2. Sustainability-oriented EU Taxes: A European Nuclear Power Tax
Outline:
Nuclear Power in the EU
Existing taxes on NP in the EU
The social costs of NP
Windfall profits
A rationale for taxing NP
Why at the European level?
Tax design & approximate revenues

3. Nuclear Power in the EU
The most important low carbon electricity source in the EU
27% of EU electricity mix is NP
27% is renewable energy
129 reactors in 14 countries in operation
400, ,000 jobs in NP industry
4 reactors currently under construction
Severe cost escalation for new reactors
Source: EC 2016, COM(2016) 177 final
Nuclear Illustrative Programme
EPR: Olkiluoto, Finland; Flamanville, France
New design, maybe safer but so far a financial disaster. Costs have tripled to quadrupled, and connection to the grid is still not in sight.
Mochovce 3&4, Slovakia, (Construction was started in the 1990ies, but halted due to lack of money. Since 2009 construction was restarted. Originally, the reactors should have been connected to the grid by 2012/2013. But there were several delays and design changes, including due to law suits and the EU stress test. Costs have doubled by now, as can be expected as a result of the delays. It shows the many reasons why investing in reactor construction is risky, even in actually favourable conditions. Connection to grid is expected for 2017 (reactor 3) and 2018 (reactor 4))

4. Existing Taxes on NP in the EU
Germany
Tax on nuclear fuel: 145 €/gram => 1 – 1.5 cents/kwh
From 2011 to 2016
Spain
Charges on nuclear waste: cents/kwh
Belgium
Charge of approx. 0.5 cents/kwh
Sweden
Tax of 0.75 cent/kwh
Will be phased out between 2017 and 2019
Minor charges in Finland, Slovakia, Romania, France

5. The Social Costs of NP
Private costs: it does not pay to build new nuclear plants
Very large initial investment of several billion €
risky return
Other social cost components: the risk of accidents, nuclear waste and state subsidies
Are social costs internalised sufficiently? Is there a scope for Pigouvian taxation?
Compare Davis 2012, von Hirschhausen und Reitz 2014, Rogner 2012, Grubler 2012
Risky return because of long amortization periods and uncertainty about future energy markets. In a regulated market, the providers costs would be covered. In a liberalized energy market, there can be no such guarantee.
The investment is risky because of cost overruns and regulatory risk, (e.g. Zwentendorf, but sth similar happened in the US as well, see Davis 2012). There is evidence for cost escalation and negative learning by doing in the past. At the moment, very few new NPPs are being built in the EU and none in the US.

6. Social Cost Components
Nuclear accidents
Risk of an accident: 1:10,000 – 1:1,000,000 (D’haeseleer 2013)
Costs of an accident:
€ 69 billion – € 343 billion (FÖS 2012)
€ 120 billion – € 430 billion (IRSN 2007, 2012)
=> Resulting EXTERNAL COSTS:
Cents/kwh 0.03 – 0.1 – no risk aversion (D’haeseleer 2013)
Cents/kwh 10.7 – risk aversion factor 100 (FÖS 2012)
Subsidies
€ 8 billion per year (Ecofys 2014)
Radioactive Waste and Decommissioning
Costs until 2050: € 253 billion (EC 2016)
Council Directive 2011/70/Euratom: Application of the polluter pays-principle
Subsidies are primarily due to research funding and guarantees during construction
Institut de Radioprotection et Sureté Nucléaire – include image loss for France after a nuclear accident

7. Windfall Profits Windfall profits from carbon pricing
Electricity prices are expected to increase due to carbon pricing
25 €/t CO2 => windfall profits of approx. € 10 billion per year in the EU
Windfall profits from lifetime extensions
Private costs after lifetime extension: Cents/kwh (D’haeseleer 2013)
Much lower than private costs of conventional energy sources (gas: cents/kwh cents/kwh)
A carbon price of 25 €/t CO2 generates windfall profits of approximately 10 Billion € a year in the EU (own calculations based on DIW/Diekmann 2007)
Replace numbers for Germany with numbers for the EU – Kurt and Mark

8. A Rationale for Taxing NP
Why tax NP?
Internalisation of external costs
Reaping of windfall profits
Little effect on consumers in liberalized energy markets (D‘haeseleer 2013, FÖS 2009)
Proposed tax rates:
1 Cent/kwh => internalisation of external costs
1.25 Cent/kwh => windfall profits for carbon price of 25€/t CO2
Special charges for NPPs under LTO licence
LTO = long term operation

9. Why a European tax? NPP accidents constitute a cross-border risk
Require cross border safety measures and prevention
Suboptimal national tax rate
EU subsidies for NP
Common energy market => Do not distort competition!
ETS as EU policy should be combined with an EU windfall tax on NP
Generation of revenues to lower Member States‘ contributions to the EU budget

10. Tax design Possible tax bases: Electricity produced Installed capacity
Nuclear fuel
@ tax bases: What is best in line with EU energy taxation directive?
Long term supply elasticity: Probably irrelevant, because new NPPs in Europe seem to be not profitable anyway
Supply Elasticity – possible exception: licence will expire soon + additional investments required = plant shut down
Electricity produced – 830,842 GWH
Installed capacity – 120,624 Mwe (2016)
Nuclear fuel

11. Approximate revenues EU NP electricity production in 2014: 830,842 GWH
Potential revenues:
€ 8.3 billion – for a tax rate of 1 cent/kwh
Internalization of external costs
€ 18.7 Billion – for a tax rate of 2.25 cent/kwh
Charge for windfall profits of carbon pricing for a price of 25 €/t CO2