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Note: A 50% increase in the price of gas would trigger a 9.5% (0.19 x 50%) increase in demand for coal, and a 33% increase in demand for oil (0.66 x 50%). Likewise, a 50% increase in the price of coal would increase gas demand by 8.5% (0.17x 50%).

Note: A 50% increase in the price of gas would trigger a 9.5% (0.19 x 50%) increase in demand for coal, and a 33% increase in demand for oil (0.66 x 50%). Likewise, a 50% increase in the price of coal would increase gas demand by 8.5% (0.17x 50%).

The results in Table 1 suggest significant potential for fuel substitution in the US power sector. To demonstrate the scale of the estimated price-driven fuel switching, let us consider past gas price movements: the average monthly percentage change was about 11 % over the period 20032009 (excluding "crisis" years 2005 and 2008, when it was much higher), but for many months it was in the range of 20%-45%. From our estimates, a 20%-45% increase in gas price leads to approximately a 4%-9% increase in utilities' use of coal. Note that elasticities depend on the current share of fuels, in terms of price and quantity, in the generation mix (see Methodology for details).

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