working paper

The Economic Benefits of the New Climate Economy in Rural America

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Rural Economic Benefits of the New Climate Economy

An annual federal investment of $55 billion in the seven areas of the new climate economy in the first five years, with $14.9 billion directed to rural counties, would create nearly 260,000 direct, indirect, and induced jobs in rural communities that would last for at least five years (a total of 1.3 million job-years) and 740,000 jobs across the United States (a total of 3.7 million job-years).2 This investment translates to 17.5 jobs created per $1 million invested in rural counties, compared with 13.5 jobs created per $1 million nationally.

This level of investment would also lead to $21.7 billion in value added or increased gross domestic product (GDP) per year for rural economies, representing $1.46 for every dollar invested. This includes $12.9 billion in employee compensation and $1.6 billion in tax revenues (see Table 2). Nationally, the added value from these investments would total $72.2 billion annually—$1.31 per dollar spent. Table 3 shows the distribution of economic benefits across the seven investment areas in the new climate economy.

In terms of annual job creation, we estimate that California, Texas, New Mexico, Missouri, and Wyoming would see the greatest benefit in absolute terms in their rural counties (Figure 4). California and Texas would see significant job gains in part due to the current size of their clean energy workforces, which we used as one of the modeling assumptions to allocate economic impacts across states. While California sees more than half of this job gain from investment in wildfire risk management, federal investments in renewable energy and transmission, distribution, and storage sectors contribute to more than 60 percent of Texas’s job creation. Investment in wildfire risk management also comprises a significant share of New Mexico’s and Wyoming’s total job creation potentials. When looking at the results on a normalized basis (rural jobs created as a share of total employment), California, New Mexico, and Wyoming are still in the top five states, but Massachusetts and Nevada also emerge as leaders (Figure 5). Investments in transmission, distribution, and storage drive job creation in both these states.

Table 2 | Rural and National (Rural and Urban) Economic Impacts from Federal Investments in Seven Areas of the New Climate Economy

 

Rural

National

Rural

National

 

Impacts per Year for 5 Years (millions)

Impacts per Year for 5 Years (millions)

Total per Year for 5 Years (millions)

Total per Year for 5 Years (millions)

Direct jobs

142,892

362,575

259,441

743,686

Indirect jobs

53,463

170,638

Induced jobs

63,083

210,473

Direct value added

$10,283

$32,987

$21,732

$72,165

Indirect value added

$6,201

$22,192

Induced value added

$5,248

$16,986

Direct employee compensation

$7,262

$20,727

$12,935

$39,950

Indirect employee compensation

$2,953

$10,804

Induced employee compensation

$2,720

$8,419

Local taxes

$416

$1,851

$1,632

$6,314

State taxes

$426

$1,783

Federal taxes

$788

$2,680

Source: WRI authors and BW Research.

Table 3 | Rural Economic Impacts by Investment Area (Each Year for First Five Years)

Source: WRI authors and BW Research.

Figure 4 | Geographic Distribution of Rural Job Creation (Jobs per Year)

Source: WRI authors and BW Research.

Figure 5 | Geographic Distribution of Rural Job Creation (per 1,000 Workers)

Source: WRI authors and BW Research.

The following sections outline the economic benefits from seven areas for federal investment and offer recommendations for policy vehicles to convey investment to rural communities.

4.1 Renewable Energy

The Issue

Over the last decade, investment in renewable electricity technologies has risen thanks to reduced technology costs coupled with state and federal policy incentives. Since 2010, cumulative installed renewable capacity has more than doubled, and renewables now make up approximately 20 percent of total electricity generation (EIA 2020a; BNEF 2021). Investment in renewable energy exceeded $60 billion in 2019, with most accruing to wind and solar (BNEF 2021).

Despite the encouraging growth, renewable energy has not been immune to recent pandemic-induced shocks, with total investments falling by $7 billion in 2020 (BNEF 2021). This decline poses a challenge to meeting ambitious climate goals. Annual renewable capacity additions must double in the coming years—from 33 GW in 2020 to upwards of 60 GW over the next decade—and maintain this growth rate to be on pace for 90 percent clean electricity by 2035 (UCB 2020a).

Box 2 | Economic Impacts from Rush Creek Wind Farm in Colorado

The 600 megawatt (MW) Rush Creek Wind Farm spans four rural counties in eastern Colorado. The project is owned and operated by Xcel Energy and came online in 2018. An economic impact analysis conducted by the National Renewable Energy Laboratorya found that in-state wind turbine manufacturing and installation can lead to significant economic benefits for these rural communities. The project’s 300 2-MW wind turbines were manufactured in Colorado by Vestas. In addition to jobs created during construction of the wind farm, Rush Creek supports an estimated 180 long-term jobs and will provide $20 million in gross domestic product annually during its anticipated 25-year lifespan. Furthermore, the project expects to generate about $45 million in landowner lease payments and $62.5 million in property taxes over its lifetime. Lease payments provide additional income support to farmers and ranchers and enhance financial stability during periods when either bad weather hits or commodity prices are low. Property taxes can provide funding for schools, libraries, fire departments, and other infrastructure projects.

Note: a. Stefek et al. 2019.

