The Canary in the Coal Decline: Appalachian Household Finance and the Transition from Fossil Fuels

Josh Blonz, Brigitte Roth Tran and Erin Troland

No 31072, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The energy transition away from fossil fuels, despite its substantial overall climate benefits, presents significant transition risks for communities historically built around the fossil fuel industry. This paper uses the decline in the Appalachian coal industry between 2011 and 2018 to understand how individuals are harmed by a reduction in local fossil fuel extraction activity. We use individual-level credit data and exogenous variation in coal demand from the electricity sector to identify how the coal mining industry’s decline affected the finances of Appalachian households. We find that the decline in demand for coal caused broad-based negative impacts, decreasing credit scores and increasing credit utilization, delinquencies, amounts in third party collections, bankruptcy rates, and the number of individuals with subprime status. These effects were broad based and cannot be explained solely by individuals who lost coal mining jobs. Individuals with the lowest pre-period credit scores were more likely to end up in financial distress and experienced a greater deterioration in credit scores. Quantile regressions show that the drop in credit scores from the coal decline was most pronounced between the 30th and 50th percentiles of the credit score distribution. Our results provide evidence that people living in fossil fuel extraction regions are likely to experience declines in financial well-being from the energy transition even if they do not directly work in the affected industry.

JEL-codes: D14 G51 L71 Q52 Q54 R11 (search for similar items in EconPapers)
Date: 2023-03
New Economics Papers: this item is included in nep-des and nep-env
Note: EEE
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Citations: View citations in EconPapers (6)

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Working Paper: The Canary in the Coal Decline: Appalachian Household Finance and the Transition from Fossil Fuels (2023)
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