Journal of Applied Input-Output Analysis, Vol. 3, 1996

The Economic Impact of a Nuclear Power Moratorium:
Simulation Experiments by the CRIEPI Medium-Term

Economic Forecasting System1

By

Mitsuho Uchida*, Tsuneaki Hattori* and Norihisa Sakurai*

Abstract
Nuclear power is an almost non-exhaustible energy source and produces no carbon

dioxide (CO2) emissions in the production process. However, many problems with nuclear
power exist, such as the issue of nonproliferation and the processing and disposal of
nuclear wastes. Most Western countries have recently reduced operation or even given up
further development of nuclear power, mainly due to the increasing difficulty of getting
public approval for the construction of nuclear power stations. If nuclear power generation

were to be halted, what would happen to the national and world economies? This paper

examines the economic impacts of a nuclear power moratorium by using the CRIEPI
Medium-Term Economic Forecasting System. The simulation results state that a nuclear

power moratorium,

if jointly

implemented by

the

G-7

countries,

would

have

a

stagflationary impact on the world and Japanese economies triggered by a drastic increasein fossil fuel prices. Despite the decrease in energy demand caused mainly by the priceeffects, CO2 emissions would drastically increase because of the shift to oil and gas from
nuclear as sources of electric power.

1. Introduction
Primary energy consumption in the world grew by about 60 percent during the past

two decades (IEA, 1992). For the next two decades (1990-2010), the IEA forecaststhat growth will further continue by 50 percent or more, reflecting increasing demandin developing countries as they are beginning to catch up to the levels of living
standards in industrialised countries. In Japan, while slightly slowing during the 1970s,

growth in energy demand revived upward again in the middle of the 1980s in
conjunction with decreased energy prices, the expansion of the service sector in theeconomy, increasing desires for higher living standards and so on. Considering thegrowing threats of greenhouse warming and the potential supply restraint of fossil fuelresources in the 21st century, however, such a high growth rate in world energy

Manuscript received December 13, 1995. Revised November 21, 1996.

* Central Research Institute of Electric Power Industry (CRIEPI), Tokyo, Japan

1 The earlier version of this paper was presented at the 10th International Conference on Input-Output
Techniques, held in Seville, Spain, 1993. The authors are grateful to an anonymous referee of thispaper for various helpful comments.

2

Journal of Applied Input-Output Analysis, Vol. 3, 1996

demand might not be sustainable in the long run unless some energy conservation
measures are implemented.

One possible solution to overcome the energy and environmental problems thatmight limit the ceiling of economic growth is to increase nuclear power, which may

cause some people uneasiness even though it is a clean and almost non-exhaustible

energy2. As of 1990, nuclear energy accounted for about 17 percent of world
electricity production and 27 percent in Japan, a bit higher than the average in theOECD area (24 percent). Despite the importance of nuclear energy, most Westerncountries have given up further development of nuclear power, mainly due toincreasing difficulty in obtaining public acceptance of constructing nuclear power
stations. Energy is essential to pursuing economic growth. In this regard, it is not onlyinteresting but also important to investigate what would happen to the economy if thisimportant source of energy were abandoned for some reasons, for example, theenvironmental risks in disposing of radioactive wastes, increasing construction costs.

of nuclear power stations, etc. (see OECD, 1989). ^he purpose of this paper is toquantitatively analyse the economic impacts of a nuclear power moratorium by using
the

CRIEPI

Medium-Term

Economic

Forecasting

Systeminwhichvariousinteractions among world energy markets, Japanese macroeconomic activity andindustrial structure, and energy demand and supply are consistently captured. In what
follows, we first explain the basic structure of this forecasting system and then present
the simulation results of the impact of a nuclear power moratorium.

2. The CRIEPI Medium-Term Economic Forecasting System
This economic forecasting system consists of four econometric models: a world energy
supply-demand model, a multisectoral econometric model for the Japanese economy inwhich a feed-back mechanism between the macroeconomy and industrial activities isincorporated, an inter-energy competition model (an energy jnarket modeLfor Japan),and a nine-region econometric model, in which Japan is divided correspioriding to the
supply territories of nine major electric power companies.