Table 4 | Rural Economic Impacts from Federal Renewable Energy Investment

 

Jobs per Year for 5 Years

Value Added per Year for 5 Years

($, millions)

Employee Compensation per Year for 5 Years

($, millions)

 

Taxes on Production and Imports per Year for 5 Years

($, millions)

Direct effects

11,700

$1,469

$761

Local

$226

Indirect effects

6,500

$1,206

$555

State

$189

Induced effects

13,400

$726

$348

Federal

$121

Total

31,600

$3,401

$1,664

Total

$536

Note: Assumed investment of $3.8 billion per year over five years to rural areas.

Source: WRI authors and BW Research.

Renewable energy can drive job growth and economic benefits in rural communities, as exemplified in Box 2. From 2017 to 2019, renewable energy jobs in rural counties grew by 20 percent, adding roughly 10,000 new jobs and accounting for the majority of employment growth in the sector nationwide (Saha and Cyrs 2021). At the same time, the renewable energy sector still represents a smaller share of total employment in rural counties than it does in urban ones, and this trend has been exacerbated by recent economic shocks.

Figure 6 | Geographic Distribution of Rural Job Creation from Federal Renewable Energy Investment

Source: WRI authors and BW Research.

The Rural Economic Opportunity

We examine the impact of $18.8 billion in federal investment per year over the next five years in renewable energy, based on opportunities to extend existing federal policies and accelerate technology deployment. Of this, $3.8 billion would flow directly to rural communities.

This level of federal investment would support nearly 32,000 direct, indirect, and induced jobs that would last for at least five years (160,000 job-years) in rural communities. The majority of these jobs would be in construction, manufacturing, and professional, scientific, and technical services industries. This level of federal investment would also add $3.4 billion in annual value to rural economies for five years including $1.7 billion in annual employee compensation and $536 million in local, state, and federal taxes (Table 4). States seeing the most significant economic benefits in rural areas would include Texas, California, Illinois, Iowa, and Colorado, which together would account for over a third of total job creation. On a normalized basis (jobs created as a share of total employment), Massachusetts, California, Nevada, Maryland, and Illinois rank among the top five states (Figure 6). Note: For detailed outputs by state, see Appendix B.

The Federal Policy Opportunity

Federal investments could be channeled through a combination of well-established policy vehicles, with renewed and/or enhanced incentive structures relative to recent years. These include tax incentives for manufacturing, deployment, and generation as well as targeted grant and loan financing for rural communities.

Figure 7 | Illustration of Federal Energy Efficiency Investment and Associated Benefits for Rural Areas

Note: USDA RESP = U.S. Department of Agriculture Rural Energy Savings Program; co-op = cooperative; HVAC = heating, ventilation, and air conditioning.

Specific policies that can play a role in accelerating renewable energy in rural America include the following:

  • Extending the federal investment tax credit (ITC) of 30 percent for offshore wind, solar, and other renewables
  • Extending the federal production tax credit for wind and other renewables
  • Renewing the advanced manufacturing tax credit (tax code section 48C) for 30 percent of investments in facilities that produce clean energy products including renewable energy generation technologies and their components
  • Expanding grant and loan programs targeted at rural communities, including the USDA Rural Energy for America Program (REAP) program3

To ensure that underserved communities are at the fore of federal investment strategies and that benefits accrue equitably, states, local governments, and other key implementing partners can adopt complementary provisions. Such measures can include requirements that a certain share of funding is allocated to economically disadvantaged communities, sales tax exemptions for projects that use community workforce agreements and/or prioritize hiring from economically disadvantaged communities, and other incentives.

4.2 Energy Efficiency

The Issue

Investing in energy efficiency remains one of the most reliable strategies for lowering emissions in the United States and will be vital for decarbonization moving forward. Energy efficiency measures alone can cut U.S. energy use and GHG emissions in half by 2050, with efficiency measures for buildings and industry in particular comprising roughly 60 percent of this potential (Nadel and Ungar 2019).

Table 5 | Rural Economic Impacts from Federal Energy Efficiency Investments

 

Jobs per Year for 5 Years

Value Added per Year for 5 Years

($, millions)

Employee Compensation per Year for 5 Years

($, millions)

 

Taxes on Production and Imports per Year for 5 Years

($, millions)

Direct effects

13,600

$1,299

$794

Local

$28

Indirect effects

8,800

$940

$495

State

$35

Induced effects

7,400

$675

$325

Federal

$98

Total

29,800

$2,914

$1,613

Total

$162

Note: Assumed investment of $2.1 billion per year over five years to rural areas.

Source: WRI authors and BW Research.

Despite the vital importance of energy efficiency investment, rural communities often face persistent underinvestment in energy efficiency relative to their urban counterparts. Rural households across the country have a disproportionately high energy burden, due to interrelated factors including low population density, lack of local capacity from energy services contractors, and the limited financial capacity of rural electric cooperatives (Shoemaker et al. 2018).

Investment in energy efficiency is also lagging. Prior to the COVID-19 pandemic, energy efficiency spending in the United States had stagnated, and investment in energy efficiency is estimated to have fallen globally by 9 percent in 2020 (EIA 2020b; IEA 2020). In recent years, annual U.S. spending on efficiency has been estimated at $60–115 billion (Nadel 2017). However, significant, far greater potential is both achievable and necessary to reach ambitious climate commitments and bolster economic growth.

The Rural Economic Opportunity

We examined the impact of $8.3 billion in federal investment per year over the next five years in energy efficiency upgrades for homes, commercial buildings, industrial facilities, and farms across the country. Of this total, an estimated $2.1 billion would flow directly to rural counties. Figure 7 illustrates an example of how such efficiency investments can flow to rural areas, generating jobs, value added, and other local or regional benefits, and a more detailed case study is provided in Box 3.

