As society deals with climate change, there is a growing call to keep fossil fuels where they belong, in the ground. But the impact of reducing oil production will depend on the policies that we implement to achieve this.
A multidisciplinary team of researchers investigated the carbon emissions, labor and health implications of several policies to reduce oil extraction, with a particular focus on how the impacts vary across different communities in California. Their results have been published in nature energy-Illustrating trade-offs between different strategies. For example, models outlawing oil extraction near communities produced greater health benefits across the state, but also resulted in more job losses, with disadvantaged communities feeling about a third of the costs and benefits.
With the goal of achieving carbon neutrality by 2045, California is currently implementing some of the most ambitious climate policies in the world. As the country’s seventh largest oil producer and the world’s fifth largest economy, California provides a unique environment for studying supply-side decarbonization policies. It already has a program to reduce carbon emissions and is currently discussing a setback policy that would ban new oil production near communities.
Petroleum production is a multifaceted endeavor. Greenhouse gas emissions from burning fossil fuels are the main driver of climate change. The extraction of these resources also leads to the emission of carbon dioxide2 In the environment, in addition to air pollution and toxic substances. Any policies aimed at limiting oil production will affect people for better and for worse. The industry employed 25,000 Californians in 2019, and provides tax revenue to local governments. “Our analysis attempts to quantify what these trade-offs look like as the country considers different policies,” said co-author Kyle Meng, associate professor in the Department of Economics at UC Santa Barbara and the Environmental Markets Lab (emLab) at the Brain School of the Environment. Science and management.
We’re taking policies traditionally focused on climate and weighing them against local impacts, health benefits and employment costs.”
Paige Weber, co-author, environmental economist at UNC Chapel Hill, formerly at emLab postdoctoral
The authors developed a framework for analyzing the impact of three policies: an excise tax (paid per barrel); carbon tax (paid per ton emitted); and setbacks at 1,000 feet, 2,500 feet, and one mile. Taxes increase the cost of production, limit activity, and reduce emissions. Setbacks mainly prevent extraction in areas where people live. In a previous study, the authors found that production decreases because it may not be economical to drill elsewhere.
To compare policies, each distance had a similar tax setback and a carbon tax level that met the same emissions target in 2045.
The authors started with a set of models to predict oil production in California. Using historical data and economic theory, the team attempted to answer the following questions: Will they move here? How much will the well produce? When will you close?
The researchers then modeled the health effects of the oil production emissions as they spread through California communities. Finally, they modeled the results each policy on jobs and workers’ compensation would have. The authors were particularly curious about how these effects might affect people who live in areas that meet California’s definition of disadvantaged community.
They calibrated the health and labor consequences of each policy based on its potential to reduce carbon. “We ask, for the same reduction of greenhouse gases, which policy has greater health benefits and lower labor costs, and how are those benefits and costs distributed?” Meng explained.
Always a barter
Setbacks have provided the biggest improvements to air quality, especially for disadvantaged communities. If you move oil production away from where people live, they will see health benefits. But there was a surprising trade-off. When oil production is close to communities, so are the jobs it provides. “The same communities that benefit from cleaner air are the same that face labor market consequences,” Meng said.
During policy discussions, there is often disagreement between groups that highlight the health impact of oil production and those that focus on employment benefits. “They are often set up as separate camps,” Meng continued. “But our analysis shows that the costs and benefits can be borne by the communities themselves.”
Carbon taxes and excise taxes raise production costs, but the two policies target different oilfields. The excise tax eliminates the most expensive operations first, and is roughly in the middle in terms of both occupational and health effects.
“The cheapest way to reduce greenhouse gas emissions would be through a carbon tax because it first goes after the most carbon-intensive oil producers,” Weber said. But because it excludes the fewest number of wells from production per ton of carbon emissions reduced, a carbon tax offers the fewest overall health benefits, while also resulting in the fewest job losses.
The authors believe their estimates of health effects are conservative. They only focused on premature deaths, as other health effects are hard to pin down. As a result, any action is likely to improve the health of Californians more than the study determines.
Similarly, the researchers speculate that they overestimated the effects of work because their framework does not account for the possibility of re-employment. It is assumed that every job loss leads to unemployment.
By 2045, California aims to reduce emissions in the transportation sector by 90%. Compared to 2019. And the Golden State is looking at several policies to make that happen.
“It’s a hotly debated issue right now because the governor just signed a law banning drilling for new oil near communities,” said co-lead author Ranjit Deshmukh, assistant professor in the Environmental Studies Program at UC Santa Barbara. The oil industry quickly circumvented this measure by gathering enough signatures to hold a referendum on the next ballot.
“Unfortunately, even the largest setback distance fell short of the state’s greenhouse gas reduction goal,” Weber said. “So, you need to combine setback with another policy.”
The authors said the country currently has no plans to use an excise tax to reduce greenhouse gas emissions from oil extraction. On the other hand, the state’s cap-and-trade program works a lot like a carbon tax. The only difference is that the market finds a price based on a cap, rather than being set by the government. However, the cap and trade program covers many sectors in the state, not just fossil fuel extraction.
This paper captured the effects of employment and health on decision much more accurately than previous studies. The researchers explained that looking at county averages for health benefits can be misleading. Consider Los Angeles County: There are a lot of differences between people living in Compton and Hollywood, or Long Beach and Lancaster. “More rigorous precision analysis is needed to accurately answer the question of how different societies bear the costs or gain the benefits of phasing out oil,” Deshmukh said.
The experimental aspect of their framework was also an innovation. Most of the other studies used only engineering models to predict production. The use of detailed historical extraction data gave the authors more confidence in the accuracy of their predictions.
The team has begun similar work to investigate the health and labor implications of phasing out oil refining in California. They plan to extend their analysis of oil production to the rest of the country. They hope their work will guide policymakers toward an effective and equitable solution to limiting fossil fuel extraction. One that maximizes its benefits while minimizing its disadvantages.