One of the most basic principles of economics is trade-offs. When we make decisions, we give up one desirable thing to get something else we want. Take driving a car, for example. Every year in Canada about 2,900 people die in car accidents. If everyone was forced to drive at a maximum speed of 10 miles per hour this number would fall to zero, or close to it. We choose to trade off those 2,900 deaths for the convenience of getting to our destinations faster.
The catastrophic failure of the Fukushima nuclear power plant in Japan brings the issue of trade-offs in energy production to the fore. We are prepared to give up a lot to have ample supplies of electricity, drive our cars and have warm houses. The World Health Organization estimates that there are now two million premature deaths per year world-wide caused by air pollution from the burning of fossil fuels. A major American study showed that each year in the United States “several hundreds of thousands” of deaths are due to such pollution. The Toronto Public Health Authority estimates that 1,700 Torontonians meet an early end each year for the same reason.
But it is not just the consumers of energy who suffer. Those who labour to produce it also pay a stiff price. China is the largest coal producer in the world and last year, after huge safety improvements, 2,433 Chinese coal miners died in accidents. This is much worse than the U.S. where “only” 69 miners die in an average year (although about 12,000 are injured). About 120 Americans die each year in the oil and gas industry, and Canadians will not soon forget the helicopter crash which killed 18 oil workers off the coast of Newfoundland in 2009.
In all, fossil fuels such as coal, oil and natural gas account for about 81% of world energy production in spite of this grisly toll. Nuclear energy has about a 5.8% market share, and the accident in Japan threatens to reduce this further. There is something about nuclear power that makes people nervous, although the facts tell a far different story.
There have been three bad accidents in the entire fifty-five year history of commercial nuclear energy. The total death toll world-wide from these three accidents is estimated to be between thirty-one (the number of emergency workers who died at Chernobyl) and 4,000 (the World Health Organization’s estimate of early mortality caused by that accident). No one died at Three Mile Island, and so far, no one has died at Fukushima. During that fifty-five year period, fossil fuels have caused between 50 and 100 million deaths due to air pollution and in excess of 250,000 deaths in mining and oil industry accidents.
Since nuclear power is so much safer than the extraction and burning of fossil fuels, both for producers and consumers, how may one account for the reluctance to build more reactors? I suspect it has something to do with a superstitious fear of the unknown, and with the association of nuclear power with nuclear weapons. We all know that smog is bad for us, and that burning coal and oil cause greenhouse gases and emit noxious chemicals into the environment. But at least we can see (and often taste) the smog. Nuclear radiation is invisible and somehow more sinister.
It is also, in some cases, much harder to get rid of once it escapes. The sensationalism around the accident in Japan only exacerbates the fear factor. Far more ink has been used on the reactor problems than on the ongoing humanitarian disaster in Japan which has killed at least 28,000 and has made about 200,000 homeless.
Our view is that ultimately, rationality will prevail, and that the nuclear power plants now in operation will continue to churn out the megawatts of electricity that the industrialized world needs. The new stations that are in the planning stages will be built, although they will have more robust designs and more safety features than before Fukushima. Faced with the trade-off between fossil fuels and the millions of annual deaths they cause as opposed to the fear of possible problems with new reactors, countries will choose nuclear.
The Fukushima disaster has caused a melt-down for the shares of uranium producers. Cameco, Canada’s largest uranium company, fell as much as 30% in the days following the earthquake, and has been slow to recover. Uranium One fell 48% and Denison Mines dropped 45%. We expect that the stocks of the uranium miners, nuclear power plant builders and reactor operators will go back to pretty much where they were before the earthquake and tsunami, although it might take a while. Prices for uranium on the spot market rose $2.50 per pound or 4% this week, a sign that the recovery is already underway.
Disclosure: The author and clients of Baskin Financial own shares in Cameco.
