Bad news. Closing coal-fired power stations costs jobs. We need to prepare
- Written by Paul Burke, Associate Professor, Crawford School of Public Policy, Australian National University
Australia’s electricity sector has begun to transition away from coal, with coal’s contribution to our electricity mix falling from around four-fifths 13 years ago to around three-fifths today.
Twelve coal-fired power stations closed between 2012 and 2017.
There are clear upsides to the transition, among them an ongoing decline[1] in carbon dioxide emissions from the electricity sector.
For local economies, however, the closure of a coal-fired power station can create economic challenges, including higher unemployment.
We’ve quantified the effects of 12 closures
In a new paper[2] in the Australian Journal of Agricultural and Resource Economics, we use detailed Statistical Area Level 4 (SA4[3]) data to quantify the extent to which local unemployment rates have increased following the closures of twelve coal-fired power stations across Victoria, NSW, Queensland, South Australia and Western Australia.
There are 87 SA4 regions in Australia, each with an average population of around 290,000 people. We found that on average the regional unemployment rate climbs by around 0.7 percentage points after a station closes.
The effect remains observable for year or two, although it varies from region to region.
Clearly, labour mobility and the creation of new jobs do not fully make up for the impact of such closures.
This means there is scope and need for strategies to smooth the labour market transition as we move towards a lower-carbon energy system.
What we found
A simple look at the data indicates that local unemployment rates tend to rise after closures, both in absolute terms and relative to what is happening at the state level.
We find that this effect remains when controlling for the impacts of other key factors, such as macroeconomic shocks and the coal export price.
References
- ^ decline (www.environment.gov.au)
- ^ new paper (onlinelibrary.wiley.com)
- ^ SA4 (www.abs.gov.au)
- ^ Burke, Best, Jotzo, 2019 (onlinelibrary.wiley.com)
- ^ ABS Labour Force, detailed (www.abs.gov.au)
- ^ Latrobe Valley Authority (lva.vic.gov.au)
- ^ worker transfer scheme (lva.vic.gov.au)
- ^ 17% (docs.jobs.gov.au)
- ^ Just Transition Authority (theconversation.com)
- ^ in 2022 (www.smh.com.au)
- ^ is set to fall over time (coaltransitions.files.wordpress.com)
- ^ Just Transition Authority (theconversation.com)
- ^ here (ccep.crawford.anu.edu.au)
Authors: Paul Burke, Associate Professor, Crawford School of Public Policy, Australian National University