Dismantling of nuclear power in Germany: sectoral and macroeconomic effects

This paper studies the sectoral and macroeconomic effects of cutting the li fetime of existing nuclear power plants from 40 years (base case) to 30 yea rs (phase-out case), given that no new capacity should be added in either c ase. These scenarios correspond to the positions currently held by the elec tricity industry and the German government, respectively, in the so-called energy consensus negotiations. Our method of analysis is to use a computabl e general equilibrium model which encompasses a detailed representation of the electricity supply industry. The nuclear phase-out entails an increase of the electricity price by up to 10 per cent and an ensuing Fall in electr icity demand by up to 4.5 per cent. The supply gap that remains after the f all in demand is accounted for is filled by additions to fossil-fuelled cap acity. The macroeconomic effects of the phase-out are rather moderate on av erage, but display considerable dynamics which reflects variations along th e time axis of the relative weight of expansionary capacity-replacement imp ulses and contractionary electricity prier effects. (C) 2001 Elsevier Scien ce Ltd. All rights reserved.