Executive Summary

Community Adjustment to Climate Change Policy

The world is becoming increasingly concerned about the risks of global warming from the buildup of greenhouse gases in the atmosphere, but many American decision-makers are worried about the economic impacts of policies that may be needed to reduce U.S. greenhouse gas emissions. The overall size and distribution of the impacts of such policies are uncertain, and depend greatly upon how governments, businesses, consumers, and workers respond to the challenge. Efforts to avert global warming would put some American businesses, workers, and communities at risk of economic dislocation. This paper focuses on how the federal government can best assist at-risk communities. Since the burning of fossil fuels such as coal, oil, and natural gas to produce energy is a major source of greenhouse gas emissions, such communities include those with high reliance on jobs in energy production — say, coal mining in Wyoming, or oil and gas production in Louisiana — and in energy-intensive industries such as steel manufacturing in Pennsylvania.

This is not the first time that important national policies have forced economic change on particular communities. The same story has been told for trade agreements, defense downsizing, and forest protection, for example. In each case, the U.S. government helped affected communities through various forms of economic adjustment assistance. In addition, in the last 20 years, numerous U.S. communities have sought to adapt to wrenching economic change brought about by global competition and recession, both with and without federal assistance.

The United States has substantial infrastructure and experience at the federal, state, and local levels in community economic adjustment. Thus, a foundation is in place for creating a new government program to help communities adversely affected by global climate change policy. Experience in the United States and elsewhere suggests that, although economic adjustment programs do not usually remove the pain of economic disruption, appropriately designed programs can lessen that pain considerably. At the same time, there is substantial room for improvement in existing adjustment efforts.

This paper recommends a new federal adjustment program for communities as part of global climate change policy. Specifically, the United States should do the following: (1) commit to address the problem by designating a single agency, the Economic Development Administration (EDA) of the U.S. Department of Commerce, and authorizing about $550 million dedicated dollars, to design and implement an economic adjustment program; (2) be proactive by identifying communities that are particularly dependent on energy-producing and energy-intensive sectors, and by helping communities to take action before dislocations occur; (3) leverage and integrate additional resources by involving multiple federal agencies and state and local governments through federal and regional task forces; and (4) be flexible in addressing community needs by supporting locally determined, comprehensive strategies for five to seven years.

Such a program would take advantage of available experience and expertise at all levels of government, and would take into account the wide variability in local circumstances and opportunities. By doing so, it would minimize economic dislocation and maximize opportunities to create jobs and protect the environment.