Supporting Coal Workers and Communities in the Energy Transition
A framework for recovery and revitalization and how policymakers measure up
Across the United States, the transition from fossil fuels to a clean energy economy is accelerating and will be supercharged by the recent passage of the Inflation Reduction Act (IRA). The clean energy transition is creating widespread social benefits ranging from lower and more stable energy costs to improved air quality. However, without thoughtful planning, the shift to clean energy will harm workers who depend on fossil fuels for their livelihoods, as well as the communities where they live and work.
Policymakers have an opportunity to shape a clean energy transition that supports workers and communities instead of leaving them behind. The fossil fuel industry is central to the economic life of communities across the country, and the real risks these communities face in the clean energy transition — job loss, depressed property values, and reduced local tax revenue for social services and institutions — can be devastating. Well-designed, targeted, proactive, and long-term interventions can help diversify local economies and drive new economic activity that aligns the global need for rapid decarbonization with local visions and priorities.
And governments are beginning to take notice of this risk and opportunity. Over the past few years, seven states passed bills designed to support coal workers and communities facing economic transition. The IRA and the Bipartisan Infrastructure Law of 2021 represent the largest set of investments and resources available to support energy communities in history. These laws could even eclipse 50 years of investments in economic development by the Appalachian Regional Commission.
Building on previous work by key stakeholders, we introduce a policy framework that outlines the risks facing fossil fuel workers and communities in the shift to clean energy and provides guiding principles for supporting them in the transition. RMI’s fossil fuel community recovery and revitalization framework can be used to assess the strengths and gaps in existing legislation and help policymakers and advocates develop and implement comprehensive, strategic policies to support a fair transition from fossil fuels.
RMI’s recovery and revitalization framework consists of three steps:
- Relief for fossil fuel workers and communities to alleviate losses of local revenue and jobs that occur immediately following fossil fuel facility closure
- Reclamation of remaining fossil fuel sites to prevent prolonged pollution risks and promote short- and medium-term job creation and local economic activity
- Reinvestment in fossil fuel communities to promote long-term economic resilience and diversification
Our framework report elaborates on these issues and gives concrete examples of policies that can begin to address them.
Nearly 100 GW of coal plants have closed in the past decade. Workers and communities that depended on these plants are already feeling the pain, and forward-looking states are beginning to address these challenges as they enact laws to accelerate the transition to clean energy and to meet the climate challenge.
Our recent report Coal Community Transition Policy in Action presents a comprehensive review of state legislation that supports coal communities and workers facing economic transition mapped onto our policy framework. We analyzed 16 bills passed in seven states and found that these states are making progress in some areas but falling short in others.
The most common transition policies that states have adopted are:
- Developing coal transition plans to guide priorities for and distribution of financial and other resources
- Requiring consultations with stakeholder advisory groups during transition policy development and/or implementation
- Providing some transition support to workers, primarily focused on training or education
- Offering economic planning and implementation assistance for coal communities
- Issuing funding, incentives, or mandates for public or private reinvestment in coal communities, often through new electricity infrastructure projects
Colorado and New Mexico together accounted for 7 of the 16 laws and will be important to watch as they continue to develop and implement transition policy. Both states have ambitious climate goals and significant dependence on fossil fuel industries and are paving new ground as they implement their respective transition plans. Colorado established the nation’s first Office of Just Transition, specifically tasked with engaging with coal communities, developing a transition plan for the state, and identifying and providing resources to workers and communities. New Mexico authorized the use of securitization as a financial mechanism to retire coal plants while simultaneously saving ratepayers money, keeping the utility financially healthy, and setting aside money for transition assistance through three new state funds.
State level action is encouraging, but critical policy gaps remain nationwide. Most state laws do not include temporary wage and benefit assistance for dislocated workers or comprehensive cleanup requirements and resources. And often the states that have the greatest dependence on the coal industry also have the lowest political support for transition planning. The table identifies important policies that are commonly covered by existing state legislation as well as common funding-related and policy-related gaps.
The Promise of the Inflation Reduction Act
President Biden signed the historic Inflation Reduction Act (IRA) on August 15, 2022, investing $369 billion to accelerate the deployment of clean energy to meet the climate challenge. The new law offers a number of provisions aimed at supporting energy communities, ensuring strong labor standards, driving domestic manufacturing, and investing in environmental justice and low-income communities. Many of the clean energy tax credits include an increase in the credit if the project is sited in an energy community, and the full value of many of the tax credits is contingent upon prevailing wage and apprenticeship requirements, helping to spur high quality jobs in the clean energy sector.
The law also creates a new program within DOE’s Loan Program Office (LPO). The Energy Infrastructure Reinvestment Financing program extends the authority of the LPO to make loan guarantees and refinancing mechanisms available to “retool, repower, repurpose, or replace” energy infrastructure that is no longer in use — specifically assets used for generation or transmission of electricity, or in the production, processing, and delivery of fossil fuels. This broad authority could drive new projects outside the energy sector (like manufacturing or data centers, for example) in coal communities and can be used for environmental remediation. The $5 billion appropriation and $250 billion in loan guarantee authority offers promise of a new and unprecedented wave of investment in coal country. The work ahead must focus on ensuring that this funding reaches the communities most in need, that it supports good paying jobs in places where jobs in the fossil industry are being lost, and that inclusive processes drive selection and development of new projects.
With the passage of the IRA, the United States has put itself on a trajectory to reduce greenhouse gas emissions to 40 percent below 2005 levels by 2030. Strong implementation is essential to ensure that utilities make use of these resources, that coal communities are supported, and that the shift to clean energy is just and equitable.