A Working Environment

For years, many politicians and industry leaders have argued that polices for reducing greenhouse gases that cause climate change or promoting alternative energy sources would have harmful effects on the American economy -- including massive job losses. These arguments gained currency through a series of economic studies and analyses -- touted loudly by some narrow interest groups -- backing up such fears.

But in the wake of wildly fluctuating energy prices across the country, rolling blackouts in California, threats to world energy markets and ongoing reports of global climate change, attitudes might finally be shifting.

While the public remains divided on the problem of climate change, two-thirds consider it a "serious" or "moderate" problem according to a Gallup survey conducted March 4 through 7, 2002. And despite sharp differences over how to deal with global warming, energy policy, fuel efficiency standards and environmental protection, American policymakers from President George W. Bush and the U.S. Congress on down say that we need to increase energy-efficiency and diversify our sources of supply. The question is how to approach climate change and energy policy in a comprehensive way that protects both workers and the economy.

A Worker-Friendly Climate Change Policy

A new report released in February 2002 by the Center for a Sustainable Economy (CSE) and Economic Policy Institute (EPI) analyzes such an approach. It looks at the impact of a multi-pronged, market-based energy policy, including reducing greenhouse gases, that is far more realistic and inclusive than any published previously in the United States. The report, Clean Energy and Jobs: a Comprehensive Approach to Climate Change and Energy Policy, analyzes a policy package that would, for the period 2001-2020, increase energy-efficiency and curb greenhouse gas emissions while improving overall economic efficiency.

The policy measures analyzed in the CSE-EPI report include:

  • a modest tax of $50 per ton on carbon dioxide emissions (the primary greenhouse gas) - roughly equivalent to 13 cents on a gallon of gasoline - phased in over a five-year period and a small surcharge on nuclear and hydroelectric power, most of it returned to the economy through a cut in taxes on wages;
  • a package of measures to promote energy-efficiency and clean-energy technologies;
  • a border adjustment on energy taxes (this adjustment rebates the taxes paid by domestic producers as their products leave the United States for foreign markets and imposes an equivalent tax on foreign products as they enter the United States); and
  • transitional assistance, modeled on the GI Bill and other successful programs, for workers and communities that would inevitably be affected.

These measures together are designed to minimize the burden on workers and consumers and provide help for those who would suffer if energy production shifted to other sources and consumption were reduced. And the policy package is self-funding in that the costs of the tax cut, transition fund for workers and communities and the administration of the clean-energy technology measures are paid entirely by the revenue receipts it would generate.

Why This One is Different

But the chief benefit of the Clean Energy and Jobs report is that it looks at a more sensible and realistic set of policies than earlier studies done in the United States.

No previous American study has conducted an economic analysis of more than two of the four elements of the policy package listed above. (Many have analyzed only the carbon charge without revenue recycling back into the economy -- and none of the other three.) That is why this policy package -- modeled on economically beneficial energy-efficiency plans adopted in several European countries - including the United Kingdom, Germany, Italy, Denmark and the Netherlands -- can be implemented domestically without the decline in economic growth and employment the previous research has predicted.

The Results

Assuming these four measures had been implemented as a policy package in 2001, an analysis of the plan, using a macroeconomic model developed at the University of Maryland, projects that:

  • U.S. carbon dioxide emissions would decline by 27 percent in 2010 and by 50 percent in 2020. Other greenhouse gasses and pollutants would also decline;
  • Gross domestic product would increase by 0.24 percent in 2010 and by 0.6 percent in 2020;
  • An additional 660,000 net jobs would be created in 2010 and an additional 1.4 million in 2020;
  • Overall unemployment would decline and real after-tax wages would rise;
  • U.S. oil imports in 2020 would be reduced -- relative to the baseline forecast -- by more than the total current U.S. purchases of oil from OPEC;
  • Household energy bills would fall each year, with the amount of savings rising steadily each year; and
  • The plan would not increase either the tax burden or the energy bills of poor and working families.

Help for Those Negatively Affected

Any significant and bold economic shift like this has a price, at least in the short-term. Employment in coal mining, for example, would suffer severely, and there would be declines in employment in electric and gas utilities. Jobs would also be lost in the production of other fossil fuels and in the rail transportation of coal. Extremely small job losses are seen in a few other industries that are either energy-intensive or are suppliers to the energy industries.

Only a portion of these losses could be absorbed by normal turnover, which is why the package provides every worker in an energy-producing or energy-intensive industry who loses his or her job with two years of full income replacement, including health and retirement benefits. It also provides up to four years of college education or other professional training and up to two additional years of income support for those who take more than two years of training or education. For some older workers, it provides the alternative of additional benefits as a bridge to retirement in lieu of education or training. In addition, for heavily affected communities, it includes $10,000 per job lost for investment in local economic development. These benefits can be fully funded with a portion of the revenues generated by the carbon/energy tax -- which would amount to $70 to 80 billion in the early years -- without reducing the national economic benefit.

A "Blue-Green" Alliance Emerges

We already have strong evidence that the plan analyzed in Clean Energy and Jobs is not just more "pie-in-the-sky" pontificating on the part of a couple of "inside-the-beltway" think tanks and academics. When the report was unveiled on February 20, 2002, just before the U.S. Senate opened its debate on national energy policy, leaders of some of the nation's largest labor and environmental organizations - including the Sierra Club, Service Employees International Union, Union of Concerned Scientists, Natural Resources Defense Council and Union of Needletrades, Industrial and Textile Employees -- came together to officially endorse its approach. This new "Blue-Green" alliance - made up of two groups which are so crucial to the success of any future comprehensive environmental or energy policy -- is currently exploring other ways to team up and help advance the debate.

Despite the support the CSE-EPI report has generated in some unlikely quarters, we are under no illusion that it provides the definitive solution for easing global warming and solving all of our energy problems. Its primary purpose is to advance the national debate over global warming by showing that the United States can have an effective energy and climate change policy without the economic and job-related costs assumed in the past.

For more information or further reading on this topic, see

  • Worker Transition & Global Climate Change, 2001 -- www.pewclimate.org/projects/worker_transition.cfm
  • Community Adjustment to Climate Change Policy, 2001 -- www.pewclimate.org/projects/community_adjust.cfm
  • Green Fees: How a Tax Shift Can Work for the Environment, and the Economy, 1992 and The Costs of Climate Protection: a Guide for the Perplexed, 1997 (both available from the World Resources Institute, 202-638-6300, or www.wri.org/)
  • Price it Right: Energy Pricing and Fundamental Tax Reform, 1998 (available from the Alliance to Save Energy, 202-857-0666, or www.ase.org)

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This article originally appeared in the 06/01/2002 issue of Environmental Protection.

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