Japan's Energy Policy Post-Fukushima: A Computable General Equilibrium Analysis of the Nuclear Energy and Renewable Energy Policies

Abstract

<p>A stable supply of electricity at an affordable cost is indispensable for sustainable national economic growth and security. Stable power supply directly affects the structure of national industry and indirectly influences economic conditions and social welfare. Japan had considered nuclear power an "efficient base-load power source". Nuclear power plants were once able to supply more than 25% of the Japanese domestic electricity demand. However, due to the Fukushima Daiichi nuclear disaster, Japan shut down all its’ existing nuclear plants for safety assessment. Consequently, imports of fossil fuels for thermal power generation increased and electricity prices rose. Citizens have had to bear a further invisible economic burden due to the rise in electricity prices precipitated by the FiT (Feed-in tariffs) policy, as implemented after the nuclear shutdown. The purpose of this thesis is to analyse the impact of the nuclear shutdown and the effects of FiT policy in order to provide practical advice on current and future power policies.</p> <p>A multi-sector, multi-electricity generation technology, Computable General Equilibrium (CGE) model is used to provide the evidence for the electricity supply problems. This CGE model captures the interdependence among markets in the determination of both prices of commodities and factors of productions as well as the impact of policy decisions on the electricity supply system. As a departure from previous literature relating to CGE analysis of energy policy, a precise disaggregation of electricity generation technology allows for significantly more accurate estimates of the industry activity impact than previously achieved, through elucidating the complexity of substitution effects among electricity generation technologies.</p> <p>The study reveals that the impact of the nuclear shutdown is to raise electricity prices and which then has an adverse effect on the economy. The main finding from the nuclear shutdown study shows that electricity-intensive industries or industries with high price competition are vulnerable to the electricity price fluctuations. The study also found the decline of domestic industries and the rise in electricity charges cause a decline in real income and adversely affect the service industry. The finding from the FiT policy study reveals that the policy worsened most aspects of the economic situation due to the further rise in electricity price, but it does limitedly improve the CO2 emission level. However, the main reason for improving CO2 emissions is elucidated as being due to a decrease in demand for all electricity including thermal power, due to economic deterioration.</p> <p>The detailed results imply a hollowing out of the electric-intensive industries, and the decline in the service sector, with an accompanying loss of employment opportunities and an increase of social security costs. The results also suggest that the rise in electricity price has expanded income disparity from the high reduction rate of the necessities demand of household consumption expenditure for many households. This will be an important point of concern for future policy.</p>