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Coal or Gas: The Cost of Cleaner Power in the Midwest

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Henry Lee, Shashi Kant Verma
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This discussion paper identifies three factors that would shift the cost differential that exists because a coal plant in the Midwestern United States can be operated at slightly more than 50% of the capital and operating cost of a new gas-fired facility. These factors are 1) the cost of meeting the requirements of the Clean Air Act Amendments of 1990 and the new U.S. Environmental Protection Agency reduction initiatives, such as additional NOx reductions and the proposed particle and ozone standards; 2) the relative prices of natural gas and coal delivered to the plant; and 3) the cost of carbon emissions, which is currently zero but could rise if the United States decides to meet future international greenhouse gas reduction targets.