As shown in Figure 1, these four models in the system are linked to each other insuch a way that variables solved in one model are transferred to other models as
exogenous variables. For example, international energy prices and world energy
supply-demand determined in the world energy model are conveyed into both themultisectoral and inter-energy competition models. The multisectoral model thendetermines major economic variables for the Japanese economy such as GDP,
employment, wages, prices, etc. at a detailed industrial sectoral level, and thisinformation is then transferred to the inter-energy competition model to consistently

determine domestic energy prices and demand for energy by type of use and category.

2 Though not taken into account in this paper, another option would be an expansion of renewableenergy such as solar energy, biomass, geothermal energy, hydropower and wind, as emphasised by theWorld Bank (1992). According to energy experts, these energy sources cannot play an important rolein energy supply until about 2010.

The Economic Impact of a Nuclear Power Moratorium

3

World Energy
Model• Energy prices• World energy
supply anddemandInter - Energy

Multisectoral Model• GNP components• Industrial structure• Employment structure• Sectoral prices/wages>

Competition Model• Sectoralenergydemand• Electricity
demand• Secondary
energy prices

Nine-Region Model• Regional industrial structure• Inter-regional population movement• Regional electricity demand

Figure 1: Overall Structure of the Medium-Term Economic Forecasting System

To capture the interactive features between energy and the economy, domestic energy
prices determined in the inter-energy competition model affect in turn sectoral outputs
and prices calculated in the multisectoral model. All these variables can be determined

endogenously in the system as a whole. And of course, separate use of each model isalso possible depending upon the purpose of the simulations. The major characteristics

of each model are summarised as follows3.
(a) World Energy Model

World energy prices and supply of and demand for energy by fuel type for eachcountry or region are simultaneously determined in the model (for details of the model,

see Kumakura, 1987). Energy demand is formulated as a derived demand system in
response to energy prices and income factors such as GDP, while energy supply bycountry or region is a function of international energy prices and the OPEC oil supply

volume, which is exogenously given. For oil and coal, the equilibrium prices andquantities are simultaneously determined in a way that supply of and demand for eachenergy source are balanced in world markets. So as to focus on the role ofeconomically powerful countries in world energy markets, the model includes a

3 The explanation of the nine-region model is omitted here as it is not utilized in the current simulation
experiments. For details of this model, see Ohkawara, 1993.

4

Journal of Applied Input-Output Analysis, Vol. 3, 1996

detailed supply-demand model for each of the G-7 countries, where energy supply
volume, conversion volume, final consumption and domestic energy prices are
determined by type of energy (oil, coal, natural gas and electricity).
This model itself can be used to analyse the following issues:(1) Interrelations between energy supply, demand and prices in world markets, forexample, how OPEC's oil production affects world supply, demand and pricesof oil;(2) To what extent each energy could be substituted for others in response tochanges in prices and supply-demand conditions;(3) How and to what extent world oil markets would be affected by the adoptionof alternative non-oil energy sources such as coal and nuclear power.
(b) Multisectoral Econometric Model

The multisectoral econometric model provides

consistent annual forecasts ofmacroeconomic activity and changes in industrial structure of the Japanese economy(see Hattori and Sakurai, 1991). It is a macroeconometric and input-output linkage
model in which the interrelationships between the macroeconomy and industrial

activities are explicitly incorporated. The model describes three major aspects ofJapanese economic activity on both aggregated and disaggregated levels: production,

expenditures and income distribution. The major data sources used in this model are
the new SNA (System of National Accounts) and time-series input-output data tables,
the latter of which were compiled by using a revised RAS method (see Kaneko, 1988).
Industries are disaggregated into eight major sectors (primary, materials, machinery,other manufacturing, construction, public utilities, services, and government) in the
SNA, but in the input-output accounts a more detailed breakdown of industries (54sectors) is available. In addition, institutional sectors are divided into three agents(households,

enterprises

andgeneralgovernment),

therebyprovidingsavings-

investment balances and financial positions of each of these agents.

The model consists of eight major blocks: final demand, input-output, value-added
formation,

sectoralprices,employment

andwages,

potential

output,incomedistribution, and institutional sectors (see Figure 2). The interdependencies among theblocks and variables can be outlined as follows.