Figure 8 | Geographic Distribution of Rural Job Creation from Federal Energy Efficiency Investments

Source: WRI authors and BW Research.

This level of federal investment would support approximately 30,000 direct, indirect, and induced jobs annually in rural counties, including in the energy services, construction, and engineering sectors, that would last for at least five years (150,000 job-years). Rural economies would also accrue $2.9 billion in annual value added for five years, including $1.6 billion in annual employee compensation and $162 million in local, state, and federal taxes (Table 5). States that would see the most significant job creation benefits include California, Texas, Ohio, North Carolina, and Michigan, accounting for over a quarter of rural jobs added. On a normalized basis (jobs created as a share of total employment), Massachusetts, Maryland, California, Connecticut, and Vermont would stand to gain the most (Figure 8). Note: For detailed outputs by state, see Appendix C.

Box 3 | Energy Efficiency Investment in Rural South Carolina

Electric cooperatives (co-ops) are an integral part of America’s rural communities. Co-ops often serve regions where a significant portion of customers are at or below the poverty level and lack resources to invest in efficiency upgrades, more efficient heating and cooling, or weatherization.

To help resolve these issues, Santee Electric Co-Op, which operates in four rural counties in South Carolina, has used an on-bill financing program called Help My House to fund energy efficiency upgrades for homes and small businesses. Members receive low-interest loans that are paid back on their monthly utility bills with terms of up to 10 years. To date, Santee has weatherized over 300 homes, without any defaults on loans. While initially the utility put up its own capital to implement the program, Santee has since been able to leverage an additional $2.5 million in loan financing from the U.S. Department of Agriculture Rural Energy Savings Program, allowing it to reach an even broader share of its customers with much needed efficiency upgrades. Through the program, members have reduced energy use by an average of 30 percent, significantly lowering their bills. The program creates local jobs including electric co-op staff to implement the program, local energy auditors, and contractors to make the upgrades. Consumers are also able to reinvest their energy savings, further benefiting the local economy.

Source: Information provided to WRI authors by James W. Kirby Jr., Vice President of Public Affairs, Santee Electric Cooperative, 2021.

The Federal Policy Opportunity

These economic benefits can be achieved through a combination of targeted tax incentives and block grant programs. In many cases, such programs are well established and received appropriations following the 2009 financial crisis comparable to those envisioned in this analysis.

Specific energy efficiency policies that could provide economic benefits to rural communities include the following:

  • Extending and enhancing incentives for efficiency upgrades in homes and residential buildings, including the existing homes tax credit (tax code section 25C) and new homes tax credit (sec. 45L)
  • Enhancing tax incentives for efficiency upgrades in new and existing commercial buildings (sec. 179D)
  • Expanding efficiency block grant programs that channel money directly to state and local agencies for targeted upgrades, including the Weatherization Assistance Program (WAP), State Energy Program (SEP), and Energy Efficiency Conservation Block Grants program
  • Establishing a comparable block grant program for industrial facilities
  • Expanding grant and loan programs targeted at rural communities in particular, including USDA REAP, the Energy Efficiency Conservation Loan Program, and the Rural Energy Savings Program

To ensure that these investments achieve tangible results in rural communities, complementary policies at the federal, state, and local levels may also be required. Historically, rural communities have tended to benefit less from energy efficiency measures than their urban counterparts, in part due to a lack of on-the-ground contractors and the added cost of making upgrades in remote areas (Shoemaker et al. 2018). Greater investment in job training and capacity building is therefore required as a complement to the above programs and policies.

4.3 Transmission, Distribution, and Storage

The Issue

The aging and fragmented electric transmission and distribution grid in the United States has suffered from decades of underinvestment, creating an opportunity for new investments that not only address safety and reliability concerns but also pave the way for the integration of next-generation clean technologies. Grid modernization will enable the integration of increasing levels of renewable generation capacity, optimization of supply and demand across long distances, and management of heightened demand from electric vehicles and appliances, all of which will be vital to addressing climate change. These investments can create major economic opportunities, including in rural communities. Transmission facilities obtain 82 percent of construction services, materials, and equipment domestically, creating U.S. manufacturing and construction jobs (WIRES 2011).

Expanded transmission is critical to any plans to decarbonize the power sector, with one analysis finding that transmission infrastructure would have to be doubled to decarbonize the power sector in a cost-effective manner (Brown and Botterud 2021). Fortunately, studies find that investing in grid modernization would be both economically and technologically feasible, effectively paying for itself many times over given the numerous co-benefits (UCB 2020b). Box 4 describes the economic benefits to four Midwest states from a recently approved transmission line, highlighting just one promising case.

Box 4 | Grain Belt Express Transmission Line to Bring Wind Power and
Economic Benefits to Midwest States

Covering nearly 800 miles through Kansas, Missouri, Illinois, and Indiana, the Grain Belt Express transmission line is projected to deliver 4,000 megawatts of low-cost wind power from western Kansas to millions of Americans in the Midwest. Analysis commissioned by Invenergy, the project developer, estimates that the project will create hundreds of jobs and bring billions in economic investment and energy savings, with significant impact in rural areas.a According to the analysis, Grain Belt Express will create nearly 22,500 temporary jobs over a three-year construction period, 968 full-time jobs after that, and $8 billion in economic investment in Kansas alone.b The line will traverse 14 counties in Kansas, of which all except one are rural, meaning most of the economic benefits will accrue to rural counties. The project will save $7 billion in electricity costs for Kansas and Missouri consumers (savings of $50/year for the average residential customer) through 2045. In addition to moving clean energy, Invenergy is committing to providing broadband access to rural communities along the line route. In Missouri, for instance, about 250,000 rural homes, schools, and hospitals within 50 miles of the transmission line that lack broadband access will benefit from the proposed expansion of broadband infrastructure, at no additional cost to taxpayers.

