Impacts of the Reimagine Appalachia& Clean Energy Transition Programs for Pennsylvania

Job Creation, Economic Recovery, & Long-Term Sustainability

By Robert Pollin, Jeannette Wicks-Lim, Shouvik Chakraborty, and Gregor Semieniuk Department of Economics and Political Economy Research Institute (PERI), University of Massachusetts Amherst

PRELIMINARY SUMMARY OF MAIN RESULTS ON:

• Employment creation through investments in clean energy, manufacturing/infrastructure, and land restoration/agriculture

• Employment contraction and just transition for workers in fossil fuel-dependent industries

The COVID-19 pandemic has generated severe public health and economic impacts in Pennsylvania, as with most everywhere else in the United States. This study proposes a recovery program for Pennsylvania that is capable of exerting an effective counterforce against the state’s economic collapse in the short run while also building a durable foundation for an economically viable and ecologically sustainable longer-term recovery. Even under current pandemic conditions, we cannot forget that we have truly limited time to take decisive action around climate change. As we show, a robust climate stabilization project for Pennsylvania will also serve as a major engine of economic recovery and expanding opportunities throughout the state.

The full forthcoming study is divided into five parts:

1. Pandemic, Economic Collapse, and Conditions for Reopening Pennsylvania

2. Clean Energy Investments, Job Creation, and Just Transition

3. Investment Programs for Manufacturing, Infrastructure, Land Restoration, and Agriculture

4. Total Job Creation in Pennsylvania through Combined Investments

5. Financing a Fair and Sustainable Recovery Program

We present here some of the main findings from Parts 2 and 3 of the forthcoming study.1

Emissions Reduction and Clean Energy Investments

We develop in this study a clean energy investment project through which Pennsylvania can achieve climate stabilization goals which are in alignment with those set out by the Intergovernmental Panel on Climate Change (IPCC) in 2018—that is, to reduce CO2 emissions by 45 percent as of 2030 and to achieve net zero emissions by 2050. We show how these two goals can be accomplished in Pennsylvania through large-scale investments to dramatically raise energy efficiency standards in the state and to equally dramatically expand the supply of clean renewable energy supplies, including primarily solar, but also wind, low-emissions bioenergy, geothermal and small-scale hydro power. We also show how this climate stabilization program for Pennsylvania can serve as a major new engine of job creation and economic well-being throughout the state, both in the short- and longer run.

Reducing Fossil Fuel Energy to Cut CO₂ Emissions

The first overarching goal of the program is to achieve, by 2030, a 50 percent reduction in CO2 emissions in Pennsylvania relative to the 2018 emissions level. Emissions in Pennsylvania in 2018 were at about 233 million metric tons after including emissions produced by bioenergy sources as well as oil, coal, and natural gas. The emissions level as of 2030 will therefore need to be no more than 117 million tons.2 About 85 percent of all energy consumption in Pennsylvania presently comes from burning natural gas, oil, coal ,and high emissions bioenergy. Consumption of oil, gas, and biomass will all need to fall by 40 percent and coal by 70 for the state to reduce CO2 emissions by 50 as of 2030.

Clean Energy Investments to Replace Fossil Fuels

The clean energy investment program that we have developed for Pennsylvania includes the following main components:

Energy Efficiency. Dramatically improving energy efficiency standards in Pennsylvania’s stock of buildings, automobiles and public transportation systems, and industrial production processes.

Clean Renewable Energy. Dramatically expanding the supply of clean renewable energy sources—including solar, wind, low-emissions bioenergy, geothermal, and small-scale hydro power—available at competitive prices to all sectors of Pennsylvania’s economy.

Total Investment Expenditures. The level of investment needed to achieve Pennsylvania’s energy goals will average roughly $26.1 billion per year between 2021 – 2030.

• This estimate assumes that Pennsylvania’s economic growth proceeds at an average rate of 1.5 percent per year. ú

• Clean energy investments will need to equal about 2.8 percent of Pennsylvania’s annual GDP.

We have generated results as to the employment impacts of these clean energy investments. We estimate that, as an average over 2021 – 2030, a clean energy investment program scaled at about $26 billion per year will generate roughly 174,000 jobs per year in Pennsylvania. This figure is equal to about 2.8 percent of Pennsylvania’s overall work force as of 2019. We show these preliminary estimates in Table 1.

