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Innovation benefits from nuclear phase-out: can they compensate the costs?

Abstract

This paper investigates whether an inefficient allocation of abatement due to constraints on the use of currently available low carbon mitigation options can promote innovation in new technologies and have a positive impact on welfare. We focus on the case of a nuclear power phase-out and endogenous technical change in energy efficiency and alternative low carbon technologies. The research is inspired by the re-thinking about nuclear power deployment which took place in some countries, especially in Western Europe, after the Fukushima accident in March 2011. The analysis uses an Integrated Assessment Model, WITCH, which features multiple externalities related to greenhouse gas emissions and innovation market failures. Our results show that phasing out nuclear power stimulates R&D investments and deployment of technologies with large learning potential. The resulting technology benefits that would not otherwise occur due to intertemporal and international externalities almost completely offset the economic costs of foregoing nuclear power. The extent of technology benefits depends on the stringency of the climate policy and is distributed unevenly across countries.

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Notes

  1. 1.

    In the notation of the equations, the second subscript indicates the variable with respect to which the cost function is differentiated, \( {c}_{2a}=\frac{\partial {C}_2}{\partial a},{c}_{2z}=\frac{\partial {C}_2}{\partial Z},{C}_{2H}=\frac{\partial {C}_2}{\partial H}. \)

  2. 2.

    The referendum had been planned long before the Japanese accident, and was scheduled for June 2011, which turned out to be only 3 months after the accident.

  3. 3.

    For additional information on single countries’ strategies (net of Japan’s predicted policy change), see for instance Rogner (2013).

  4. 4.

    See IAEA and WNA statistics.

  5. 5.

    It is not within the scopes of this paper, instead, to deeply investigate what could be the technology solutions to replace nuclear. It suffices to say that there is an on-going debate on this issue, see among others, Steinke et al. (2013), Delucchi and Jacobson (2011a, b), Trainer (2012), and Tavoni and van der Zwaan (2009).

  6. 6.

    Incidentally, large-scale fission nuclear power may well be considered a mature technology, having been deployed starting from the 50s and definitively consolidated during the 70s and 80s. As such, it is characterized by low learning rates and potentials, and specifically lower than the other low-carbon technologies with which it would compete (Kahouli-Brahmi 2008).

  7. 7.

    See www.witchmodel.org for model description and related papers.

  8. 8.

    Concerning the offshore investment cost, the reported value is an average for the different offshore categories, where costs vary as a function of sea depth and distance from shore of the installation. The breakthrough investment cost is naturally somewhat arbitrary, fixed roughly ten times higher than traditional technologies’ average one.

  9. 9.

    The expression “technology benefits” refers to the innovation benefits related to R&D and to the technological benefits associated with the deployment of infant technologies characterized by LbD related to experience.

  10. 10.

    Policy costs measured in terms of GDP are larger, but we focus on consumption as a better indicator of welfare. In the 450 ppme scenario, the GDP loss without nuclear power would be 3.71 % and it would increase to 4.47 %, should technology benefits be excluded.

  11. 11.

    For example, in the 450 ppme case reported in Figure 3 relative technology benefits would be equal to 0.39/(3.17–2.74) = 91 %.

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Correspondence to Enrica De Cian.

Additional information

The research leading to these results has received funding from the Italian Ministry of Education, University and Research and the Italian Ministry of Environment, Land and Sea under the GEMINA project.

This article is part of the Special Issue on “The EMF27 Study on Global Technology and Climate Policy Strategies” edited by John Weyant, Elmar Kriegler, Geoffrey Blanford, Volker Krey, Jae Edmonds, Keywan Riahi, Richard Richels, and Massimo Tavoni.

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De Cian, E., Carrara, S. & Tavoni, M. Innovation benefits from nuclear phase-out: can they compensate the costs?. Climatic Change 123, 637–650 (2014). https://doi.org/10.1007/s10584-013-0870-9

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Keywords

  • Abatement Cost
  • Carbon Price
  • Marginal Abatement Cost
  • Breakthrough Technology
  • Integrate Assessment Model