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Energy policy

Well setbacks limit California’s oil supply with larger health benefits and employment losses than excise and carbon taxes

Nature Energy volume 8, pages 562–564 (2023)Cite this article

Subjects

Compared to excise taxes and carbon taxes, setback restrictions on new oil wells have larger health benefits and worker compensation losses, but are more equitable by bringing greater benefits and lower losses to disadvantaged communities in California. For California to meet green gas emissions (GHG) targets, larger setbacks than currently proposed or additional supply-side policies are needed.

Recommendations for policy

  • Oil supply-side policies including setbacks on new and/or existing oil wells, excise taxes, and carbon taxes can help phase out oil extraction and achieve carbon emissions mitigation goals.

  • For the same 2045 GHG reduction target, oil well setbacks generate the largest statewide health benefits in terms of avoided mortality but also the largest statewide lost worker compensation, followed by excise taxes and carbon taxes.

  • Setbacks may achieve the most equitable outcomes, with the highest share of health benefits and the lowest share of lost worker compensation borne by disadvantaged communities.

  • Setbacks on new oil wells alone are unlikely to achieve California’s 2045 90% GHG mitigation target and may need to be extended to existing oil wells and combined with an excise tax or carbon tax.

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Fig. 1: Health, labour, and equity outcomes of supply-side policies for decarbonizing oil extraction in California.

Further reading

  • Erickson, P., Lazarus, M. & Piggot, G. Limiting fossil fuel production as the next big step in climate policy. Nat. Clim. Chang. 8, 1037–2043 (2018). This study examines the effects of limiting oil production on carbon emissions in California.

    Article  Google Scholar 

  • Elkind, E. N. & Lamm, T. Legal Grounds: Law and Policy Options to Facilitate a Phase-Out of Fossil Fuel Production in California (Berkeley Center for Law, Energy and the Environment, 2020); https://www.law.berkeley.edu/wp-content/uploads/2020/04/Legal-Grounds.pdf. This study highlights the law and policy options including excise or severance taxes and oil well setbacks to facilitate the phase-out of oil production in California.

  • Ericson, S. J., Kaffine, D. T. & Maniloff, P. Costs of increasing oil and gas setbacks are initially modest but rise sharply. Energy Policy 146, 111749 (2020). This study estimates the oil and gas resource and revenue loss under various oil well setback distances in the U.S. state of Colorado.

    Article  Google Scholar 

  • Kunce, M. Effectiveness of Severance Tax Incentives in the U.S. Oil Industry. Int. Tax Public Finance 10, 565–587 (2003). This study examines the impacts of severance or excise taxes on oil drilling and production activity across U.S. states.

    Article  Google Scholar 

  • Mayfield, E., Jenkins, J., Larson, E. & Greig, C. Labor pathways to achieve net-zero emissions in the United States by mid-century. Energy Policy 177, 113516 (2023). This study estimates the labor impacts of a transition to a net-zero emissions energy system which includes the retirement of oil and gas infrastructure.

    Article  Google Scholar 

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Acknowledgements

We thank the State of California for supporting this work through the Green-house Gas Reduction Fund. The State of California assumes no liability for the contents or use of this study. The study does not reflect the official views or policies of the State of California.

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Author notes

  1. These authors contributed equally: Ranjit Deshmukh, Paige Weber, Olivier Deschenes, Kyle Meng.

Authors and Affiliations

  1. Bren School of Environmental Science and Management, University of California Santa Barbara, Bren Hall, Santa Barbara, 93106, California, USA

    Ranjit Deshmukh, Tia Kordell, Ruiwen Lee, Tracey Mangin, Sandy Sum, Vincent Thivierge & Kyle C. Meng

  2. Environmental Markets Lab (emLab), University of California Santa Barbara, Bren Hall, Santa Barbara, 93106, California, USA

    Ranjit Deshmukh, Paige Weber, Olivier Deschenes, Danae Hernandez-Cortes, Tia Kordell, Ruiwen Lee, Christopher Malloy, Tracey Mangin, Measrainsey Meng, Sandy Sum, Vincent Thivierge, Anagha Uppal & Kyle C. Meng

  3. Environmental Studies Department, University of California Santa Barbara, Bren Hall, Santa Barbara, 93106, California, USA

    Ranjit Deshmukh & Measrainsey Meng

  4. Department of Economics, University of North Carolina, Gardner Hall, Chapel Hill, 27599, North Carolina, USA

    Paige Weber

  5. Department of Economics, University of California Santa Barbara, North Hall, Santa Barbara, 93106, California, USA

    Olivier Deschenes, Christopher Malloy & Kyle C. Meng

  6. National Bureau of Economic Research, Cambridge, MA, USA

    Olivier Deschenes & Kyle C. Meng

  7. School for the Future of Innovation in Society, Arizona State University, PO Box 876002, Tempe, 85287, Arizona, USA

    Danae Hernandez-Cortes

  8. School of Sustainability, Arizona State University, PO Box 877904, Tempe, 85287, Arizona, USA

    Danae Hernandez-Cortes

  9. Marine Science Institute, University of California Santa Barbara, Santa Barbara, 93106, California, USA

    Tia Kordell, Ruiwen Lee, Tracey Mangin & Measrainsey Meng

  10. Department of Geography, University of California Santa Barbara, Ellison Hall, Santa Barbara, 93106, California, USA

    Anagha Uppal

  11. Department of Earth Science, University of California Santa Barbara, Webb Hall, Santa Barbara, 93106, California, USA

    David W. Lea

Authors
  1. Ranjit Deshmukh
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Corresponding authors

Correspondence to Ranjit Deshmukh, Paige Weber, Olivier Deschenes or Kyle C. Meng.

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The authors declare no competing interests.

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Deshmukh, R., Weber, P., Deschenes, O. et al. Well setbacks limit California’s oil supply with larger health benefits and employment losses than excise and carbon taxes. Nat Energy 8, 562–564 (2023). https://doi.org/10.1038/s41560-023-01273-0

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