Policy Incentives for Fluidized Bed Coal Conversion

Mark Maguire
John D. Keenan

DOI: 10.2190/8A9P-3RQC-7KU6-T0RJ


Fluidized bed combustion is a commercially available technology to burn coal. However, due to high capital costs, the technology is not economically feasible. In this research, a cash flow model was used to analyze the effect of several policy incentives, and to determine if the effectiveness of the incentives is a function of capital investment. It was found that tax credits are more effective than subsidies, accelerated depreciation has only a weak effect, and that an additional 20 percent tax credit is needed to exceed a minimum acceptable return on investment of 17 percent. The effectiveness of the incentives increases with increasing capital investment. A program is outlined to provide an additional 20 percent tax credit, at a cost of $6 billion but reducing oil imports by 8.7 percent.

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