New Study Reveals Impact of Energy Transition on Local Government Finances in the US

Wisconsin State Capitol Building, USA
Photo by Isaac Mitchell / Pexels

A groundbreaking study provides an in-depth analysis of how the shift to renewable energy sources impacts local government revenues. This comprehensive study, conducted across 79 counties in 10 leading energy-producing states, brings new insights into the fiscal implications of the energy transition for local governments.

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Key Insights

The study sheds light on the current financial contributions of fossil fuels and renewable energy to local government budgets. It highlights the critical role of these revenues in supporting public services like transportation infrastructure, public education, and social services. A striking finding is the significant revenue generated by fossil fuels compared to renewables. In 2021, fossil fuels provided more than $1,000 per capita annually in several counties, far outweighing the financial input from wind and solar energy. This dominance reflects the current energy mix in the United States, where most primary energy production still relies on fossil fuels.

Renewable Energy’s Rising Contribution

Despite the current dominance of fossil fuels, the study finds that wind and solar energy contribute more to local public revenue per unit of primary energy production than their fossil fuel counterparts in some states. This finding indicates the growing financial significance of renewable energy sources in the local government landscape. One of the significant challenges highlighted is the difficulty in replacing fossil fuel revenues with renewables, especially in regions heavily dependent on fossil fuel extraction. The study suggests that solar energy has the technical potential to replace fossil fuel revenues in such areas, but doing so would require using a large portion of developable land.

Regional Variations in Energy Revenue

The research points out notable variations in energy-related revenues across different regions. These disparities are primarily influenced by state policies and how funds are shared between state and local governments. This underscores the complexity of managing local government finances amidst the energy transition. As the world moves towards reducing greenhouse gas emissions, the study emphasizes the need for local governments to develop new strategies for revenue generation. It suggests that while renewable energy offers new avenues for revenue, fossil fuel–dependent regions will require substantial support to maintain public service provision and diversify their economic bases.

Climate Crisis 24/7 used generative AI technology to help produce this article, which a human editor at Climate Crisis 24/7 edited. Climate Crisis 24/7 is dedicated to accuracy and transparency; any article that uses AI will be noted.

This report — “The Energy Transition and Local Government Finance: New Data and Insights from 10 US States” – is written by Daniel Raimi and colleagues from Resources for the Future.

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