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CBO: How Policies to Reduce Greenhouse Gas Emissions Could Affect Employment

May 5, 2010

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The Congressional Budget Office (CBO) has analyzed the research on the effects that policies to reduce greenhouse gases would have on employment.

Human activities around the world are producing increasingly larger quantities of greenhouse gases, particularly carbon dioxide resulting from the use of fossil fuels and from deforestation. Because of concerns that the accumulation of such gases in the atmosphere will result in a variety of environmental changes over time that would have serious and costly effects, policies to reduce those emissions are being considered. Such policies would impose costs on the U.S. economy and affect patterns of employment throughout the country.

Adopting policies aimed at reducing emissions of greenhouse gases would shift the demand for goods and services away from fossil fuels and products that require substantial amounts of those fuels to make or to use and toward alternative forms of energy and products that require lesser amounts of fossil fuels. Employment patterns would shift to mirror those changes in demand. Changes in employment in specific industries would reflect the amounts of greenhouse gases they emit (through production and use of their output) and the difficulty of reducing their emissions of those gases.

The Congressional Budget Office (CBO) has analyzed the research on the effects that policies to reduce greenhouse gases would have on employment and concluded that total employment during the next few decades would be slightly lower than would be the case in the absence of such policies. In particular, job losses in the industries that shrink would lower employment more than job gains in other industries would increase employment, thereby raising the overall unemployment rate. Eventually, however, most workers who lost jobs would find new ones. In the absence of policies to reduce emissions of greenhouse gases, changes to the climate also might affect employment; however, this brief does not address such changes because that effect would probably arise after the next few decades, and it has not been studied as carefully by researchers.

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