The first step begins by assuming that each of the final demand components isdetermined on the basis of the given relative prices, income and other variables. These

final demand items, including exports and imports, are then entered into the inputoutput block to determine sectoral outputs for the 54 input-output sectors/These
sectoral outputs are, after aggregation into the eight SNA sectors, inputted into thevalue-added formation block to determine sectoral value-added, GDP deflators and thetotal intermediate inputs for the eight SNA sectors. GNP is obtained by adding up

sectoral GDP, import duties, imputed bank service charges/iand net transfers of factor
incomes from abroad. GDP by sector affects both the employment and wages as wellas income distribution blocks. The prices and employment and wages blocks are alsostrongly interdependent: while sectoral output prices are determined mainly by the cost
mark-up principle and partly by supply-demand gaps/sectoral wages are formulatedby the Philips curve hypothesis. The supply-demand gap is defined as the difference

The Economic Impact of a Nuclear Power Moratorium

5

Input - Output

Sectoral output requirements (54 sectors)
Final demands by item and commodity
Potential Output

Supply/demand gaps
Sectoral production

Data Conversion

function
Working hours

Capital utilisation rates

Employment &Wages

Value-Added
Formation

Outlay(Final Demand)

OutputIntermediate input
Value added

Consumption
Investment
Exports
Imports
Government
expenditures

byUnemployment rate
Sectoral
employed persons,
employees,
and wages

eight activities

Sectoral prices

Income Distribution

Output prices
by commodity & activity
Intermediate input prices
Value-added deflators
Final demand deflators
Wholesale andPersonal income
Operating surplus
Non-wage income
Transfers

consumer prices

Institutional Sectors
Balance ofsaving and investment
by institutional sector
Financial surplus
or deficit by sector

Figure 2: Basic Structure of Multisectoral Model

between actual and potential output. The potential output by industry is calculated byusing a production function for industry assuming full utilization of labour and capital
inputs. Wholesale and consumer prices as well as aggregate final demand deflators arethen consistently determined as weighted averages of prices of sectoral output. Labourdemand by sector is determined as a function of the output level and real wages. Basedon the outputs, prices, incomes and other variables thus determined, the next iterative
step starts again in the final demand block. A multisectoral temporary equilibrium canbe achieved when all the endogenous variables have converged.

6

Journal of Applied Input-Output Analysis, Vol. 3, 1996(c) Inter-energy Competition Model

This domestic energy model aims to analyse and forecast energy supply-demand forvarious energy sources in Japan (see Kumakura, Fujii, Nagata and Matsukawa, 1989).
In particular, it determines energy demand by sector and by kind, focusing on amechanism of inter-energy substitutions for various final consumers.

The model consists of two major blocks: the energy conversion block and the enduse energy consumption block. Namely, the domestic (supply) prices of energy are
determined in the energy conversion block for each product of three energy conversion
sectors, i.e., electricity, oil products and city gas. Although import energy prices playa dominant role in the determination of domestic energy prices in Japan, the modeltakes into account other effects such as cost structures of the conversion sectors, taxes

and other institutional factors. Meanwhile, final consumption of energy is determinedin the second block by sector (agriculture, mining, nine manufacturing sectors,
construction, services, households, transportation and non-energy category) and by

fuel type (coal, coke, oil, natural gas, electricity, etc.). The model determines energy
demand in two steps. First, total energy demand by sector or by type of use isdetermined by sectoral output or income, energy prices, and changes in end-use
technology. Second, demand for each type of energy in each sector or use isdetermined by share functions explained by relative energy prices. Finally, through theinteractions between these two blocks, equilibrium levels of energy prices, final energy
consumption, energy conversion volume as well as primary energy supply are
consistently determined.

In addition to these two blocks, this model has a module for calculating CO2
emissions in the energy conversion process and final consumption sectors, so as tocalculate the level of CO2 emissions depending upon different economic growthscenarios.

