Postprint version. Published in American Journal of Agricultural Economics, Volume 90, Issue 4, November 1, 2008, pages 933-950. Copyright © 2008 Agricultural and Applied Economics Association. Published by Blackwell. The definitive version is available at http://dx.doi.org/10.1111/j.1467-8276.2008.01147.x.
This article examines possible explanations for increased utilization of Powder River Basin (PRB) coal in electric power generation that occurred over the last two decades. Did more stringent environmental policy motivate electric power plants to switch to less polluting fuels? Or, did greater use of PRB coal occur because relative price changes altered input markets in favor of this fuel. A key finding is that factors other than environmental policy such as the decline in railroad freight rates together with elastic demand by power plants were major contributors to the increased utilization of this fuel.