Green Nuclear: Climate Economics

Steven Kaiser
February 21, 2016

Submitted as coursework for PH241, Stanford University, Winter 2016

Fig. 1: Damage costs of electricity. [8] (Courtesy of The European Commission.)


Nuclear energy involves significant overhead costs. Upfront costs associated with nuclear plant construction are estimated at $4 billion. However, considering potential complications and investment, when accounting for interest payments over the life of a loan the total cost of nuclear plant construction is estimated at approximately $17 billion. [1] Fossil fuel plants are significantly less expensive to build, and can be built over short periods of time. Considering risk and construction time, fossil fuel plants are the easier financial investment, despite their environmental implications. [2]

Climate change is driven by greenhouse gas emissions, a harmful externality of fossil fuel burning. Unlike many renewable resources that cannot supply consistent base-load energy, nuclear energy represents a low-emission alternative to fossil fuels. As seen in Fig. 1, nuclear energy has the second lowest emissions of major energy sources. Despite nuclear's impressive lack of emissions, coal, the most common fuel source, accounted for 39% of American energy in 2014. Coal is also the most harmful common fuel source, with the largest greenhouse gas emissions per unit of energy produced. [3] Not only does coal contribute more to climate change per unit of energy production than nuclear, it also causes greater air-pollution related human deaths than nuclear energy, even considering potential safety risks associated with nuclear. [4] With these considerations, the US Government should evaluate fuel sources along impacts on climate, namely air-pollution externalities, as opposed to renewable status or otherwise. In order to combat aforementioned economic hurdles associated with nuclear plant start-up costs, the US Government has the opportunity to bolster nuclear power in the United States through subsidies and carbon taxes.

Nuclear Subsidies

Between 1950 and 2010 nuclear energy has received very little government support by means of tax incentives. [5] The majority of government support comes in the form of research and design investments. The oil industry, in comparison, received over $194 billion in tax incentives over the same period of time. [5] In 2013, fossil fuels received 20% of government energy tax incentives. Renewables, including wind, solar, geothermal, and hydroelectric, received 57% of government energy tax incentives. Nuclear, on the other hand, received less than 5% of the share of government tax incentives. [6] It is relevant to stress the economic impact of economic relief. The first two new nuclear reactors to be built in the United States since 1996 were financed in large part by a $6.5 billion dollar government-backed loan. [2] Tax incentives to further lower the energy-production costs of nuclear have the potential to make the prospects of nuclear investment less daunting as a viable alternative to coal.


Nuclear energy represents a less-polluting alternative to coal and other fossil fuel combustion energy sources in America. However, due to the large upfront construction costs and associated risk, the private sector is apprehensive to invest in the fuel source. Unlike the private sector, which is primarily driven by profit, the United States Government has the ability to create an economic environment in which nuclear energy is more attractive for the private sector through tax subsidies and carbon taxes that target high-polluting energies, namely coal. [7] The government must recognize greenhouse gas emissions as the driving force of climate change and more appropriately disburse tax incentives across nuclear, renewables, and fossil fuels to reflect such recognition if the government is to truly combat climate change.

© Steven Kaiser. The author grants permission to copy, distribute and display this work in unaltered form, with attribution to the author, for noncommercial purposes only. All other rights, including commercial rights, are reserved to the author.


[1] J. M. Deutch et al., "The Future of Nuclear Power," Massachusetts Institute of Technology, 2003.

[2] N. Resnikoff, "US To Help Build First Nuclear Reactors in Decades," MSNBC, 19 Feb 14.

[3] "Electric Power Monthly," U.S. Energy Information Administration, March 2015.

[4] A. Markandya and P. Wilkinson, "Electricity Generation and Health," The Lancet 370, 979 (2007).

[5] "60 Years of Energy Incentives: Analysis of Federal Expenditures for Energy Development," Management Information Services, Inc., October 2011.

[6] M. F. Sherlock and J. M. Stupak, "Energy Tax Incentives: Measuring Value Across Different Types of Energy Resources," Congressional Research Service, R41953, March 2015.

[7] "Splitting the Cost: Nuclear Energy is Unlikely to Work Without a Carbon Tax," The Economist, 12 Nov 09.

[8] P. Busquin, "External Costs: Research Results on Socio-Environmental Damages Due to Electricity and Transport," European Commission, EUR 20198, 2003.