The New Nuclear Power Debate

(Gloconomy) - Nowadays, the discussion about the use of nuclear power seems more relevant than ever before. Especially large emerging economies, such as China and India, are likely to face an enormous demand in energy over the coming decades. Additionally, nations like Germany are seeking ways to reduce their emissions. Nuclear power may be a relatively fast, affordable and cheap solution. The resistance against the renewed nuclear power plans is fierce though.

Current numbers

A recent report by the World Nuclear Association showed some staggering figures. In terms of the largest number of existing nuclear power plants, the United States (104), France (58) and Italy (55) are absolute leaders. In terms of nuclear power dependence, countries like France (75 percent), Belgium (52 percent) and Ukraine (49 percent) are strongly relying on this particular type of energy production.

The numbers for the next 20 years show a completely different picture though. In the year 2030, Russia probably has built 44 new nuclear power plants. India aims at 60 new facilities, whereas China wants to have 153 new nuclear power plants within its territory. On the contrary, the United States is currently only developing one new facility. The numbers show the growing importance of nuclear power in the large emerging economies.

Contra

Opponents of nuclear power use three major arguments. First of all, the risk of accidents and terrorist attacks. Although safety has improved significantly during the past decades, there is always the risk of human failure that can sparkle new, potentially catastrophic meltdowns. Furthermore, plants can and will always be potential terrorist targets, thus implying the need for tight and reliably security measures.

Secondly, criticasters point at the nuclear waste problem. In countries such as Germany, the greatest fear of civilians is leakage of nuclear waste, for instance into their water supply.

Finally, nuclear power is often regarded as an obstacle towards a greener and more sustainable energy system. Opponents argue that expanding the usage of this type of energy production will have a delaying effect on the necessary green revolution.

Pro

Supporters of nuclear power have four strong arguments. First of all, nuclear power is, provided an existing older plant is used, extremely cheap to produce. Although new plants are extremely expensive, older plants with a positive return on investment are relatively cheap to operate. This implies that the produced energy is pure profit for energy firms operating them and can result in lower energy bills for consumers.

Secondly, the production process of this type of energy results in a relatively low amount of carbon emission, thus making it a clean instrument to produce energy compared to e.g. coal plants.

Thirdly, supporters indicate that the extra amounts of nuclear waste can easily be stored at current locations. The waste is already there, and building an extra shaft will not result in more danger or risk.

Finally, supporters also argue that nuclear power can enhance the transition towards a greener, more sustainable form of energy production. Because of the large profit margins that older nuclear plants can realize, energy corporations can invest heavily in new sustainable forms of power, thus greatly enhancing the green revolution.

Recommendations

Popular or not, nuclear power is a major contributor to the present worldwide energy production process, and this situation is unlikely to change fundamentally in the next decades. However, the supply of uranium is limited. And so is the amount of carbon emission we can release into our environment. Consequently, the adaptation of new forms of energy production in the near future is inevitable.

Several measures can enhance the transition of the current situation into a new, green energy production world.

1. Strict International Safety Standards
There should be improved international safety standards in order to avoid future accidents and terrorist attacks. Nuclear radiation knows no boundaries or borders. Germany can have the best nuclear regulations in the world. But when France neglects its safety standards and an accident occurs near the German border, Germany will suffer regardless of its own precautions.

A similar story applies to terrorist threats. India can heavily fortify its nuclear installations, but when plants in neighboring Pakistan are vulnerable, India will suffer the burden as well when things turn ugly. Therefore, tight international standards should be implemented, carefully monitored by for example the United Nations or the International Energy Agency.

2. Only older plants
Only older plants should remain open and plans for new ones should be carefully revised. New plants cost an estimated 5.5 billion euro. Additional costs for nuclear waste disposal and dismantling not included. Older plants, built i.e. 20 years ago, have past the return on investment break-even point. Therefore, almost all future earnings can regarded as profit, making them extremely attractive to remain open for a little while longer.

3. Reinvest Profits
The enormous profits made by keeping the older plants alive should be invested in new research for cleaner and more sustainable forms of power production. Like for example in the DESERTEC initiative. This will accelerate the speed of the green revolution, and take away some of the protests.

4. International Energy Exchange
Finally, there should be an open dialogue with large emerging economies such as China, India and Brazil. It is not reasonable to simply ask these giants to cancel all future nuclear power plant initiatives, as this will result in immense shortages in their domestic energy markets, both in the short as well as the long term.

