Nuclear energy in the UAE: the social cost advantage

  • DEC, 2020
  • ENVIRONMENTAL ECONOMICS

Usually, nuclear worries linger. We estimated and compared the social costs of nuclear energy across (i) Italy, country that closed its last nuclear plants in 1990, (ii) the UK, country that has nuclear plants currently in operation, and (iii) the UAE, country that has more recently embarked upon nuclear power program, with its first reactor connected to the grid since August 2020. The UAE sampled respondents seem to be associated with the lowest level of social costs, displaying greater acceptance towards nuclear energy projects.

Nuclear energy is a cleaner energy source that does not emit CO2, at least not directly during the operation phase. By including nuclear in the energy mix alongside renewable energy whilst decreasing dependence on fossil fuels, countries can contribute to mitigate the impacts of climate change.

Historically, public views towards nuclear energy have been controversial. For instance, soon after the Chernobyl’s accident over 30 years ago, Italy decided to phase out the nuclear plants that had been in operation until then. Around 2010, Italy was considering again introducing nuclear in the energy mix, but following the Fukushima accident plans were halted indefinitely.

Nevertheless, some countries seemed to be immune from the Fukushima accident. For instance, whilst the UK will soon see most of its old nuclear plants approaching the decommissioning phase, new nuclear plants have been planned. In addition, other countries have been investing in nuclear energy: the UAE connected its first reactor to the power grid in August 2020.

Successful energy transitions usually benefit from positive views from the public. This, for instance, can reduce implementation time. In case of nuclear energy projects, it can facilitate the location of nuclear plants.

What is the public view towards nuclear energy in the UAE and how does it compare to other countries? We have assessed and compared views and preferences of the public towards hypothetical nuclear energy projects across Italy, the UK, and the UAE. We collected data via online nation-wide surveys. Quotas were set so as to obtain samples that are broadly representative of the target populations.

To estimate social costs-which include costs not directly observed in a market-, we need to understand people’s preferences. This requires a solid methodology, rooted in Economic theory. We employed the choice experiment technique that allows us to evaluate preferences for a good not exchanged in a market-in this case the building of hypothetical nuclear plants-and its associated features, such as potential reduction of CO2 emissions, the distance of a nuclear power station from the area of residence, and potential electricity bill reductions. Individuals were presented with a series of hypothetical projects, and asked each time to pick their preferred one, or none of them. In this way, we can indirectly understand what they prefer. Also, if they would tend to oppose or accept nuclear energy projects and in which conditions.

By measuring how much electricity bill reduction respondents would demand to compensate for the building of nuclear plants, it is possible to estimate monetary compensations that can be used as a proxy for social costs. In major implementations, policy makers compare expected benefits and costs, and it is important to include also those not directly available in a market, yet valued by society and individuals.

Drawing from a total sample of over 4,000 respondents, we found that respondents from across these three countries considered do prefer nuclear plants away from their area of residence, and value public and private benefits that are potentially associated with nuclear energy projects, such as reduction of CO2 emissions and electricity bill (which could compensate the closer location of a nuclear plant). Remarkably, the UAE sampled respondents present the lowest estimated compensation (in terms of AED/Km), that reaches a level of up to 7 times less as opposed to the case of Italy (where strong opposition towards nuclear energy was recorded), and up to 5 times less vis-à-vis the case of the UK. All in all, it appears as the public in the UAE presents a greater level of acceptance towards nuclear energy projects.

Davide Contu is an Assistant Professor, Faculty of Management, Canadian University Dubai.

Reference to published articles:
https://www.sciencedirect.com/science/article/pii/S0301421519306196
https://www.tandfonline.com/doi/abs/10.1080/00036846.2019.1707766?journalCode=raec20
https://www.sciencedirect.com/science/article/pii/S0921800915301890