The possibility that workers could be adversely affected by environmental policies imposed on heavily regulated industries has led to claims of a "jobs versus the environment" trade-off by both business and labor leaders. The present research examines this claim at the industry level for four heavily polluting industries: pulp and paper mills, plastic manufacturers, petroleum refiners, and iron and steel mills. By focusing on labor effects across an entire industry, we construct a measure relevant to the concerns of key stakeholders, such as labor unions and trade groups. We decompose the link between environmental regulation and employment into three distinct components: factor shifts to more or less labor intensity, changes in total expenditures, and changes in the quantity of output demanded. We use detailed plant-level data to estimate the key parameters describing factor shifts and changes in total expenditures. We then use aggregate time-series data on industry supply shocks and output responses to estimate the demand effect. We find that increased environmental spending generally does not cause a significant change in industry-level employment. Our average across all four industries is a net gain of 1.5 jobs per $1 million in additional environmental spending, with a standard error of 2.2 jobs—an insignificant effect. In the plastics and petroleum sectors, however, there are small but significantly positive effects: 6.9 and 2.2 jobs, respectively, per $1 million in additional expenditures. These effects can be linked to favorable factor shifts—environmental spending is more labor intensive than ordinary production—and relatively inelastic estimated demand.
RFF Live — Dec 10, 2020
Looking Ahead: Benefit-Cost Analysis for Environmental Regulation
A forward-looking conversation on environmental economic analysis under the incoming Biden administration
Workshop/Seminar — Nov 23, 2020
Private Event: The US Wood Pellet Industry
A discussion on US forestry and land management practices
Journal Article — Nov 23, 2020
Estimating Forest Sustainability Bond Prices for Natural Resource and Ecosystem Services Markets
A journal article that introduces a sustainable forestry bond that is composed of wood products and ecosystem services, geared toward increasing the cash flow to a traditional forest bond.