In this paper, we study the effect of Clean Air Act Amendments (CAAA),enacted in 1990, on the U.S. coal industry. We are interested in the dynamic effects of environmental regulation on the decisions of entry and closures (temporary, permanent) of coal mines. We estimate the underlying structural parameters of the model and use them to simulate the effect of environmental regulation on the coal industry. In the counter factual environment, we look at the effect of no clean air act on the coal industry.