Notes: a. Invenergy n.d.b. Invenergy n.d.

The Rural Economic Opportunity

We examined the impact of $19.6 billion in federal investment in the transmission, distribution, and storage sector per year over a five-year period, with approximately $3.4 billion flowing directly to rural communities.

Table 6 | Rural Economic Impacts from Federal Investments in Transmission, Distribution, and Storage

 

Jobs per Year for 5 Years

Value Added per Year for 5 Years

($, millions)

Employee Compensation per Year for 5 Years

($, millions)

 

Taxes on Production and Imports per Year for 5 Years

($, millions)

Direct effects

21,400

$2,689

$1,603

Local

$61

Indirect effects

14,400

$1,858

$954

State

$77

Induced effects

13,000

$1,222

$582

Federal

$224

Total

48,800

$5,769

$3,140

Total

$362

Note: Assumed investment of $3.4 billion per year over five years to rural areas.

Source: WRI authors and BW Research.

The construction, engineering, and financing associated with this investment would create nearly 50,000 rural jobs each year that would last for at least five years (250,000 job-years). The investment would also yield $5.8 billion in value added for rural economies each year for five years, including $3.1 billion in employee compensation and $362 million in tax revenues (see Table 6). California, Texas, Tennessee, Nevada, and Florida would account for over one-third of rural jobs supported. On a normalized basis (jobs created as a share of total employment), Massachusetts, Nevada, California, Maryland, and Arizona would see the most job gains from federal investment in TDS (Figure 9). Note: For detailed outputs by state, see Appendix D.

Figure 9 | Geographic Distribution of Rural Job Creation from Federal Investments in Transmission, Distribution, and Storage

Source: WRI authors and BW Research.

The Federal Policy Opportunity

These economic benefits can be achieved through a combination of targeted tax credits and grant, loan, and loan guarantee programs. These mechanisms can be deployed in tandem to accelerate and unlock private investment for emerging technologies.

Specific policies that together can catalyze needed investments include the following:

  • Offering tax credits to incentivize transmission projects that are regionally significant and enable renewable energy integration; stand-alone energy storage technologies; and domestic clean energy manufacturing facilities (tax code sec. 48C)
  • Reauthorizing the Department of Energy’s Smart Grid Investment Grant program to promote investments in smart grid technologies
  • Authorizing the Department of Transportation to make transmission infrastructure projects, especially those that emphasize the integration of renewable energy, eligible under the Transportation Infrastructure Finance and Innovation Act loan guarantee program
  • Providing loans and loan guarantees through the USDA Electric Infrastructure Loan & Loan Guarantee program to help finance transmission and distribution systems in rural areas
  • Providing grants and technical assistance to rural electric cooperatives to deploy energy storage and microgrid technologies

While many policies mentioned above would apply to the whole country, some specifically target rural areas. USDA’s Electric Program, for instance, provides loans and loan guarantees to maintain, upgrade, and expand rural energy infrastructure, including investments in smart grid technologies that can catalyze broadband services in underserved rural communities. Electric cooperatives, which provide electricity to most rural customers, are one of the main beneficiaries of these federal programs. Federal funding can further help electric cooperatives improve energy grid capacity and resiliency by investing in energy storage and microgrid projects. Moreover, federal investment including tax credits to incentivize the construction of transmission projects should be accompanied with policies that address current challenges around siting, permitting, and allocating costs for new projects.

4.4 Environmental Remediation of Abandoned Fossil Fuel Infrastructure

The Issue

The production and use of fossil fuels have economically powered communities across the United States for generations. At the same time, the mining, drilling, and burning of fossil fuels have exacted an enormous toll on the environment and public health. Abandoned coal mines, where mining-related structures, equipment, and waste have been left behind in disuse and disrepair, exist in many rural parts of the country and adversely impact local ecosystems in addition to emitting methane. Orphaned oil and gas wells—i.e., wells that no longer have a solvent or known owner to pay plugging costs—also emit methane, harming the health of surrounding communities and contributing to climate change. Studies find that orphaned, unplugged wells emit anywhere between 0.03 to 0.19 metric tons (mt) of methane per well (Raimi et al. 2020), with a corresponding range in total emissions of 64,000 to 404,000 mt for the estimated 2.1 million orphan wells in the United States.

Federal investment in environmental remediation programs can provide near-term job opportunities to clean up polluted sites as well as create additional jobs if those sites are converted to other productive uses such as developing solar energy on former mine lands. In many cases, these sites are in rural communities with ties to oil, gas, and coal production, thus providing opportunities to support communities adversely impacted by declining production. Cleaning up coal mines, for instance, can employ former miners who already have the required skills or can be quickly trained for these positions. Similarly, there is significant overlap in skills required for plugging wells and those used in oil and gas extraction.

