Estimating the economic value of energy transmission is difficult because investments in transmission capacity are endogenous to market conditions. This column presents recent research that takes advantage of a natural experiment to generate a credible counterfactual. The unexpected closure of the San Onofre Nuclear Generating Station in California increased generation costs by $350 million per year; it also led to increased carbon emissions worth $320 million annually.
Lucas Davis, Catherine Hausman, 16 June 2014
Enrica De Cian, Samuel Carrara, Massimo Tavoni, 22 December 2013
After the Fukushima incident in 2011, many countries decided to shrink their nuclear power programmes. This article presents recent research on the optimal role of nuclear power in reducing carbon emissions. Phasing out nuclear power would be costly, since it is currently the cheapest low-carbon alternative to fossil fuels. However, these costs would be largely offset by the implicit subsidy to R&D in renewables, which suffers from innovation externalities. Still, carbon pricing and explicit R&D subsidies would be a more efficient way of determining the future of nuclear power.