmission lines that carry coal-fired electricity versus newer renewables. There are already other challenges confronting these communities, such as abandoned coal mines and, in the future, abandoned oil and gas infrastructure unless appropriate steps are taken now to anticipate and proactively address these problems (Partridge et al., 2020).
The final criterion for evaluating pathways to a future carbon-neutral U.S. economy is that policies to support the transition and ensure that it enhances U.S. economic strength, promotes equity and inclusion, and supports communities should be accomplished in as cost-effective a manner as possible. The economic investment required to transition the U.S. economy to carbon neutrality will be extensive and will require widespread coordination among the diverse sectors and actors necessary. The scale of the required investment is large enough that it will impinge on other national priorities and on the overall economy.
Committing to cost-effectiveness as a core criterion for evaluating pathways, alongside the other goals identified in Chapter 3, ensures that policies to advance carbon neutrality are achieved at the lowest possible overall costs and prioritizes investments and policies that create flexibility in how goals are achieved that allow for cost reductions wherever possible. Prioritizing effective investments, therefore, works to bolster the social contract for the U.S. transition to carbon neutrality by maximizing the impact of each investment and by lowering political opposition tied to concerns about costs and regulation. Cost-effectiveness should not be applied, however, as the sole criterion for consideration, nor be focused solely on carbon emissions reductions. The goal is not to find the most cost-effective strategies to reduce carbon emissions but rather to find the most cost-effective strategies to reduce carbon emissions while also strengthening the U.S. economy, promoting inclusion and equity, and supporting communities facing transitions.
Cost-effectiveness, as traditionally used by environmental economists, refers to the idea of achieving a given environmental or social outcome at the lowest aggregate cost to society (e.g., Hahn and Stavins, 1992). Here, aggregate cost refers to the societal resources diverted to comply with a particular policy, and equivalently the goods and services foregone by households and/or the government as that diversion occurs,
versus a counterfactual absent the policy, and without regard to who bears those costs. It does not include any environmental impacts.
Cost-effectiveness is often contrasted with what economists refer to as efficiency, which does not take the environmental outcome as given but instead seeks to maximize aggregate net benefits (National Center for Environmental Economics, 2014). In other words, efficiency calculations assess what policy maximizes the monetized environmental benefits minus the aggregate cost noted above. This can include a variety of different benefits, such as reductions in health costs from pollution or inclusion of the social cost of carbon. Again, this is without regard to who bears the costs or receives the benefits.
Rationale for Cost-Effectiveness and Other Considerations
There is a long history and debate over the role of cost-benefit analysis in policy analysis, but most would argue it remains a useful metric (Arrow et al., 1996, p. 221). Seeking to understand the aggregate costs and benefits, among other criteria, is necessary to appreciate where society should spend scarce resources.
Measuring environmental, mortality, and morbidity benefits creates particular ethical dilemmas and analytic difficulties (Jamison et al., 2006). As opposed to efficiency, or maximizing net benefits, cost-effectiveness has the advantage of not requiring such an effort. In the present context, where the case for carbon neutrality is already made, focusing on the aggregate benefits of decarbonization itself at this stage is unnecessary.
Focusing on the aggregate economic costs of proposed policies, and seeking to lower them, ensures that resources remain available to tackle other social problems as well as promoting economic well-being. At the same time, it has long been recognized that lowering aggregate costs to society often comes at the expense of achieving equitable costs across members of society (Okun, 1974). Thus, cost-effectiveness must be considered only alongside other criteria, using multiple-criteria methods and negotiation frameworks among politicians, stakeholders, and the public that allow for consideration not only of the cost-effectiveness of achieving a net-zero carbon economy but also the aggregate co-benefits or externalities of different policies, as well as the distribution of costs and benefits across groups. The committee recognizes that these other goals—regarding the economy, equity, and transition—are not as precisely defined and place constraints on cost-effectiveness.
