Estimating Path Dependence in Energy Transitions

Research Seminars

What induces clean energy transitions? When transitional dynamics exhibit strong path dependence, a temporary shock to input composition can trigger permanent structural change. The paper presented in this Research Seminar examines 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, the author finds increasing imbalance in the coal composition of electricity capital lasting ten decades following a shock. A structural change model enables recovery of a key substitution parameter from reduced-form estimates and explores conditions for triggering sustained future clean energy transitions.