Japanese nuclear power and the Kyoto agreement

Abstract

We find that, on an economic basis, nuclear power could make a substantial contribution for meeting the emissions target Japan agreed to in the Kyoto Protocol. It is unlikely however that the contribution would be as large as projected in official Japanese forecasts. The economic costs of the carbon constraint rise if siting, construction, and approval problems prevent the economically desirable level of expansion of nuclear power. We also evaluate the economic effects of subsidizing nuclear power to achieve the expansion projected in official forecasts. While the subsidy required is substantial, the economic welfare effects are relatively small because of second-best considerations. We use the EPPA model, a global computable general equilibrium model, in the analysis. Our estimates thus include the effects of changing world energy prices and terms of trade as they affect competitiveness of nuclear power and economic welfare.