Date created: 3/5/07 Last modified:3/5/07 Maintained by: John Quiggin John Quiggin
6 July 2006
The government’s inquiry into nuclear power has yet to hold hearings and take evidence, let alone produce a report. But its most important work has probably already been done. The announcement of the inquiry and the debate leading up to it has finally brought political reality in the debate over nuclear power and climate change into line with economic and scientific reality.
The only thing we know, with any reasonable degree of certainty, about the economics of nuclear power is that, at current prices, nuclear power is not competitive with generation based on burning carbon-based fuels like gas and coal. The most convincing evidence on this point is derived, not from engineering studies, but from simple observation. Even with a favourable regulatory environment like that of the United States, no new nuclear power plant has been commissioned for several decades. Nuclear power is growing only where it has some form of government backing.
If nuclear power is uneconomic at current prices, and is to be considered as a way of mitigating global warming, the economic policy problem has a simple answer. Put a price on carbon dioxide emissions either through a carbon tax or through requiring emitters to hold tradeable permits, and let the market find the most cost-effective solution. If the price of emissions rises enough, and no other solutions are more cost-effective, nuclear power will become competitive.
The fact that an answer is obvious does not mean that it will be reached. In this case, however, two members of the committee appointed by the government (economist Warwick McKibbin and George Dracoulis ) have already stated that some form of carbon price is needed. In a sense, their most important work has been done.
There are, of course, plenty of secondary issues to be addressed. We don’t know, for example, what price would be required for firms to invest in nuclear power, and we have no good way of accounting for costs of decommissioning and waste storage. We also lack good evidence on how much demand for electricity would decline in response to a permanent increase in the cost of CO2 emissions, and therefore of electricity.
However, there is no need to determine the answers to these questions in advance. What is necessary is a commitment to increase the cost of CO2 emissions over time, either directly through a carbon tax or indirectly, by issuing emissions permits in quantities that decline gradually over time, allowing emissions to reduce gradually over time.
The market will do the rest, with the assistance of some appropriately designed policies to meet gaps in research, for example in relation to clean coal technologies. The result may be a shift to nuclear power, development of alternative energy sources or improvements in conservation and energy efficiency. The important point is that in broaching the question of nuclear power, Howard has opened up the central policy issues that have, until now, been off the table.
Equally importantly, in restarting the debate on nuclear power, Howard took as starting points the fact that the global climate is warming, and the inference, supported by many converging strands of evidence, that this warming is primarily due to human activity. The massive body of evidence supporting these conclusions is too large for any single person to manage, but the International Panel on Climate Change provides readable (though still lengthy) summaries of the work of thousands of scientists on this topic.
Of course, the government’s official position, as stated by successive Ministers for the Environment, has long included acceptance of the standard scientific view. However, this acceptance has been undermined by the fact that many of the government’s closest political supporters have vigorously denied the science of global warming, with sotto voce support from senior Ministers.
This campaign has been ludicrous at times, with the vast body of peer-reviewed research on climate science being matched against the writings of such authorities as science fiction writer Michael Crichton and astrologer Theodor Landscheidt (whose work has been promoted by Australia’s Lavoisier Institute). Reliance on such dubious authorities reflects the fact that only a handful of qualified scientists support the denialist position, and most of these have obvious financial or ideological conflicts of interest.
Cimate science denialism has been politically useful to the government, bolstering its anti-Kyoto position, even if its arguments have been implausible and its advocates have been kept at arms length. But its usefulness is now passed, and the problem is to develop a policy framework for mitigating climate change at minimum economic cost.John Quiggin is an ARC Federation Fellow in Economics and Political Science at the University of Queensland.
John Quiggin is an Australian Research Council Federation Fellow in Economics and Political Science at the University of Queensland.
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