In addition, the pathways to decarbonization discussed in Chapter 2 anticipate a combination of multiple changes to the economy and energy system, and the policies
recommended in Chapter 4 are also meant to be adopted as a package. This can make traditional methods of evaluating cost-effectiveness less accurate, if calculations are done for each individual policy, independently, because policies adopted as a package may have interactive effects that either reduce or enhance cost-effectiveness in comparison to the same policies adopted separately. Cost-effectiveness and other criteria thus need to be evaluated for the program as a whole, not just individual parts.
Cost-effectiveness as a criterion for policy design frequently points to flexibility in compliance (Schmalensee and Stavins, 2017). For example, rather than requiring a particular technology to achieve an environmental outcome, such as zero-carbon emissions, define the performance requirement and leave firms and households free to achieve the goal however they wish. A staple of these programs has been emissions or credit trading programs of one sort or another. The acid rain trading program is widely acknowledged to have significantly reduced sulfur dioxide emissions at a significantly lower cost than likely alternatives (Carlson et al., 2000). Individual coal-fired power plants were given limited allocations of emission allowances, which they needed to surrender annually, one-for-one, for each ton of sulfur dioxide that they emitted. Firms with higher emissions could purchase additional allowances from other firms who overcomplied. However, it may be difficult to consider cost-effectiveness for a large-scale transformation like the transition to electric vehicles, as noted in the 2013 report, Transitions to Alternative Vehicles and Fuels (National Research Council, 2013). The report attempts to look at policies, costs, and benefits to reduce greenhouse gases by 80 percent by 2050, while attempting to include transition barriers such as resistance to novel products, lack of infrastructure, lack of choice diversity, economies of scale, learning by doing, and the time constraints for change as well as interactions with the fuel-electricity systems. However, the committee that authored this earlier report found it difficult to estimate the most cost-effective pathway to do such a transition.
A frequent concern with emissions trading and other market-based policies is that they can create hot spots where emissions persist and that the environmental (and economic) consequences may be inequitable. For example, Ringquist (2011) argues that the acid rain trading program did not concentrate emissions in Black or Hispanic communities, but did concentrate emissions in poorly educated communities. Similarly, environmental justice advocates anticipated, warned about, and ultimately documented hot spots from air toxics and criteria pollutants resulting from California’s greenhouse gas emissions trading program that required follow up policies to reduce inequitable impacts (Cushing et al., 2018). In contrast, a recent study by Hernandez-Cortes and Meng (2020) suggests that the California program reduced the pollution exposure gap among communities.
Perhaps more relevant to many of our recommendations focused on performance standards, the lead phasedown program in the United States effectively removed lead from gasoline at a significant cost savings (Newell and Rogers, 2006). In the lead phasedown, refineries were allowed a certain declining concentration of lead in refined gasoline during the 1980s. To the extent they over- or underachieved the target, they calculated the total volume of excess- or under-emitted lead. Those excess-emitting refiners were required to buy that amount of credits from under-emitting refiners; credits could also be banked for use in future years. By ratcheting down the benchmark for compliance, lead was effectively eliminated from gasoline.
As an analogy to the roadmap for creating a carbon neutral economy, seeking to eliminate fossil fuel emissions in the same way lead was eliminated from gasoline creates a risk of equity concerns in potential hot spots. Another concern with policies that provide for flexibility designed to foster cost-effectiveness arises if the lowest-cost strategies either result in lower co-benefits or higher externalities or ancillary risks. For example, carbon capture and sequestration and renewable technologies have very different co-benefits and risks with regard to environmental pollution and health effects, impacts on the electricity grid, and so on.
Given the disruption of traditional energy systems, markets, and workforces anticipated with decarbonization policies, these secondary benefits and costs may be substantially different and should be seriously considered in evaluating policies. Thus, cost-effectiveness exists as only one of several ends toward which this deep decarbonization plus framework drives. The establishment and maintenance of a social contract for a national low-carbon economic and energy transition demand attention and consideration for the full array of implications of policy choices for the economy and society.
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