In a comment to a post on clean coal technologies, Robert Prather has a concise statement of what I think makes the most sense for dealing with emissions from old power plants:
When the clean air act was put into place it was assumed that a lot of older plants would shut down so they were exempted from the clean air regulations. Well, they didn’t shut down at least in part because their competitors had been hamstrung with the clean air act. The concept of grandfathered plants should be done away with and the cost of their pollution pushed back on them using a cap-and-trade system. They should be treated like every other plant. If it’s economical for them to do the upgrades, they should. If it’s economical for them to purchase enough credits in the cap-and-trade system to continue operations, that should happen. If they can’t produce power in a way that’s both economical and clean, within the rules of the system, they should shut down.