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Nuclear Phase-out Under Stringent Climate Policies: A Dynamic Macroeconomic Analysis

Abstract:
In this paper we investigate the long-run economic consequences of phasing out nuclear energy in the presence of stringent climate policies. We integrate endogenous growth theory and technology-based activity analysis into a dynamic numerical general equilibrium model. Both market-based and policy-mandated nuclear phase-out are studied. Using data from the Swiss economy we find that the aggregate welfare loss of carbon policy is as large as 1.21% and that nuclear phase-out raises the loss to 1.58%. Nuclear phase-out has no significant effect on economic growth. Increased investment, induced innovation, and sectoral change are the reasons that the economic impact of nuclear phase-out and the trade-off between energy and climate policy are moderate, once the dynamics of an economy are taken into account. Optimal phase-out time for nuclear depends mainly on future cost escalation in the energy sector. Keywords: Energy and growth, Decarbonization, Nuclear phase out, CGE model, Induced innovation

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Energy Specializations: Energy and the Environment – Climate Change and Greenhouse Gases; Nuclear Power – Other; Nuclear Power – Spent Fuel Management; Nuclear Power – Policy and Regulation; Nuclear Power – Markets and Prices; Energy and the Environment – Policy and Regulation

JEL Codes:
Q54 - Climate; Natural Disasters and Their Management; Global Warming
Q49 - Energy: Other
Q53 - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
E60 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General
L13 - Oligopoly and Other Imperfect Markets

Keywords: Energy and growth, Decarbonization, Nuclear phase out, CGE model, Induced innovation

DOI: 10.5547/01956574.38.1.lbre

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Published in Volume 38, Number 1 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.