The Persistent Consequences of the Energy Transition in Appalachia’s Coal Country

Each year, the Joseph Crump Fellowship is presented to a talented Harvard Kennedy School doctoral student who is conducting research on the cutting edge of energy or environmental policy. The Fellowship, administered by the Belfer Center’s Environment and Natural Resources Program and the Mossavar-Rahmani Center for Business and Government, calls for the recipient to develop a policy brief or paper summarizing the research conducted that year. The 2021-22 Crump Fellowship recipient, Eleanor Krause, authored this policy brief based on her research. Read more about the fellowship here.

Executive Summary

The persistence and intensification of earnings, employment, and opportunity gaps across place has become an increasingly salient feature of the United States economy over the past several decades.¹ This economic divergence has occurred alongside a remarkable transition away from coal-fired electricity that is expected to continue as lower-carbon energy sources become more economically viable. While essential to minimizing the damages of climate change, the shift poses significant challenges to the relatively rural and distressed communities traditionally reliant on this resource. Indeed, many historically coal-dependent communities in Central Appalachia have long been characterized by deep poverty, limited employment opportunities, and high rates of public assistance, and recurrent adverse shocks to coal employment over the past several decades have amplified many of these qualities, potentially elevating the risks associated with the energy and economic shifts ahead. How have Appalachia’s coal-dependent communities adjusted to historical and contemporary declines in demand for coal, and how do these shocks – and their consequences for the educational composition of affected communities – influence the capacity for future generations to adapt to new challenges?

In this policy brief, I present estimates of how Appalachia’s coal country has adjusted to recent
declines in coal mining employment (“coal shocks”), and I demonstrate how this adjustment process is, in part, dictated by the persistent consequences of historical employment shocks in Appalachia.

The evidence suggests that recent coal shocks (i.e., declines in coal employment occurring between 2007 and 2017) have been relatively painful for affected communities, causing large reductions in local population sizes, declines in local employment counts, declines in earnings, and increases in the rate of government transfer receipt. All of these adjustment costs are more severe in counties with a history of “selective migration” induced by shifting employment opportunities in the 1980s. That is, the estimated effect of recent coal shocks on population sizes, employment, earnings, and transfer payments is significantly larger in counties that lost greater numbers of their college-educated adults in the 1980s thanks to historical employment shocks in proximate labor markets. The upshot is that coal-dependent communities may demonstrate little resilience to recent coal shocks in part because of the persistent consequences of historical shocks, which fundamentally altered the educational composition of affected communities. By dramatically reducing the number of college-educated individuals living in a community, adverse shocks have the capacity to put places on a pathway of decline that makes it more difficult to adapt to economic shifts in subsequent generations. These insights preview the potentially damaging implications of future contractions in the coal industry, revealing the need for greater empirical investigation of the types of policy efforts that might ameliorate the painful local adjustment costs associated with the energy transition going forward.

[1] See, for example, Ganong and Shoag (2017); Chetty and Hendren (2018); Autor (2019); Moretti (2011).