Estimating Path Dependence in Energy Transitions

• Environmental and Energy Economics Workshop

Date and Location

Wednesday, October 19, 2016, 4:10 PM - 5:30 PM
ARE Library Conference Room, 4101 Social Sciences and Humanities

Abstract

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.