Investments in Manufacturing/Infrastructure and Land Restoration/Agriculture

In Part 3 of the study, we present investment programs for Pennsylvania in the areas of public infrastructure, manufacturing, land restoration, and agriculture. Specific investment areas include manufacturing R&D, broadband development, regenerative agriculture, and plugging orphaned oil and gas wells. We have scaled this overall set of investments at $8.2 billion per year over 2021 – 2030, equal to about 1 percent of Pennsylvania’s 2019 GDP. We estimate that the full program would generate about 78,000 jobs per year in the state. We present these estimates in Table 2.

Overall Job Creation through Combined Investment Programs Overall, the combination of investments in clean energy, manufacturing/infrastructure, and land restoration/agriculture will create about 252,000 jobs in Pennsylvania, equal to about 4.1 percent of the state’s 2019 work force. These investments will also provide the foundation for a long-term sustainable growth path for the state. Table 3 shows these summary employment figures.

Just Transition for Displaced Workers in Fossil Fuel-Based Industries

Nearly 64,000 people are employed in Pennsylvania in fossil fuel-based industries, including oil and gas extraction, support activities for oil and gas, coal mining, and other ancillary sectors, such as fossil fuel-based power generation. This amounts to about 1 percent of Pennsylvania’s overall workforce as of 2019. We show these figures in Table 4.

Workers in Pennsylvania’s fossil fuel-based industries will experience job losses as the state dramatically reduces consumption of these CO2 -generating energy sources in order to reach the emission reduction goals, starting with a 50 percent emissions reduction in the state as of 2030. Our estimates of the employment contraction in Pennsylvania’s fossil fuel based industries follow from our framework in which oil and natural gas consumption fall by 40 percent as of 2030 while coal falls by 70 percent.3

Based on this rate of contraction, we estimate that, on average, 2,870 fossil fuel-based jobs will be lost per year between 2021 – 2030. But based on the demographic profile of workers in these fossil fuel-based sectors, we also estimate that 1,056 workers in the industry will voluntarily retire at age 65 or sooner. This means that 1,814 workers per year will experience displacement—i.e. their jobs in the fossil fuel industry will be phased out, and they will need to find employment elsewhere. We show how we derive these estimates in Table 5. Figure 1 also summarizes these results

This average annual figure of about 1,800 fossil fuel-based industry workers experiencing job displacement in Pennsylvania represents a tiny fraction—three one-hundredths of one percent (0.03 percent)—of the state’s overall 2019 labor force of about 6.5 million people. Nevertheless, it is critical that all of these roughly 1,800 workers per year are provided with a package of generous just transition policies, as they move out of the fossil fuel industry into other areas of employment or into voluntary retirement. The just transition program should include five components:

• Pension guarantees for retired workers who are covered by employer-financed pensions;

• Retraining to assist displaced workers to obtain the skills needed for a new job;

• Re-employment for displaced workers through an employment guarantee, with 100 percent wage insurance.

• Relocation support for all workers who require this support; and

• Full just transition support for older workers who choose to continue past the traditional retirement age of 65

In Table 6, we present what would be a viable just transition package for this average of about 1,800 displaced workers in the state every year from 2021 – 2030. As we will present in detail in the full study, the overall costs of providing these displaced workers with generous just transition support will be trivial relative to the size of Pennsylvania’s economy. The just transition program should be financed jointly by federal and state government funding sources.

POLITICAL ECONOMY RESEARCH INSTITUTE

The Political Economy Research Institute (PERI) promotes human and ecological wellbeing through our original research. Our approach is to translate what we learn into workable policy proposals that are capable of improving life on our planet today and in the future. In the words of the late Professor Robert Heilbroner, we at PERI “strive to make a workable science out of morality.”

Established in 1998, PERI is an independent unit of the University of Massachusetts, Amherst, with close ties to the Department of Economics. PERI staff frequently work collaboratively with faculty members and graduate students from the University of Massachusetts, and other economists from around the world. Since its founding, PERI has become a leading source of research and policy initiatives on issues of globalization, unemployment, financial market instability, central bank policy, living wages and decent work, and the economics of peace, development, and environmental sustainability.

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1 This project was commissioned by The Heinz Endowments, the Community Foundation of the Alleghenies, Policy Matters Ohio, the Keystone Research Center and the West Virginia Center on Budget and Policy. We greatly appreciate their financial support as well as the fact that they respected our terms of engagement. Those terms included full autonomy in drafting the study and reaching the conclusions presented here. The results presented here are near-final but remain preliminary.

2 Our basic measures of CO2 emissions throughout this study are units of metric tons. However, to simplify, for the most part we refer hereafter to this unit as “tons” of CO2 emissions.

3 We assume that the state’s much smaller bioenergy sector will also contract by 40 percent over this period.