Authored by William Nordhaus, an expert on economic growth and natural resources, The Swedish Nuclear Dilemma: Energy and the Environment addresses the policy implications of Sweden's decision to decommission its 12 nuclear power plants. A 1980 advisory referendum-primarily a response to safety concerns-called for phasing out nuclear power by 2010. Sweden's parliament approved a plan last week to begin the phase out, with the first plant closure scheduled for as early as July 1998. Sweden relies on nuclear power for about half of its electricity; the remainder comes mainly from hydropower. The country constructed its first nuclear plant in 1972.
"Although Sweden is a small country producing but a tiny fraction of the world's energy and output, it plays a large role on the stage of world opinion," Nordhaus writes. "The world is watching Sweden's redesign of the welfare state, and it will also pay close attention to how Sweden manages its nuclear power industry." In his book, Nordhaus constructs a model of the Swedish electricity system to quantify the economic costs and benefits of various energy options and to address a number of questions in the Swedish nuclear debate. These include: Where will replacement power come from if and when the existing nuclear reactors are shut down? How much will it cost? What effect will these costs have on the performance of the Swedish economy? How might Sweden reduce its greenhouse gas emissions while phasing out a very large source of carbon-free electricity? How will this all play out against the backdrop of electricity deregulation that is going on not only in Sweden but also across Europe and much of the rest of the world?
Nordhaus concludes that the economic and environmental rationales for a nuclear phaseout in Sweden are very thin, with substantial economic losses projected. He estimates the cost of a nuclear phaseout, if implemented evenly from 2000-2010, to be about $15 billion (in discounted 1995 dollars). Nordhaus notes that this amounts to $2100 per Swedish citizen. With the country's gross domestic product (GDP) in 2010 estimated to be around $340 billion, this $15 billion cost amounts to nearly 5% of its GDP.
"A nuclear phaseout will hardly bankrupt Sweden," Nordhaus writes. "But it represents a loss in real income and wealth that is substantial by any account." Further, he finds that any gains in environmental quality, health or safety from moving to a different fuel cycle for generating electricity are unlikely, and that some fuel cycles, particularly coal-based or oil-based ones, are likely to lead to a significant deterioration in health and environmental conditions. Nordhaus also points out that Sweden's decision to phase out nuclear energy conveys a message about the priority of domestic energy concerns and international environmental commitments, especially those related to future climate change that aim to reduce emissions of greenhouse gases.
"Sweden will be hard pressed to keep its international commitments to stabilize carbon dioxide emissions even with its nuclear industry producing full tilt," Nordhaus writes. "If it phases out its nuclear power, then it will be virtually impossible for the country to keep its climate change commitments."
The other side of the commitment dilemma, Nordhaus says, is that keeping both its nuclear and climate change commitments raises the price of both. He estimates that a nuclear phaseout in the year 2010 will cost $19 billion. If this policy is combined with a limitation of carbon dioxide emissions to 1990 levels, the price tag of both policies rises to $109 billion, one-third of Sweden's annual GDP. If the macroeconomic, fiscal and international-trade interactions are added to this number, the price tag, Nordhaus says, becomes frighteningly large.
"Sweden is unique in having a well-managed nuclear power industry, producing at low cost, and having found a political resolution to the thorny issues of siting and disposal of nuclear wastes," Nordhaus writes. "How is the world to read the message of shutting this industry down in the prime of its economic life? Sweden should recognize that its actions will be read internationally as an important message about the viability of nuclear power as a future energy source."
William Nordhaus is the A. Whitney Griswold Professor of Economics at Yale University and a former member of the President's Council of Economic Advisers. He has authored several books, the most recent of which is Managing the Global Commons. He is also co-author with Paul Samuelson of Economics, the leading introductory textbook on economics, which enters its sixteenth edition.
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