The Rural Economic Opportunity

This analysis examines the impact of a total federal investment of $2.4 billion for plugging and environmental remediation of over 60,000 documented orphaned oil and gas wells and cleaning up over 2,000 abandoned coal mines per year over five years. Of this, $1.3 billion would go to rural areas, representing a significant down payment toward creating economic opportunities for fossil fuel–dependent regions impacted by the transition to a low-carbon economy. Figure 10 illustrates an example of how such investments can flow to rural areas, generating jobs, value added, and other local or regional benefits.

Figure 10 | Illustration of Investments in Orphaned Oil and Gas Well Remediation and Associated Benefits for Rural Areas

We estimate that this rural investment would support 14,620 direct, indirect, and induced jobs each year that would last for at least five years (73,100 job-years). The investment would also lead to $1,997 million in value added to rural economies each year for five years, including $952 million in employee compensation and $164 million in tax revenues (Table 7). Rural counties in Pennsylvania, Kentucky, Kansas, West Virginia, and Texas would account for nearly three-quarters of jobs supported. On a normalized basis (jobs created as a share of total employment), rural counties in Pennsylvania, Kansas, West Virginia, Kentucky, and Wyoming would benefit the most from federal investment in environmental remediation of orphaned oil and gas wells and abandoned coal mines (Figure 11). Note: For detailed outputs by state, see Appendix E.

Table 7 | Rural Economic Impacts from Federal Investments in Environmental Remediation of Abandoned Oil and Gas Wells and Coal Mines

 

Jobs per Year for 5 Years

Value Added per Year for 5 Years

($, millions)

Employee Compensation per Year for 5 Years

($, millions)

 

Taxes per Year for 5 Years

($, millions)

Direct effects

4,770

$921

$411

Local

$36

Indirect effects

4,943

$615

$316

State

$41

Induced effects

4,905

$461

$225

Federal

$88

Total

14,618

$1,997

$952

Total

$165

Note: Assumed investment of $1.3 billion per year over five years to rural areas.

Source: WRI authors and BW Research.

Figure 11 | Geographic Distribution of Rural Job Creation from Federal Investments in Environmental Remediation of Abandoned Fossil Fuel Infrastructure

Source: WRI authors and BW Research.

The Federal Policy Opportunity

The federal government has historically played a large role in the cleanup and remediation of polluted sites, especially those located in low-income and minority communities. The following federal investments in environmental remediation of abandoned mines and wells can significantly reduce pollution in rural communities:

  • Increasing federal funding to clean up abandoned coal mine sites, potentially through the federal Abandoned Mine Land program
  • Creating a new federal program to plug and remediate documented orphaned oil and gas well sites

Large-scale remediation programs for orphaned and abandoned sites as envisioned in this report require public funding, in large part because such sites no longer have solvent owners. However, federal investment should be paired with policy reforms that ensure that fossil fuel companies, rather than taxpayers, are responsible for cleaning up polluted sites moving forward. Though states require oil and gas companies to set aside money to plug wells and restore sites once production ends, the amount required from them is nowhere close to the actual plugging and remediation costs (Bordoff et al. 2020). State and federal agencies can collaborate to ensure that bonding requirements and other mechanisms are strengthened. Federal grants to states can also be tied to requirements that states update their regulations to reflect true costs, thereby reducing the risks of creating a new generation of orphaned wells.

Furthermore, the scale and pace of federal investment should account for the current administrative capacity of state programs to channel federal dollars into remediation projects. To that end, a portion of federal funding could be targeted toward state regulatory agencies, improving their capacity to administer large-scale programs.

Finally, Congress and implementing state agencies can incorporate provisions to ensure that investments are accompanied with strong labor standards, including a prevailing wage guarantee, “local hire” directives, and preference given to laid-off fossil fuel workers in the region. These provisions can heighten the benefits of federal investments in rural communities, which host a disproportionate share of abandoned fossil fuel sites.

4.5 Tree Restoration on Federal Lands

The Issue

Federal lands are critical to the economies of many U.S. rural communities: Rural counties in the western United States with large shares of federal land have experienced significantly higher rates of growth in employment, income, and population in recent decades compared with rural counties with smaller shares (Lawson 2017). Federal lands are also critical for emissions mitigation: Federal forests store 63 gigatons of carbon dioxide equivalent (GtCO2e)—an amount that exceeds cumulative U.S. net emissions over the last decade—and more carbon per acre than privately owned forests (Smith et al. 2019).

But federal lands can do even more to contribute to rural economies and carbon removal. Increasing rates of disturbance due to wildfire, pests, and disease have left large areas of federal forest land degraded or barren, sequestering carbon at lower rates than it otherwise could (Domke et al. 2020). Current funding for restoration programs within the U.S. Forest Service (USFS) and other land management agencies is woefully insufficient to meet the need for reforestation and restocking on federal lands, resulting in a growing backlog of projects (Wagner 2014). Disturbed and unhealthy forests also provide inferior opportunities for recreation, causing a drag on neighboring rural economies (Rosenberger et al. 2012; Arnberger et al. 2018).

Due to overstocking and a subsequently high risk of catastrophic wildfires in many western federal forests, this analysis considers restocking opportunities only in eastern states; however, this analysis does include reforestation opportunities in western states where forests and corresponding carbon stocks have been lost due to fire and pathogens. Eighteen million acres of federal land are suitable for reforestation or restocking (Cook-Patton et al. 2020; USFS 2021; Sohngen 2018).4 Collectively, these lands could sequester an additional 17 metric tons of carbon dioxide equivalent (MtCO2e) per year by 2030, and up to 35 MtCO2e per year in 2040 and beyond (Cook-Patton et al. 2020; Mulligan et al. 2020).5

The Rural Economic Opportunity

Such a wide-scale effort to restore trees on federal lands would require a concerted and sustained national investment. This analysis considers a national investment of $445 million annually over 20 years, of which $350 million would flow to rural areas (see Appendix K). This investment in rural America would support 9,300 direct, indirect, and induced jobs annually that would last for 20 years (186,000 job-years). These jobs would provide $474 million in annual value added to rural economies, including $330 million in employee compensation and $12 million in tax revenues (Table 8). Figure 12 illustrates an example of how such investments would flow to rural areas, generating jobs, value added, and other local or regional benefits.

