Meltdown: not just a metaphor by Joseph Stiglitz (Guardian UK)

Posted on 8 avril 2011. Filed under: énergie, Corporate Social Responsibility |


    Fukushima nuclear plant, Japan 

    The damaged Fukushima nuclear plant,  Photograph: Reuters
    Vested interests cause both our financial system and the nuclear industry to compulsively underestimate risk

The consequences of the Japanese earthquake – especially the ongoing crisis at the Fukushima nuclear power plant – resonate grimly for observers of the American financial crash that precipitated the Great Recession. Both events provide stark lessons about risks, and about how badly markets and societies can manage them.

Of course, in one sense, there is no comparison between the tragedy of the earthquake – which has left more than 25,000 people dead or missing – and the financial crisis, to which no such acute physical suffering can be attributed. But when it comes to the nuclear meltdown at Fukushima, there is a common theme in the two events.

Experts in both the nuclear and finance industries assured us that new technology had all but eliminated the risk of catastrophe. Events proved them wrong: not only did the risks exist, but their consequences were so enormous that they easily erased all the supposed benefits of the systems that industry leaders promoted.

Before the Great Recession, America’s economic gurus – from the head of the Federal Reserve to the titans of finance – boasted that we had learned to master risk. « Innovative » financial instruments such as derivatives and credit default swaps enabled the distribution of risk throughout the economy. We now know that they deluded not only the rest of society, but even themselves.

These wizards of finance, it turned out, didn’t understand the intricacies of risk, let alone the dangers posed by « fat-tail distributions » – a statistical term for rare events with huge consequences, sometimes called « black swans ». Events that were supposed to happen once in a century – or even once in the lifetime of the universe – seemed to happen every 10 years. Worse, not only was the frequency of these events vastly underestimated; so was the astronomical damage they would cause – something like the meltdowns that keep dogging the nuclear industry.

Research in economics and psychology helps us understand why we do such a bad job in managing these risks. We have little empirical basis for judging rare events, so it is difficult to arrive at good estimates. In such circumstances, more than wishful thinking can come into play: we might have few incentives to think hard at all. On the contrary, when others bear the costs of mistakes, the incentives favour self-delusion. A system that socialises losses and privatises gains is doomed to mismanage risk.

Indeed, the entire financial sector was rife with agency problems and externalities. Ratings agencies had incentives to give good ratings to the high-risk securities produced by the investment banks that were paying them. Mortgage originators bore no consequences for their irresponsibility, and even those who engaged in predatory lending or created and marketed securities that were designed to lose did so in ways that insulated them from civil and criminal prosecution.

This brings us to the next question: are there other « black swan » events waiting to happen? Unfortunately, some of the really big risks that we face today are most likely not even rare events. The good news is that such risks can be controlled at little or no cost. The bad news is that doing so faces strong political opposition – for there are people who profit from the status quo.

We have seen two of the big risks in recent years, but have done little to bring them under control. By some accounts, how the last crisis was managed may have increased the risk of a future financial meltdown.

Too-big-to-fail banks, and the markets in which they participate, now know that they can expect to be bailed out if they get into trouble. As a result of this moral hazard, these banks can borrow on favourable terms, giving them a competitive advantage based not on superior performance, but on political strength. While some of the excesses in risk-taking have been curbed, predatory lending and unregulated trading in obscure, over-the-counter derivatives continue. Incentive structures that encourage excess risk-taking remain virtually unchanged.

So, too, while Germany has shut down its older nuclear reactors, in the US and elsewhere, even plants that have the same flawed design as Fukushima continue to operate. The nuclear industry’s very existence is dependent on hidden public subsidies – costs borne by society in the event of nuclear disaster, as well as the costs of the still-unmanaged disposal of nuclear waste. So much for unfettered capitalism!

For the planet, there is one more risk, which, like the other two, is almost a certainty: global warming and climate change. If there were other planets to which we could move at low cost in the event of the almost certain outcome predicted by scientists, one could argue that this is a risk worth taking. But there aren’t, so it isn’t.

The costs of reducing emissions pale in comparison to the possible risks the world faces. And that is true even if we rule out the nuclear option (the costs of which were always underestimated). To be sure, coal and oil companies would suffer, and big polluting countries – like the US – would obviously pay a higher price than those with a less profligate lifestyle.

