Estimating Path Dependence in Energy Transitions / Kyle C. Meng.

Format:

Book

Author/Creator:

Meng, Kyle C.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w22536.

NBER working paper series no. w22536

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2016.

Summary:

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.

Notes:

Print version record

August 2016.