Figure 12 | Illustration of Investments in Tree Restoration via the Restoration Trust Fund and Associated Benefits to Rural Areas

Over 70 percent of rural jobs would be created in the Intermountain West region, which includes the top five states for job creation. Utah stands to benefit the most, with a total potential of 1,500 jobs each year for 20 years. On a normalized basis (jobs created as a share of total employment), Utah, Colorado, Wyoming, Idaho, and New Mexico have the highest levels of job creation (Figure 13). Note: For a full table of all state-level impacts, see Appendix G.

Table 8 | Rural Economic Impacts from Tree Restoration on Federal Lands

 

Jobs per Year for 20 Years

Value Added per Year for 20 Years ($, millions)

Employee Compensation per Year for 20 Years ($, millions)

 

Taxes on Production and Imports per Year for 20 Years ($, millions)

Direct

7,000

$282

$235

Local

$2

Indirect

700

$55

$30

State

$3

Induced

1,600

$137

$65

Federal

$7

Total

9,300

$474

$330

Total

$12

Note: Assumed investment of $350 million per year over 20 years to rural areas.

Source: WRI authors and BW Research.

Figure 13 | Geographic Distribution of Rural Job Creation from Tree Restoration on Federal Lands

Source: WRI authors and BW Research.

The Federal Policy Opportunity

Congress can provide sufficient funding to federal agencies to accelerate tree restoration on federal lands. Actions that could contribute toward this objective include increasing appropriations for USFS programs that can help restock federal forests affected by pests, diseases, or other disturbances, including the Forest Health Monitoring Program, Vegetation and Watershed Management Program, and Collaborative Forest Landscape Restoration Program.

Actions could also include increasing appropriations for programs that support tree restoration on lands managed by other federal agencies, including the Bureau of Land Management (BLM), U.S. Fish and Wildlife Service (USFWS), and Department of Defense. Federal funding can also attract matching funds from state and local governments, civil society, and the private sector, augmenting its benefits for rural economies and climate change. However, funding for federal lands can be deployed only at the rate that federal agencies can design, review, and permit projects. Increasing agency capacity to conduct these project planning activities is therefore critical to scaling up tree restoration on federal lands.

In addition to increased program funding and agency capacity, forest restoration on federal lands will require an expanded workforce to plan, implement, and monitor projects. Developing and training this workforce and ensuring that high-quality, well-paid jobs are created will require additional investment beyond what we consider here. Providing funding for jobs through the proposed Civilian Climate Corps could alleviate this potential labor bottleneck and set standards for job quality.

4.6 Tree Restoration on Non-federal Lands

The Issue

Opportunities for tree restoration on non-federal lands cover 296.2 million acres and offer the potential to remove 156 MtCO2e per year by 2030, and up to 312 MtCO2e per year in 2040 and beyond—greater than any other near-term strategy for carbon removal (Cook-Patton et al. 2020; Sohngen 2018; USFS 2021; Fargione et al. 2018; Mulligan et al. 2020).6 More than two-thirds of the nation’s forest area are located on non-federal lands, including land owned by state and local governments and an estimated 11 million private forest landowners (Oswalt et al. 2014). Non-federal forests produce over 90 percent of U.S. timber supply and other forest products while storing 130 GtCO2e (Oswalt et al. 2014; Smith et al. 2019). Those forests are an important economic driver for many rural communities: Private forests contribute over 5 percent of national manufacturing GDP (Forest2Market 2019), while recreation and other ecosystem services provide additional economic value.

Even beyond forests, trees can be an important contributor to rural economies. Silvopasture systems can diversify income streams for producers, increase livestock productivity by reducing heat stress, and build land value (Grado and Husak 2004; Mayerfeld et al. 2016). Cropland agroforestry systems generate on-farm income from a secondary crop like timber, fruit, or nuts while benefiting the primary crop by reducing soil erosion and enhancing soil fertility (Schoeneberger et al. 2012).

Restoring trees on private, state, and other non-federal public lands can create new jobs in rural forest and agricultural communities while enhancing the capacity of forests to reduce emissions. Because of the high labor inputs and relatively low capital requirements for tree restoration projects, investments in tree restoration tend to generate more jobs than comparable investments in other economic sectors (Pollin and Chakraborty 2020).

The Rural Economic Opportunity

This analysis examines a federal investment of $4.3 billion per year over 20 years, of which $2.8 billion would flow to rural areas. That investment would create 76,200 direct, indirect, and induced jobs that would last for 20 years (a total of 1.5 million job-years), of which 44,000 jobs would be attributable to reforestation and restocking projects and 32,200 would be attributable to silvopasture and cropland agroforestry. This investment would add $3.9 billion annually to rural economies, including $2.7 billion in employee compensation and $212 million in tax revenues (Table 9). Figure 14 illustrates an example of how such investments would flow to rural areas, generating jobs, value added, and other local or regional benefits.