3. Measurement of the Effects of a Nuclear Power Moratorium
Using the above econometric system, we carried out simulation experiments to
examine how and to what extent the suspension of nuclear power generation affects
the energy prices and economic activities in the world and Japanese economies. Thissection presents major results of the simulation experiments4 .
3.1. Simulation Scenarios

The following two scenarios were prepared for simulation experiments of nuclear
power suspension:

4 Published quantitative analyses of a nuclear power moratorium are few. In a more general scope,
Dale W. Jorgenson Associates (1982) attempt to examine the economic effects of changes in energy
supply conditions, including a nuclear power moratorium by the US government.

The Economic Impact of a Nuclear Power Moratorium

7(1) Immediate suspension case: Assuming that half of the nuclear power plants
currently operating in the G-7 countries (Japan, the US, Canada, France,
Germany, Italy and the UK) is halted in 1990 and another half is completely
abolished in 1991.

(2) Phased suspension case: Assuming that nuclear power generation in the G-7
countries is steadily reduced from 1990 and by the year 2000 is totallyabolished.

The economic impacts of a nuclear power moratorium can be outlined in the model
as follows. First, assume that a reduction in nuclear power generation is compensatedfor by increased thermal power generation, thus boosting fossil fuel demand in theworld economy. The prices of fossil fuels would therefore rise (in the world energy
model), pushing up their import prices in Japan as well. Because of the substitution ofthermal power generation for nuclear power, the volume of imported fossil fuels to
Japan would inevitably increase. The increase in both import prices and volumes offossil fuels would invoke a stagflationary impact on the Japanese economy (in themultisectoral model). The rise in fossil fuel prices would also influence the volume andcomposition of energy demand in Japan through changes in relative prices ofsecondary energy (in the inter-energy competition model).

3.2. Impacts on World Energy Supply and Demand
Figure 3 outlines a mechanism of the impacts of a nuclear power suspension onworld-wide energy supply and demand. In the short term, the electric power sector
would respond to the nuclear power halt by raising capacity utilization of existing
thermal power plants. In the long term, however, it will try to manage by building up

new thermal power plants, the pace of which would be limited only by physicalrestrictions. For fuel consumed by newly constructed thermal power plants, we
assume the ratio of oil to natural gas would be 2:1. We also impose the global

warming restriction by assuming that only oil and gas would be consumed as

substitutes for nuclear power, in spite of the fact that currently 41 percent of thepower generation volume in the G-7 countries is produced by coal, 8 percent by oil
and 10 percent by natural gas.
In general, the increased fossil fuel demand in the electric power sector of the G-7

countries would increase the world-wide demand for fossil fuels, thereby raising theprices of both fossil fuels and electricity, which in turn would lower the growth in theworld economy. While the increase in energy prices, and the resultant fall in economic
activities, decreases demand for energy, it also affects the supply-side in energy
markets by increasing the supply of economically excavatable energy volumes.

Accordingly, through the adjustment process of supply and demand, the model
determines equilibrium levels of fossil fuel prices and electric power supply anddemand at an international level.

8

Journal of Applied Input-Output Analysis, Vol. 3, 1996

Decrease in nuclear
power generation

Restrictions on thermal
power plant expansion

Increase in thermal
power generation(Decrease)

Decrease in electricity
demandIncrease in fossil
fuel demand in theelectric power sector

Increase in world
fossil fuel demand(Decrease)(Decrease)

Decrease in grossdomestic production

Q

Rise in fossil
fuel prices

Rise in electricity(Decline)

rates

Increase in world
fossil fuel supply

Figure 3: Impact of Suspension of Nuclear Power Generation on World Energy

Supply and Demand

Arabian Light($/barrel)
80

70 -

Phased suspension case

58 0

\

60

Immediate suspension case
50

\

30

37.5

\v

40

-/—\-

42 .3

—-"

Base case

20

10

0 -1
1980

1

1

1

L_

1985

'

1
1990

1

1

l_

•

•

i

i

1995

i

i

i

2000

i

i

i

i

2005

(year)

Figure 4: Impact on Oil Prices

The Economic Impact of a Nuclear Power Moratorium

9

Table 1: Impact on World Energy Supply and Demand
1990

1991

1992

2005

Electricity generated in G-7 countries (billion kWh)

