Economics of Nuclear Power and Climate Change Mitigation Policies

by Sam Peterson

The availability of nuclear power may be crucial in determining whether greenhouse gas (GHG) emissions can be reduced enough to reach the goal of limiting worldwide temperature increases to 2°C. The aforementioned goal, established during a 2009 United Nations climate change conference in Copenhagen, Denmark, appears contingent on the ability of nuclear power to generate electricity without GHG emissions (UNFCCC, 2009). In a 2012 study of the economics of nuclear power generation, Bauer et. al. utilized a “long-term global multiregional model ReMIND-R” intertemporal model to analyze the effects of four differing paths for global nuclear policy following the 2011 Fukishima Daiichi meltdown in Japan. Early shutdown and removal of nuclear plants is shown to contribute to “discounted cumulative global GDP losses of 0.07% by 2020,” and if policy dictates prohibition of investment in nuclear power, those losses will double. The study concluded that the discounted reduction in global GDP by 2035 would be significantly worse if global environmental policy shifts in the direction of a carbon budget of some kind, which would strongly suggest limits on and/or cap emissions from coal, natural gas and crude oil.

In 2010, before the Fukishima Daiichi incident, the Nuclear Energy Agency (NEA) estimated total nuclear capacity would increase between 37% and 110% by 2035, and the International Energy Agency (IEA) predicted nuclear-based electricity generation capacity would increase by 79% in the same time period (NEA, 2010; NEA & IAEA, 2010). Bauer et. al. examined four scenarios concerning the future of nuclear power in the 21st century. The most severe policy constraints involved closing all existing nuclear plants and placed a complete moratorium on investment, known as the “Full Exit” scenario, reflecting “skeptical position regarding safety or public acceptability.” In the “New Start” situation, all currently operating plants are shut down, but there is the possibility for future investment, working under the assumption that existing plants are unsafe. A more liberal approach is the “Phase Out” track, where existing plants operate until they are deemed unsafe, with no new plants constructed. In the most optimistic scenario, a nuclear “Renaissance” occurs, which functions under the present consensus on the relative safety of nuclear power.

The authors used a situation where no intertemporal carbon budget is implemented, representing the scenario with the least governmental intervention in the nuclear industry. The carbon budget, by general definition, is the quantity of carbon dioxide emissions humanity can emit while restricting global average temperature increases to 2°C. Over the course of the 21st century, “total primary energy consumption [will grow] by approximately 133%,” but fossil fuels dominate production in the energy sector until 2050. In the reference scenario, nuclear power attains a 17.2% share of power creation in 2075, due to constraints of uranium production. Meanwhile, in the “Phase Out” scenario, a stringent carbon budget reduces use of “coal by 40%, gas by 18%, and oil by 13%” by 2020, at which point nuclear power begins to significantly contribute to power production. By 2050, this scenario leads to a discounted global GDP decrease of nearly 2.1%, or 2.3% if nuclear power is phased out compared to the baseline condition of no carbon budget and a nuclear phase-out.

Unsurprisingly, a majority of the global GDP loss occurs due to incorporation of a carbon budget as a component of climate policy. The authors conclude nuclear power is only of “moderate importance” for decreasing emissions in comparison to the carbon budget, though the budget allows for “flexible exhaustion.” For example, natural gas utilized for electricity production can fulfill a significant portion of the shortfall caused by early shutdown of nuclear facilities, but this policy would be difficult to implement due to long-term commitments from international governments. In short, if public and scientific consensus remains unchanged regarding nuclear safety, a carbon budget would have less detrimental effects than currently estimated.

Bauer, N., et al. (2012). “Economics of nuclear power and climate change mitigation policies.” Proceedings of the National Academy of Sciences of the United States of America 109(42): 16805-16810.

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