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Without policy change, Wyoming could be worst off during clean energy transition, analysis finds

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Basin Electric Power Co-Op Laramie River Station

A train carries coal to Basin Electric Power Co-Op Laramie River Station in Wheatland on Dec. 31, 2020. A new study found that Wyoming could fare especially poorly during the clean energy transition without policy changes.

Fossil fuels are a cornerstone of Wyoming’s economy. A new analysis turns a spotlight on the significance of industry revenues in the highest-producing states.

The paper, published this month by nonprofit research institution Resources for the Future, outlines how lost fossil fuel revenue will inevitably hit some states much harder than others.

“Wyoming is probably at the top of that list,” said Daniel Raimi, a fellow at Resources for the Future and one of the paper’s authors.

Though Wyoming has the fourth-highest share of total government revenue from fossil fuels, the authors estimate that 59% of Wyoming’s own-source revenue — funds generated internally — comes from fossil fuels. That’s the biggest share of any state. In North Dakota, which ranks second, fossil fuels contribute an estimated 31% of own-source revenue. Alaska is third with 21%.

According to the paper, Wyoming’s $7,339 in per-capita government fossil fuel revenue also far exceeds all other states. North Dakota and Alaska, again the next-highest, generate an estimated $3,854 and $2,713, respectively.

Outside of states whose budgets rely heavily on extraction, the link between the transition away from fossil fuels and those states’ revenues isn’t necessarily as obvious as the link between the energy transition and jobs, Raimi said.

“As society seeks to achieve a ‘Just Transition,’” the paper’s introduction reads, “addressing the revenue shortfalls that arise from the reduction in fossil energy will be critical, particularly for the rural communities where such activities are highly concentrated.”

Even if no new climate policies were enacted, the analysis found, fossil fuel revenue will decline significantly by 2050, even in the oil and gas sectors. But while coal is projected to drop swiftly regardless of climate policy, more ambitious emissions targets accelerated the expected decline of oil and gas production.

The authors hope the paper will help national policymakers recognize the regional implications that transition could have for government finances and public services, ultimately boosting federal support for those most affected.

“This projected timeline suggests that oil and gas communities will have more time to use natural resource revenues to diversify their economies,” Raimi wrote in a blog post published alongside the paper. “Still, the long-term challenge of economic diversification, particularly in rural, resource-dependent regions, suggests that these planning efforts should start now.”

Because fossil fuels are projected to decline even in the absence of new climate policy, delaying the energy transition will only prolong the fiscal challenges faced by fossil fuel states, Raimi argued. He and the other authors offer a range of policy changes, such as implementing carbon or mileage taxes, raising the costs of fossil fuel production or increasing individuals’ property and income taxes.

Raimi acknowledged, however, that none of those recommendations would be easy to implement.

“The current political climate of the United States,” he wrote in the blog post, “means that prospects for economy-wide carbon pricing, taxes for vehicle miles traveled, fossil fuel subsidy reform, value-added taxes, or higher marginal income tax rates are, on a good day, precarious.”

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