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New discussion paper on the death spiral for the coal industry in the U.S.

New discussion paper on the death spiral for the coal industry in the U.S.

 

The paper examines the causes of the decline of the US coal industry over the last decade and analyzes whether the current policy shift could reverse the trend. The main drivers for the decline are the competitive situation with cheap gas-fired generation and renewables. Climate policy interventions have so far played a minor role. Thus, the old and inefficient U.S. coal-fired power plant fleet will shrink further, despite the reorientation of U.S. energy and climate policy. Only with the massive interventions, which were assumed in the examined scenarios - - contrary to the current trends- , the decline can be halted. Especially for investments in production facilities, however, the risk of becoming stranded assets by national or international climate policy is very high.

 

Mendelevitch, Roman, Christian Hauenstein, and Franziska Holz. 2019. “The Death Spiral of Coal in the USA: Will New U.S. Energy Policy Change the Tide?” 1790. DIW Berlin Discussion Paper. Berlin, Germany: German Institute for Economic Research (DIW Berlin).