In the end, those gambling in Las Vegas lose more than they gain. As a society, we are gambling – with our big banks, with our nuclear power facilities, with our planet. As in Las Vegas, the lucky few – the bankers that put our economy at risk and the owners of energy companies that put our planet at risk – may walk off with a mint. But on average and almost certainly, we as a society, like all gamblers, will lose.

That, unfortunately, is a lesson of Japan‘s disaster that we continue to ignore at our peril.

© Project Syndicate 2011

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The Green Prophet, Susan Kraemer – « Nuclear Power Continues World Dependence on Middle East Oil »

Posted on 24 février 2011. Filed under: énergie, environnement - changement climatique |

arab oil

Out of the frying pan…are uranium reserves to run out in a decade?

In its haste to free itself from oil-powered electricity, during the Arab oil shocks of the ”70s, France switched to nuclear energy. It had been vulnerable in its dependence on the Middle East, and moved to nuclear to free itself of the risk from more oil shocks. Since then, it has been the poster child nation for nuclear energy, getting almost 80% of its electricity from nuclear power. It must be in good shape to weather the bumpy exit from the oil age, right?


It turns out that uranium, the fuel needed to make nuclear power, is completely dependent on oil for the very heavy duty machinery needed for extracting the annual supplies of uranium needed. And it takes a staggering amount of heavy mining equipment to extract the tiny amount of uranium needed.

What’s more, the world is running short of uranium fuel to supply reactors. According to Scientific American in 2009, the World Nuclear Association gives these figures.

Every year, each of the 436 nuclear power plants in the world need to mine 143 million pounds of uranium, to extract the usable fuel. The largest mine in the world produces only 18.7 million pounds, or about a quarter of what just the US nuclear power plants need to mine each year.

The McArthur River uranium mine North of  Saskatchewan is the largest mine in the world, and yet it can only supply a quarter of the 104 US nuclear plants’ needs.

From that 18 million pounds of natural uranium, only 1.8 million pounds of enriched uranium is produced, containing usable 4.5 percent U235. Currently the US gets about ten percent of it nuclear fuel from melted down Russian warheads, but this is not an unlimited supply, obviously.

The rapid decline of highly concentrated uranium deposits concerns European policy makers. “The high grades will be depleted within a decade,” says energy analyst Jan Willem Storm van Leeuwen, at Ceedata, which advises European governments on energy.

In 2005, he predicted that at present consumption rates, the industry-wide average ore grade will fall below 0.1 percent—or one metric ton of uranium for every 1,000 metric tons of nonuranic material—within the next decade.

Uranium depletion is one issue. But the amount of fossil energy fuel needed to extract and then refine the uranium is even more reason that nuclear power will prove unsustainable in freeing the world from fossil fuels.

“Seventeen-foot-tall, 11-ton raise-boring machines spear into the rock with as much as 750,000 pounds (340,194 kilograms) of force and then chew out the ore with a 10-foot- (three-meter-) wide reaming head that applies as much as 115,000 pounds (52,163 kilograms) of force for every foot (30.5 centimeters) it turns. They work more than 1,700 feet (520 meters) below the surface, knocking ore into remote-controlled loaders in a tunnel nearly 2,100 feet (640 meters) belowground.”

Extracting the usable uranium from the slurry is another energy-intensive process, and carried out in gigantic coal power plants with their own environmental problems. The US uranium is refined in 90% coal-powered Kentucky at a gigantic plant covering 74 acres that itself grinds through through megawatts of coal power to make the nuclear fuel that must be replenished each year.

The plant “sucks up at least 300 megawatts of electricity most of the time, peaking at as much as 2,000 megawatts (much of it from a coal-fired power plant nearby), to heat uranium hexafluoride until it gasifies and then force it through 1,760 porous membranes that gradually concentrate the level of the fissile isotope—a method invented during World War II.

“The gaseous diffusion is an electricity-intensive process,” says Jeremy Derryberry, a spokesman for the coal company. But “we don’t discuss how much power we use to do the enrichment.”

If the coal plant owner is coy about the energy use, the consultant is not.

By 2070, says Storm van Leeuwen, the amount of energy it takes to mine, mill, enrich and fabricate one metric ton of uranium fuel may be larger than 160 terajoules—the amount of energy one can generate from it.

Within 60 years, the energy needed to get fuel for nuclear power will be the same as the energy it can make.

MENA nations considering a shortsighted lurch into nuclear:
Iran Going Nuclear in Joint Power Plant Plan with Neighbors
Jordan Explores the Nuclear Option
Is Israel Coming out of The Nuclear Closet by Planning Nuclear Power Station?

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