Abstract
We estimate the effect of the natural gas fuel cost on the choices for a new power generator; the energy source of gas, wind, or solar; and its capacity. Higher fuel costs increase odds of more renewable capacity, as opposed to gas, with large, significant effects for both wind and solar. As the United States has yet to implement nationwide carbon policies, we use fuel cost to proxy for a carbon tax. Our scenarios of $10–$50 per ton of carbon dioxide reduce emissions from new generators by 22%–47%, equivalent to 2%–4% of total electricity emissions.
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