NCPA - National Center for Policy Analysis


May 21, 2008

As Congress debates whether to limit carbon-dioxide emissions, one of the most vocal supporters of such legislation -- the nuclear-power industry -- is poised to reap a multibillion-dollar windfall if restrictions take effect, says the Wall Street Journal.

Nuclear operators stand to gain from greenhouse-gas legislation in two ways, says the Journal:

  • Their plants don't spew carbon dioxide, so they would not have to buy emissions allowances, giving them a competitive advantage over competitors that burn fossil fuels.
  • In addition, a cap-and-trade system would probably push up wholesale electricity prices in deregulated markets, as coal- and natural-gas-burning utilities raise prices to recover the additional cost of allowance purchases.
  • In deregulated markets, generators with the highest costs set the market price, so lower-cost nuclear operators could enjoy the higher prices charged by coal- and gas-burning utilities without the higher costs.

A study by the Congressional Budget Office, released this month, concluded that nuclear plants could make electricity more cheaply than any other form of power generation if carbon allowances cost $45 apiece.

Nuclear-plant owners aren't the only ones that stand to benefit.  Natural-gas-fired generators would benefit if they sell electricity where coal-fired plants set prices.  That is because gas plants release only about half as much carbon dioxide as coal plants and would need fewer allowances, so their profit margin would widen.

Source: Rebecca Smith, "Carbon Caps May Give Nuclear Power a Lift," Wall Street Journal, May 19, 2008.

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