Burnout to Buildout: Coal Exit and the Geography of Transition Costs

Abstract

Does exiting polluting assets necessarily deliver a green transition? Using coal-targeted federal rules as a nationwide shock to U.S. utility firms, I trace firm-level generation portfolios and show that coal exit is followed mainly by path-dependent substitution within fossil generation. Renewables instead expand where firms face binding renewable mandates and targeted financial incentives for specific technologies. I then build a stylized model to clarify the tradeoff between the fossil and renewable paths, and quantify two geography-related costs that arise in the policy-driven renewable transition. First, policy-induced renewable buildout can be geographically misaligned: firms earn $290--$300 less in annual electric operating revenue per kilowatt from solar projects in low-irradiance regions. Moreover, the renewable transition creates a systematic and overlooked social cost via increased workplace remoteness. Counterfactual analysis suggests that aligning policy with resource geography reduces these costs.

Keywords: energy transition, polluting assets, geographic misalignment, E vs. S dilemma

JEL Classification: D22, G31, Q42, Q53, Q58, L94