Figure 14 | Illustration of Investments in Tree Restoration via USDA Conservation Programs and Associated Benefits to Rural Areas

Note: USDA = U.S. Department of Agriculture; EQIP = Environmental Quality Incentives Program; CRP = Conservation Reserve Program.

Figure 15 | Geographic Distribution of Rural Job Creation from Tree Restoration on Non-federal Lands

Source: WRI authors and BW Research.

Table 9 | Rural Economic Impacts from Tree Restoration on Non-federal Lands

 

Jobs per Year for 20 Years

Value Added per Year for 20 Years ($, millions)

Employee Compensation per Year for 20 Years ($, millions)

 

Taxes on Production and Imports per Year for 20 Years ($, millions)

Direct

57,300

$2,278

$1,917

Local

$34

Indirect

4,800

$431

$229

State

$44

Induced

14,000

$1,210

$589

Federal

$134

Total

76,200

$3,919

$2,734

Total

$212

Note: Assumed investment of $2.8 billion per year over 20 years to rural areas.

Source: WRI authors and BW Research.

Rural jobs created by restoring trees on non-federal lands are concentrated in the Midwest, which would account for more than one in three jobs created. The top five states for rural job creation would be Missouri, Ohio, South Dakota, Michigan, and Wisconsin. On a normalized basis (jobs created as a share of total employment), states with the greatest job creation would include Missouri, South Dakota, North Dakota, Montana, and Maine (Figure 15). Note: For a full table of state-level economic impacts, see Appendix H.

The Federal Policy Opportunity

Federal incentives for planting and maintaining trees on non-federal lands in ways that are ecologically appropriate, increase forest resiliency, and sequester carbon will be critical to creating rural jobs and realizing economic benefits. A federal incentive program could take the form of a tax credit or landowner payments for tree restoration. While these policy mechanisms target the same objectives, there are important trade-offs in how they would function (see Table 10).

A tax credit approach could be modeled off the existing 45Q tax credit for carbon capture, utilization, and storage, but with a focus on natural carbon capture. Making the tax credit refundable or transferable would facilitate participation by all eligible landowners, regardless of their tax liability.

Direct payments could come through expansion of existing USDA conservation programs such as the Environmental Quality Incentives Program and the Conservation Reserve Program, with additional guidance to prioritize forest restoration projects in application review processes as well as guidance regarding carbon credit allocations.

Table 10 | Characteristics of Incentive Structures for Tree Restoration on Non-federal Lands

 

Tax Credit

Landowner Payments

Authority

Requires new congressional authority

Could use existing authorities for Farm Bill conservation programs

Administration

Treasury Department

USDA

Payment rates

Set in statute, could be outcome based (per ton of carbon dioxide sequestered)

Set by USDA based on practice costs, land rental rates, and/or other factors

Distribution of benefits

May provide greater benefits to large landowners due to their larger tax liability and capacity to cover administrative costs

May primarily benefit smaller landowners due to income limits for Farm Bill program eligibility

Note: USDA = U.S. Department of Agriculture.

Source: WRI authors.

Under either a tax credit or direct payment program, expanding eligibility to third-party intermediaries that contract with landowners to implement tree restoration projects could facilitate scale-up by reducing transaction costs and leveraging private finance (Mulligan et al. 2020).

Additional federal funding would also be needed to accelerate reforestation, restocking, and agroforestry restoration on state- and locally owned lands as well as private lands that cannot take advantage of tax credits or USDA programs. The USFS could funnel additional funding to tree restoration projects through the Forest Stewardship Program, the Forest Health Management Program on Cooperative Lands, and the Urban and Community Forestry Program.

Importantly, the investments and policy levers contemplated here do not include necessary investments upstream in the supply chain for rural tree restoration efforts, such as expanding the national nursery capacity or building and supporting a sufficient workforce to implement tree restoration projects at an accelerated pace and scale. Current legislative proposals to increase funding for federal nurseries and fund the Civilian Climate Corps proposed by President Biden can begin to address these needs. These investments also do not address the need for long-term, ecologically informed forest management to support carbon storage and climate resilience into the future. State- and local-level programs to incentivize and support forest stewardship and maintenance of forest cover will be necessary to complement federal investment.

4.7 Wildfire Risk Mitigation

The Issue

Many forests in the United States, particularly in western states, are facing the risk of large and intense wildfires that threaten ecosystems and communities. Historical wildfire suppression has created unnaturally high tree densities and abundant brushy vegetation that can fuel high-severity fires (Steel et al. 2015). Additionally, the effects of climate change are already increasing fire incidence and intensity as hotter, drier summers become the norm and chronically drought-stressed trees succumb to insect infestations, creating additional fuel for fires (McKenzie et al. 2011; van Mantgem et al. 2013).

In 2020, the USFS and Department of the Interior (DOI) spent $2.3 billion fighting wildfires, and this yearly cost is likely to increase as the effects of climate change intensify (NIFC 2020). There is evidence, however, that federal investment in prescribed burning and removal of small-diameter trees could help decrease the size and intensity of wildfires while improving forest health and decreasing fire suppression costs (North et al. 2015; Snider et al. 2006). This investment could also support rural forestry jobs, stimulate rural economies, and decrease fire risk for communities living adjacent to forests.

