Out of the black into the green? Modeling the pathways for regional coal transitions

Grass, D., Kuhn, M., Patange, O. ORCID: https://orcid.org/0000-0002-6075-8214, Fürnkranz-Prskawetz, A., & Wrzaczek, S. (2025). Out of the black into the green? Modeling the pathways for regional coal transitions. IIASA Working Paper. Laxenburg, Austria: WP-25-002

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Abstract

Coal is a major contributor to anthropogenic carbon emissions and climate change. Coal mining and combustion are also a leading cause of premature mortality due to local air pollution. On the other hand, coal is central to many regional economies that rely on its mining, power generation, industrial use and exports. With changing climate and rising pollution levels associated with coal, the urgency for coal phase-out has become more prominent in recent years. This has put pressure on coal-dependent regional economies to implement energy transitions in a time bound manner. This paper studies optimal pathways for a coal phase-out within a small, open, regional economy consisting of a coal extraction sector, an energy sector composed of both coal-based and renewable power generation and a final consumption sector that relies on coal and electricity. Taking the perspective of a social planner who maximizes regional welfare and employing optimal control theory, we study the conditions under which coal extraction and fossil power generation are phased out, depending on preferences, cost and price structures. We also provide a systematic analysis of the dynamic processes associated with the transition out of coal of (formerly) coal-based regional economies, including the scope for multiple equilibria that may reflect stalling transitions. Our results will be relevant for regional governments in undertaking a transition away from coal in way that safeguards regional welfare and at the same time contributes to the global climate goals.

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