International cooperation might not be able to stop all plant construction, but can result in for instance the export of power from countries with an energy surplus to these nations. Korea could sell its surplus of nuclear power to China, whereas Latin-American countries could sell their surplus in solar energy to Brazil. This promotes the use of green technology. Additionally, it provides emerging economies extra cash to invest in renewable resources, and prevents them from joint ventures with suspicious nuclear parties with cheap but potentially dangerous nuclear ambitions.

Nuclear power seems inevitable. However, by using it wisely, sparingly and together, it is possible to use it as a bridge for a more sustainable future.


(c) GLOCONOMY 2010

Europe Divided over Economic Situation

The perceived economic and employment situation in Europe varies enormously. According to the latest Eurobarometer, 77 % of the Europeans consider the economic circumstances in their own country as  being bad. Current employment conditions are regarded as negative by 83 % of the European population. The discrepancies between the various nations are immense though. 

In Spain, Portugal, Latvia and Ireland, 95 % of the population thinks the economic situation in their country is bad. For Hungary this number rises to 96 %, whereas Greece tops the list with a staggering 98% of its citizens that rates the current state of their economy as being negative.

Will the Euro prevail?

Global financial markets continue to tumble because of the weak economic situation in Greece. Many analysts fear that the financial unrest can easily affect other, mainly Southern European countries, that are supposed to have similar structural economic problems.

Together, these often junk rated countries are called the PIGS- nations; Portugal, Ireland, Greece and Spain. Meanwhile, economists, politicians and civilians in the predominantly conservative Northern part of Europe are discussing a new financial system for the continent. Some nations pursue the return of their own currency. Others strive to introduce a new currency exclusively for the formerly strong monetary countries, such as Germany, The Netherlands and Finland.

Reasons not to abandon the euro

Although these initiatives may sound rational at the moment, and may have the potential to take away some of the turmoil at the financial markets on the short term, on the long term the disadvantages will outweigh the temporarily advantages.

Transformation costs

First of all, because of the initial transformation costs. It will take billions of euros to reset all the numbers and figures into a new currency. Complex financial IT systems, websites and intranet, accounting mechanisms, invoices and all relations with domestic as well as international stakeholders will have to be changed. This operation will take an immense amount of time, energy and money for the involved parties. It will result in a significant and long lasting loss of efficiency.

Intra trade

Secondly, a split of the euro will considerably decrease in intra-European export and trade. Since the introduction of the euro, Northern European EU countries have witnessed a significant increase of their export to Southern European member states as a result of the different purchasing-parities of these two zones. Additionally, the absence of internal European trade- and currency barriers has led to an extensive increase of economic activity. Giving up the euro would strongly reduce this internal competitive advantage and force some parties to export to or from e.g. China. This would eventually result in a decrease of overall European prosperity.

Image

Finally, giving up the euro would cause severe image damage across the world. Not only would a euro breakup lead to a financial hurricane, the other part of the globe will lose a lot of confidence in the second currency of the world. Investors would flee to other safe-havens like for example the U.S. dollar or to China. Foreign Direct Investment in Europe is likely to plummet, and the costs of image-loss are too big to calculate.

Switzerland case

There is also the possibility that only one or two countries will exit the euro-union and strive to become ‘the new Switzerland’. However, it is of the utmost importance to realize that Switzerland is not as focused on export as e.g. The Netherlands or Germany. Switzerland is also not so dependent on its mainports as for example The Netherlands are on Amsterdam Airport and the harbor of Rotterdam, global mainports which are of vital importance to the country’s economy.

In addition, there can only be one or two Switzerland’s. If more nations become neutral, the specific Swiss advantages of neutrality will be eroded. Finally, nobody knows what the current state of the Swiss economy with the euro would have been. Maybe Switzerland would have been ever better of than it already is.

Future

Concluding, it can be stated that despite all the current financial turbulence, the euro is of vital importance to the European mainland. Abandoning the euro, even partially, will result in significant losses and these will, by far, outweigh the eventual benefits. Europe needs to enforce a tighter control on its euro -member states in order to prevent new Greek tragedies and ensure future prosperity.

(c) GLOCONOMY 2010

V or W, that's the question

Nowadays, economic analysts, businessmen and politicians are divided into two camps when it comes to the current state of the world economy. Continuous increase of economic activity or a new global decline? A V- or W-shaped road to recovery, that’s the question.

V-shape

On the one hand, a significant amount of influential people from the scene are confident that the worst part of the recession is over. They state that the global economy is now slowly climbing up from the all time low in march 2009, and will recover over the next couple of years. These specialists thus believe that the current crisis has a V-shape, and that the world is back on the way up.

Worldwide recovery
There are several indications why a V shaped recovery could take place as we speak. First of all, there are recovery signs worldwide. Consumers spending during the holiday season have increased worldwide. Housing prices have stabilized. Unemployment rates seem to have stabilized.