Prescribed burning and biomass removal could also offer climate benefits by reducing the risk of high-intensity fires that contribute to emissions and decrease forest carbon storage. Prescribed burning alone could reduce wildfire carbon emissions in the western United States by 18–25 percent and could increase long-term forest carbon storage by 18 MtCO2 per year through avoided tree mortality (Fargione et al. 2018; Wiedinmyer and Hurteau 2010).

There are 57.4 million acres of forest considered to be at a high or very high risk of wildfire in the United States, of which 33.2 million acres are found in rural counties (Dillon and Gilbertson-Day 2020). Deploying landscape-scale strategies to reduce wildfire risk can be resource- and time-intensive and requires participation from many stakeholders. Federal investment and policy support are required to employ these treatments at scale.

The Rural Economic Opportunity

This analysis contemplates a federal investment of $1.5 billion per year over 20 years, which would support prescribed burning and small-diameter tree thinning in federal, state, and private forests at high risk for wildfire. Over 70 percent of this investment, or $1.1 billion, would flow to rural counties. This investment, plus the downstream economic impact of generating products from small-diameter trees, would create 49,000 direct, indirect, and induced rural jobs that would last for 20 years (a total of 980,000 job-years). This would result in $3.3 billion in value added to rural economies, including $2.5 billion per year in employee compensation and $183 million in tax revenues (Table 11). Figure 16 illustrates an example of how such investments would flow to rural areas, generating jobs, value added, and other local or regional benefits.

Figure 16 | Illustration of Investment in Wildfire Risk Management and Associated Benefits to Rural Areas

Note: USDA = U.S. Department of Agriculture; EQIP = Environmental Quality Incentives Program; CRP = Conservation Reserve Program.

Table 11 | Rural Economic Impacts from Wildfire Risk Management

 

Jobs

Value Added

($, millions)

Employee Compensation

($, millions)

 

Taxes on Production and Imports

($, millions)

Direct effects

27,000

$1,345

$1,540

Local

$29

Indirect effects

13,300

$1,096

$373

State

$38

Induced effects

8,700

$816

$587

Federal

$116

Total

49,000

$3,257

$2,500

Total

$183

Note: Assumed investment of $1.1 billion per year over 20 years to rural areas.

Source: WRI authors and BW Research.

The majority of rural jobs created by federal investment in fuel load reduction occur in the western United States. The top five states for rural job creation (California, New Mexico, Wyoming, Idaho, and Oregon) account for more than 75 percent of all yearly job creation potential for the conterminous United States. California alone offers 25 percent of the job creation opportunity. On a normalized basis (jobs created as a share of total employment), states with the highest levels of job creation include California, New Mexico, Wyoming, Idaho, and Oregon (Figure 17). Note: For a full table of state-level impacts, see Appendix I.

Figure 17 | Geographic Distribution of Rural Job Creation from Wildfire Risk Management

Source: WRI authors and BW Research.

The Federal Policy Opportunity

Meeting the need for large-scale fuel load reduction in U.S. forests will require federal investment in policy vehicles that help build long-term forest resilience while stimulating rural economies. To address underfunding for fuel treatment in federal agencies, Congress could increase funding to the USFS “Hazardous Fuels” budget and the DOI Office of Wildland Fire, which allots fuel management funds to the BLM, USFWS, National Park Service, and Bureau of Indian Affairs. An increase in program funding for the USFS State and Private Forestry division could also help accelerate fuel load reduction projects in non-federal forests. The USFS Collaborative Forest Landscape Restoration Program (CFLRP), for example, uses public-private partnerships to address fire risk and forest health at scale, but its yearly appropriations are mostly devoted to existing projects. CFLRP’s appropriations could be increased to support the development of new projects in areas in vital need of fuel load treatment. For an example of fuel treatment projects using existing federal funding, see Box 5.

Box 5 | New Mexico Collaborative Fire Risk Management

The Forest Stewards Guild (FSG) is a national organization focused on community-building and improved forest management. The Southwest branch hosts more than 20 youth conservation crews that prepare high schoolers and recent graduates to work in the forest industry. They work closely with business, state, and federal partners to address barriers and implement post-wildfire reforestation and pre-wildfire management measures.

In 2016, the FSG and other partners were awarded $360,000 in matched funding through the USFS Collaborative Forest Restoration Program enabling a youth conservation crew and state and local partners to implement forest restoration and fire risk management treatments on 288 acres in New Mexico’s Rio Grande del Norte National Monument.a The process of strategic thinning and prescribed fires is a common fire risk management practice for the area, with tree removal garnering variable value in bioenergy, architecture, and heating technologies. Through this project, fuel removal and forest restoration directly employed 14 workers in full-time restoration jobs and provided job training experience for 28 local youth.b

Notes: a. FSG 2019.b. FSG 2019.

Beyond the scope of existing federal programs, new policies could improve the longevity and effectiveness of fire risk mitigation initiatives while supporting community resiliency, innovation, and economic activity. Most USFS fuel treatment projects currently rely on yearly appropriations and, as a result, project terms are too short to make necessary impact and contractors cannot rely on ongoing funding. Improving mechanisms for financing federal fuel treatment, such as amending the USFS’s budgetary authority to allow for longer-term contracts and greater leveraging of private investment, would help build capacity to address wildfire risk at scale. Longer-term project funding would also help create fire risk management jobs that would have longer durations, which in turn could support the development and training of professionals specializing in biomass removal and prescribed burning. Even with increased investment in the programs described above, federal fuel treatment projects will require support from private finance and additional staff capacity through partnerships and contracting with state, nonprofit, and private entities.

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