Governmental efforts to reduce greenhouse gas emissions and require polluters to pay have raised questions about the effect that such rules can have on energy-intensive industries such as manufacturing. Some opponents to such limits argue that electricity prices will be driven up substantially and large numbers of jobs in energy-intensive industries will be lost. Targets for reducing emissions have already been legislated in places such as California, a state whose voters debated the jobs question during a 2010 ballot initiative to suspend the emissions rules.

A 2010 study by UCLA and Dartmouth College for the National Bureau of Economic Research, “How Do Energy Prices, and Labor and Environmental Regulations Affect Local Manufacturing Employment Dynamics?” looks at companies’ choices on where to locate their factories and facilities in response to state and local laws and business conditions. The study focuses on three areas — labor laws, electricity prices and the relative strength of Clean Air Act regulations — to assess why manufacturing may cluster in certain areas. The researchers then examine the potential impact of climate change-related laws that put a price on greenhouse gas emissions.

The study’s findings include:

• Areas of the U.S. with weaker union protections, lower energy prices and more lax air pollution regulations see a higher concentration of energy-intensive industries.
• While energy prices play a role in the choice of sites for some manufacturing industries, such prices are only a significant factor in a limited number of industries.
• If places such as California and the northeastern United States, where emissions reduction targets have also been legislated, introduce a $15 per ton cap-and-trade program, job losses on the order of 0.1% to 1.1% could be expected.

Overall, the study’s researchers found that the effect of electricity price on where manufacturers choose to locate was “modest.”

Tags: California, global warming, greenhouse gases, pollution, organized labor