M-RCBG Associate Working Paper No. 6

Coal to Natural Gas Coal Switching and CO2 Emissions Reduction

Jackson Salovaara



US natural gas prices fell in 2009 on account of weak demand and increased supply from shale gas production. The fall in prices led to a reduction in coal-fired electricity generation and a concomitant increase in natural gas-fired electricity generation. Low natural gas prices conjoined with static coal prices and underutilized natural gas power plant capacity to create an environment primed for switching from natural gas to coal. Due to differences in chemical make-ups and plant efficiencies between the two fuels, this switching led to a significant reduction in carbon dioxide emissions. This thesis models how the fuel switching effect occurred and how it translated to an emissions reduction. It also analyzes several hypothetical policies aimed at augmenting the effect to achieve further reductions in emissions. Throughout the analysis, it considers the other impacts—environmental, human health, and economic—of a large-scale shift from a fuel system based on coal to one based on natural gas.

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