NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Estimating Path Dependence in Energy Transitions

Kyle C. Meng

NBER Working Paper No. 22536
Issued in August 2016
NBER Program(s):Development of the American Economy, Environment and Energy Economics, Economic Fluctuations and Growth, Public Economics

Addressing climate change requires transitioning away from coal-based energy. Recent structural change models demonstrate that temporary interventions could induce permanent fuel switching when transitional dynamics exhibit strong path dependence. Exploiting changes in local coal supply driven by subsurface coal accessibility, I find that transitory shocks have strengthening effects on the fuel composition of two subsequent generations of U.S. electricity capital. To facilitate a structural interpretation, I develop a model which informs: tests that find scale effects as the relevant mechanism; recovery of the elasticity of substitution between coal and non-coal electricity; and simulations of future carbon emissions following temporary interventions.

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Document Object Identifier (DOI): 10.3386/w22536

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