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Estimating Path Dependence in Energy Transitions

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  • Kyle C. Meng
Abstract
What induces energy transitions away from dirty fuels? When transitional dynamics exhibit strong path dependence, a temporary shock to fuel composition can trigger a permanent transition from dirty to clean fuels. I empirically examine whether such dynamics characterize the U.S. electricity sector's use of coal - the most climate-damaging fuel - across the 20th century. Exploiting local coal supply shocks driven by changing regional accessibility of subsurface coal, I find that a negative shock triggers a declining trajectory in the relative use of coal for electricity lasting for up to ten decades. Interpreted through a structural change model, reduced-form estimates imply a long-run elasticity of substitution between coal and other fuels of 3.5, a pivotal but largely unknown parameter found across recent models of optimal climate policy. Calibrated model simulations further characterize how climate policies of varying magnitudes and durations could trigger a permanent future energy transition away from coal.

Suggested Citation

  • Kyle C. Meng, 2016. "Estimating Path Dependence in Energy Transitions," NBER Working Papers 22536, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:22536
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    Cited by:

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    2. Elizabeth Baldwin & Yongyang Cai & Karlygash Kuralbayeva, 2018. "To Build or Not to Build? Capital Stocks and Climate Policy," CESifo Working Paper Series 6884, CESifo.
    3. Kacker, Kanishka & Lange, Ian, 2022. "Inter-regional coal mine competition in the US: Evidence from rail restrictions," Energy Economics, Elsevier, vol. 110(C).
    4. Baldwin, Elizabeth & Cai, Yongyang & Kuralbayeva, Karlygash, 2020. "To build or not to build? Capital stocks and climate policy∗," Journal of Environmental Economics and Management, Elsevier, vol. 100(C).
    5. Paulo Vitor Levate & Eduardo Gonçalves & Juliana Gonçalves Taveira, 2021. "Regional drivers of green inventions in OECD countries," Letters in Spatial and Resource Sciences, Springer, vol. 14(3), pages 335-354, December.
    6. Bakkensen, Laura & Schuler, Paul, 2020. "A preference for power: Willingness to pay for energy reliability versus fuel type in Vietnam," Energy Policy, Elsevier, vol. 144(C).

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    More about this item

    JEL classification:

    • N51 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries - - - U.S.; Canada: Pre-1913
    • N52 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries - - - U.S.; Canada: 1913-
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • Q35 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Hydrocarbon Resources
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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