5,210

5,313

5,409

6,792

Of which nuclear power generated (billion kWh)

1,354

1,388

1,422

1,951

Crude oil price ($/barrel)

18.5

19.5

20.5

42.3

Coal price ($/ton)

4311

45.5

47.7

85.4
6,157

Base case

Case of suspension of nuclear power generation

Electricity generated in G-7 countries (billion kWh)

4,930

4,826

4,887

Of which nuclear power generated (billion kWh)

635

0

0

0

Crude oil price (Sftarrel)

31.3

37.5

29.1

58.0

Coal price ($/ton)

51.7

61.8

50.6

94.7

Note: Figures for 1990-1992 are in the case of immediate suspension; for 2005 are in the case of phased suspension.

Figure 4 represents trends in world oil prices up to 2005, the terminal year of thepresent forecast period for both simulation cases. While the two cases have similar
impacts in the long term, the immediate suspension case reveals a more drastic up anddown in oil prices in the short run, provoking large fluctuations in economic activities
and energy supply and demand in the world economy. In what follows, we examine theshort-run impacts of the nuclear power suspension by using the immediate suspension

scenario and the long-run impacts by referring to the phased suspension case.
As shown in Table 1, in the immediate suspension case, oil prices would drasticallygo up from $16.7/barrel as of 1989 to $31.3/barrel in 1990 and $37.5/barrel in 1991.
Thereafter, they would fall to $29. barrel in 1992 due to both a decrease in demandfor oil and an increase in the oil supply. However, this stabilized price of oil is still$7/barrel higher than that of the base case.
It is noted that a radical reduction of nuclear power generation would not becompletely compensated for by an increase in thermal power generation and therefore
would lead to a serious bottle-neck in the electricity supply, at least in the short run.
According to the simulation results, total electric power generation would fall below

the level of the previous year; about two-thirds of the reduction of nuclear power
generation in both 1990 and 1991 (for 1991, it amounts to 1.4 trillion kWh, equivalent
to 340 million tons of oil) would be compensated for by the increase in thermal power
but the remaining one-third would not. As a result, the total amount of electric power
generation in the G-7 area would decrease by 5.4 percent in 1990 and by 9.2 percent

in 1991 when compared with figures in the base case. The negative effect would be thelargest in 1992, falling 9.7 percent below the base case as demand for electricity isgreatly restrained by the drastic rise in electricity prices. During this period, the GDP
in the G-7 area would fall a maximum of 1.2 percent in 1991, and thereafter would

remain 1 percent below the base case figure. Meanwhile, world demand for oil would
rise by 7.3 percent in both 1991 and 1992 compared with the base case, but decrease
thereafter due to higher oil prices.

Looking at the long-run effect, oil prices would gradually increase until 2005: theywould go up to $29.4/barrel in 1995, $7 higher than the base case, and to $58.0/barrel

10

Journal of Applied Input-Output Analysis, Vol. 3, 1996

Inter-Energy Competition Model
World Energy Model
Suspension of nuclear
power generation

Rise in primary
j energy| (international)

Rise in primary energy

j prices(domestic) prices

Decrease in primary

Increase in thermalenergy supply

power generation

Rise in electricity
pricesRise in secondary
energy prices

Decrease in energyjconsumption by type of!
I Decrease indemandI production by
j sectorii

Decrease in energyj,demand by sector

Multisectoral Model

Figure 5: Effect of Suspension of Nuclear Power Generation on Inter-Energy
Competitionin 2005, $16 higher than the base case. The growth rate of total electric power
generation in the G-7 area would fall to 1.2 percent per annum, lower than the basecase growth rate of 1.8 percent, so that the volume of electric generation would be 6.2
trillion kWh, 9 percent below the base case figure in 2005. Meanwhile, oilconsumption in the world market economy would increase to 2.95 billion tons of oil, 7
percent higher than in the base case. Furthermore, the GDP in the G-7 area would be 1
percent ($120 billion) below the base case figure.
3.3. Impacts on Japan(a) Impacts on Energy Supply and Demand

