NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Estimating Path Dependence in Energy Transitions

Kyle C. Meng

NBER Working Paper No. 22536
Issued in August 2016, Revised in July 2019
NBER Program(s):Program on the Development of the American Economy, Environment and Energy Program, Economic Fluctuations and Growth Program, Public Economics Program

What induces clean energy transitions? When transitional dynamics exhibit strong path dependence, a temporary shock to input composition can trigger permanent structural change. I examine whether such dynamics characterize the U.S. energy sector's use of coal - the most climate-damaging fuel - over the 20th century. Exploiting local coal supply shocks driven by changing regional accessibility of subsurface coal, I find increasing imbalance in the coal composition of electricity capital lasting ten decades following a shock. A structural change model enables recovery of a key structural parameter from reduced-form estimates and explores conditions for triggering sustained future clean energy transitions.

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Document Object Identifier (DOI): 10.3386/w22536

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