Viability of an expanded United States nuclear power program and its effects on energy markets

Abstract

The four biggest energy sources in the United States are coal, crude oil, natural gas, and nuclear power. While coal and nuclear power are produced domestically, more than 70% of crude oil and 20% of natural gas is imported. This places an unhealthy dependence on foreign products for our economy. Just as importantly, all of these energy sources, with the exception of nuclear power, produce large amounts of polluting emissions in the form of greenhouse gases which are responsible for environmental degradation. For these two reasons, we explore possible government policies to shift the US energy economy towards domestically-produced, environmentally-clean alternative energy sources, the most prevalent of which is nuclear power. Different forms of government support for investment in nuclear power is discussed, such as investment tax credits and production tax credits. As an instrument of public policy to affect energy imports and environmental impact, the possibility of a carbon tax (on the order of $150/tC) is considered. The effects of this carbon tax on the energy sector in the medium-term future (in the year 2020) are analyzed. Under the constraint of maintaining current natural gas demand the results show that there will be an increase in the use of nuclear power while lowering the dependence on crude oil and coal. To accomplish this, the use of natural gas is shifted from the power sector to the residential, commercial and industrial sectors due to the economic incentives to do so. From an environmental perspective, this carbon tax lowers emissions by a predicted 30% of its 2020 business-as-usual rates. Economically, the carbon tax lowers crude oil import levels by 20% and reduces the US balance of payments by over $170 billion in the year 2020.