The impacts of the nuclear power suspension on energy supply and demand in Japan
were simulated by the inter-energy competition model. As shown in Figure 5, theincrease in international prices of primary energy would raise prices of both domestic
primary and secondary energy. Other things being equal, the rise in secondary energy
prices would reduce sectoral production and bring about a decrease in sectoral energy
demand, which in turn bears on the price formation of secondary energy.
For the primary energy supply, the rate of decrease from the base case is 3.7
percent in 2000 and 4.3 percent in 2005. Though larger in the immediate suspension

The Economic Impact of a Nuclear Power Moratorium

11(million kl oil equivalent)
700 I

662

650
613

633

600

590
550

500

463'
450

400

i

1988

i

1990

i

i

1995

2000

i

i

2005

(year)

Base case

Immediatesuspension case

Phasedsuspension case

Figure 6: Impact on Primary Energy Supply

case in the short run, both suspension cases have similar degrees of impact after theyear 2000 (Figure 6). By type of primary energy, the rates of increase in the LNG and
crude oil supply from their base case levels will be 27 percent and 17 percent,respectively, as nuclear power is totally replaced by these alternative energy sourcesby 2005.

On the other hand, the rate of difference of secondary energy prices in 2005
between the two simulation cases and the base case is 15.5 percent for oil products,
11.4 percent for coke, 14.5 percent for city gas and 25.9 percent for electricity. This

relatively large increase in electricity prices can be explained by (1) higher
depreciation costs caused by the shutdown of nuclear power plants, (2) additional
construction costs of new thermal power plants and (3) increased consumption offossil fuels at higher costs.
Reflecting the relatively high increase in electricity prices and lower economic

activity, electricity demand (including auto-generation demand) would decrease by 6.6

percent from the base case figure in 2005, whereas total energy consumption would

decrease by 4.2 percent (Figure 7). Among different uses of electricity, the rate ofdecrease in electricity demand is the highest in the industrial sector and lower in thecommercial and transportation sectors, where substitution possibilities for otherenergy sources are technologically limited (Figure 8).
These drastic changes in electricity demand can be traced by examining the degreeof income and price effects on electricity demand. The income effects on electricity
demand through the decrease in production and income (measured by GDP, etc.) arerather small, explaining a decrease of 0.5 to 1.0 percent of electricity demand in 2005

(in terms of rates of difference from the base case, shown in Figure 8). On the

12Journal of Applied Input-Output Analysis, Vol. 3, 1996

(year 2005)

I

Coal

Coke

l

Oil

products

City gas

Electricity

Total

Figure 7: Impact on Final Energy Consumption (Rates of difference from base case)(year 2005)
-0.5
-2.1

-4.3

• Purchased Power-6.6-Auto-generation
-10.7
III

Industrial

Commercial

Residential

liTransportation

Total

Figure 8: Impact on Electricity Demand by Sector (Rates of difference from base case)

The Economic Impact of a Nuclear Power Moratorium

13

other hand, the price effects on electricity demand are much larger, accounting for adecrease of about 10 percent for the industrial sector, 1 percent for the commercial
sector and 3 percent for the residential sector. This large impact of price effects mainly
comes from the sharp increase in electricity prices5.
Finally, it is interesting to see the impact on the environment, namely, changes in thelevel of CO2 emissions between simulation cases and the base case. The CO2
emissions would reach 409 million tons in 2005 for the two nuclear power suspension
cases, about 14 percent higher than that of the base case and 50 percent higher than
the 1990 emission level.

The major source of this increase comes from the electric power sector, whose CO2
emission level is about 46 percent higher than the base case level and accounts for 40
percent of total CO2 emissions in 2005. The underlying reason for this strong increase
in CO2 emissions can be explained by the higher use of alternative primary energy
sources (notably, crude oil and LNG) to compensate for decreasing use of nuclear
power energy, even though total energy demand declines relative to that in the basecase. Accordingly, the emissions of CO2 would drastically increase in the electricutility sector because massive substitutions between primary energy sources would
occur within this sector, although CO2 emissions in the commercial and residential

sectors would slightly decrease along with their declining energy demand6.
(b) Impacts on the Economy

Lastly, the impact of a nuclear power suspension on Japanese economic activity canbe shown by the simulation results from the multisectoral model. Figure 9 outlines
how this impact affects economic activity in Japan with a stagflationary process.

The simulation results are summarised as follows (Table 2). For the immediatesuspension case, the sharp increase in imported oil prices and the depreciation of theyen would raise wholesale and consumer prices by 3.1 percent and ,1.1 percent,respbctively, in the first year (1990). The inflationary process is aggravated in the next

5 The energy demand functions in our energy model were estimated using share functions by sector,
and by type of demand. Although different specifications were used for each function, the level of
estimated income and price elasticities of electricity roughly ranges from 0.5 (transportation sector) to
0.9 (residential sector) for income elasticities, and from 0.0 (transportation sector) to -0.5 (industrial
sector) for price elasticities. Typically, the price elasticities are high in energy-intensive industries andthose using alternative energy sources. Since the rate of decrease in real GDP is about 1 percent in2005 (see Table 2) and the increase in relative prices of electricity is on average about 20 percent, theresulting impact is much larger for the price effects.

6 Primary energy consists of crude oil, coal, natural gas, nuclear, and so on, while final or secondary
energy is the final form of energy which becomes directly available for final users through the processof primary energy conversions. Electricity is a representative final energy source. The simulation
results exhibit that although final energy demand would decrease in every sector due to slower growthin economic activities and the rapid increase in energy prices (see Figure 7), demand for crude oil and

LNG would sharply increase in order to substitute for nuclear energy. This primary energy substitution
would cause a net increase in CO2 emissions because carbon intensities are high for crude oil and LNG,
but nil for nuclear energy.

14

Journal of Applied Input-Output Analysis, Vol. 3, 1996

Table 2: Impact on the Japanese Economy
Case of phased suspension

Case of immediate suspension
1990

1991

1992

1995

2005

Real GNP

-0.9

-1.5

-1.7

-0.5

-1.0

Private consumption

-0.5

-1.2

-1.4

-0.8

-1.9

Private housing

-1.1

-2.4

-2.7

-1.4

-2.4

Private equipment

-0.5

-1.2

-1.7

-0.5

-1.2

Exports

-0.2

-2.0

-4.1

1.6

3.0

Imports

0.9

-2.1

-4.3

-0.3

-1.3

Current accounts

-523

-678

-366

-347

-839

Wholesale prices

3.1

6.4

6.0

3.2

7.0

Consumer prices

1.1

2.8

3.4

2.0

4.6

Real GDP .

-1.0

-1.6

-1.8

-0.6

-1.2

Year

Materials

-2.4

-2.4

-2.6

-1.3

-1.7

Machinery

-0.7

-1.7

-2.5

0.0

-0.3

Services

-0.8

-1.3

-1.5

-0.6

-1.3

Real energy imports

0.91

1.36

1.36

1.67

3.11

Note: Figures denote rate differences from the base case, excluding current accounts (0.1 billion dollars) and real energy
imports (trillion yen).

Rise in crude-oil

Rise in importprices(in dollars)

prices(in yen)Price hikes

Sluggishness of

Decline indomestic demand

Production

Wages

Aggravation of

Sluggishness

Employmentof the world
economy/inflation(Increase)(Decrease)
Exports

Increase

Depreciation

Deterioration ofof the yen

the current accountin fossil

fucJ imports

Imports(Increase)(fuel substitution)

Figure 9: Macroeconomic Impact of Nuclear Power Suspension

The Economic Impact of a Nuclear Power Moratorium

15

couple of years, and imports of fossil fuels in nominal terms would amount to 3.9
trillion yen in 1990 and 5.7 trillion yen in 1991.

Real GNP would decline appreciably because of increased import prices, large
outflows of domestic income abroad, and the decline in exports due to a world-wide

recession: relative to the base case, domestic GNP would decrease by 0.9 percent in1990 and 1.7 percent in 1992. In the fifth year (1994), the loss of GNP becomes thelargest, about 2.2 percent below the base case GNP (9.4 trillion yen). GNP growth
rates would be lower than those of the base case by 0.9 percentage point in 1990, 0.6
percentage point in 1991 and 0.3 percentage point in 1992, so that the GNP growthrate would fall by 0.5 percentage point annually on average during the first five years.
The major factors in this decline are a drop in housing and business investments.

During this process, the current account surplus would also fall rapidly, due to boththe increase in energy imports and the decline in exports: in 1990 the current surplus
would be 52 billion dollars less than the base case and would become negative by thesixth year of the simulation. Looking at industrial production, the impact is unevenacross sectors. The production of the materials manufacturing sector reveals thebiggest decline, dropping by 2.4 percent in 1990 and 2.6 percent in 1992. The
influence on the machinery sector's production is much lower in 1990 (0.7 percent),
but the decline becomes worse thereafter due to stagnant exports in later years.
Next, the long-term impacts of a nuclear suspension are summarised as follows.
Compared with the short-term impacts, export performance would play a moredecisive role in the long-term changes of the economy, mitigating the negative impacts
on the economy from a nuclear power suspension. Specifically, although exports
would be 4.1 percent less than in the base case in 1992, they would eventually increase

to 3.0 percent more than in the base case in 2005, mainly because of the continuing
depreciation of the yen induced by energy price increases. Domestic demand, however,would decline by 1.9 percent (12 trillion yen) in 2005 from the base case figure, andthe major contributors to this decline are stagnant growth in private consumption andhousing investment, indicating relatively large welfare losses in the household sector.
Meanwhile, imports would remarkably increase in nominal terms, whereas they would

decrease in'real terms by 1.3 percent due to falling domestic demand. As a result, theJapanese real GNP would be 1.0 percent lower in 2005 (6.3 trillion yen) than in thebase case, which is 0.05 percentage point less than the base case GNP growth rateduring 1990 and 2005. Wholesale prices would be 7.0 percent and consumer prices
4.6 percent higher in 2005, and an inflationary trend would continue during the whole
period. Between 1990 and 2005, the average rate of increase in consumer prices would

be 2.7 percent per annum, 0.3 percentage point higher than in the base case. Moreover,the current account surplus would fall rapidly, owing to increasing payments forenergy imports. For production activity, the materials manufacturing industry would
show a sharp decline of 1.7 percent in 2005, while the machinery sector would suffer
slightly, only 0.3 percent, because higher exports would partly compensate for the
decline in domestic demand for this sector.

16

Journal of Applied Input-Output Analysis, Vol. 3, 1996

4. Conclusion

Using the CRIEPI Medium-Term Economic Forecasting System, this paper has tried
to evaluate the possible impacts of a nuclear power moratorium on the world andJapanese economies. The simulation results show that two scenarios (immediatesuspension and phased suspension) have similar effects in the long term, but
significantly different effects in the short term. When examining the short-term impact,
world oil prices rise to $37.5/barrel in the second year of the simulation period (1991),
which is $18 higher than the base case level. This 'oil shock1 impact raises thewholesale price level in Japan by 6.4 percent and reduces Japanese real GDP by 1.6
percent (5 trillion yen), resulting in huge economic costs in the second year of a
nuclear moratorium. Meanwhile, long-term impacts of a nuclear power halt are also
very costly, and GDP would decline by 1.0 percent for the G-7 countries as a wholeand by 1.2 percent for Japan in 2005.

These results indicate that any nuclear suspension policy, whether drastic or
gradual, would have a significant stagflationary impact on the economy. Although thecosts to maintain or build up nuclear power stations are high, this implies that theopportunity costs of doing without nuclear power are also huge. Therefore, nuclear
suspension policies, if implemented at all, should be accompanied by other policies tomitigate negative impacts on the economy and world energy markets. Though not
explicitly stated in our model, another important implication is that nuclear

moratorium policies once planned in several industrial countries would have an
unfavourable impact on most oil-importing developing countries by deteriorating theirterms of trade and by shrinking the market for their exports. These potential global
economic impacts should be conscientiously taken into account whenever a country
consider a nuclear moratorium.

Finally, a nuclear suspension policy would lower the demand for energy in Japan

mainly through price effects, and at the same time would drastically increase CO2
emissions because of the fuel shift to oil and gas from nuclear as an electric powersource.

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