Growth China & India
Secondly, the continuous growth of China and India keep stimulating worldwide demand. These two emerging world powers still have rapidly developing domestic markets, continuing to drive imports and exports for firms worldwide. China has recently even surpassed Germany as the largest exporting country in the world.

Demand for resources
Finally, the demand for resources is rapidly increasing. As a result of more consumer spending in especially China and India, demand for oil, metals and other resources continues to rise and stimulate the world economy.

W-shape

On the other hand, there is a movement that believes that the current positive economic signs are just temporarily. In their opinion, the road to recovery is significantly more bumpy, and the present growth will be followed by another period of economic downsizing before going up again many years from now. The so called W-shape recovery.

Ending government injections
This party predicts that there are strong indicators for a new period decline. First of all, because the government injections are coming to an end. Countries worldwide have stimulated their economies by enormous injections by their governments in e.g. infrastructure and construction. As these projects are coming to an end, economic activity could plummet again.

Fragile states
Secondly, there are several fragile states that are disrupting the financial system. Several nations that are on the verge of bankruptcy as a result of the crisis. Iceland has already gone bankrupt and is struggling under the heavy burden to pay back savings money to the United Kingdom and The Netherlands. Other nations such as The Baltic states and Greece are also close to an economic collapse. But the most striking example is Dubai. Once a goldmine for investors, the ambitious city state has almost vanished from the global economic map, and only survived because of huge injections from its neighbor Abu Dhabi. Financial shocks such as these are likely to keep the economy from recovering.

Disappointing U.S. numbers
Finally, disappointing figures from the United States continue to question the current growth. Although being chased by China, the U.S. is still the economic super power of the world. Recent disappointing numbers about unemployment rates in December 2009, continue to raise questions about the fact whether the economy will not be declining again over the time to come.

Bumpy Ride

It is impossible to predict which scenario will actually take place. The only thing we can take for granted, is take it will be a bumpy ride, and everybody around the globe will be affected by the outcome.

Million Dollar China

While many nations struggle with the current economic crisis and some, like for example Iceland are on the verge of going bankrupt, China has once again underlined its new position as economic superpower. The number of billionaires in the country rose this year from 101 to a staggering 130. Only the United States have more billionaires.

Surprisingly, the list is leaded by two entrepreneurs in green technology. On top of the billionaires list is the owner of Build Your Dream, the successful electronic car manufacturer that is partially funded by super investor Warren Buffet. Wang Chuanfu has now over 5.1 billion U.S. dollars on his bank account. Number two is Zhang Yin, founder of the paper recycling company Nine Dragons.

The major catalyst for the enormous wealth growth is the domestic car industry. Despite the global financial meltdown, domestic demand in China is still rapidly rising. This has resulted in astonishing new financial figures. In the Capital of Beijing, there are now over 143.000 millionaires. That’s a medium sized city full of financial fortune. Peking beats the economic engine of China, Shanghai, which counts over 116.000 millionaires.

It is estimated that in 2013, China will have more millionaires than the current leaders, the United States. On the one hand, the explosive growth in China raises eyebrows with regard to several social and political issues. Will the distribution of China’s new health be distributed relatively evenly among its citizens and not result in enhanced domestic tensions? What is the role of corruption and the central party in this growth, and will the changing balance of power not be abused?

On the other hand however, this new distribution of wealth gives hope. First of all, because its shows that previously closed, relatively undeveloped countries can achieve wealth and prosperity by opening their borders and joining the global community.

Secondly, the fact that the two richest persons in China became wealthy because of their green, innovative firms indicates that emerging economies do not necessarily need to undergo a polluting, old fashioned industrial revolution. Instead, China is giving a clear and green example of how economic growth and green sustainable policy can go hand in hand. In this respect, the US can learn a lot from its inevitable successor.

Why India can't be(at) China

As the global economy stumbles, a new international balance of power becomes visible. While the economic crisis imposes a heavy burden on most of the traditional economic powerhouses, emerging giants take their chance. But not all of them seem to succeed in conquering their new spot on the economic world stage. China appears to be among the winners, while India struggles to keep up.

BRIC
After several prosperous decades for the Asian Tigers Singapore, Hong Kong, Malaysia, Korea and Taiwan, a new generation of rapidly developing economies has conquered the global charts of economic growth. Brazil, Russia, India and China (BRIC) have become major contestants in the battle to outflank the United States as the world economic leaders.

Although Brazil and Russia have been restricted by domestic and international struggles with regard to political and social-economical issues, the two nations with the largest populations in the world, China and India, have become eminent economic powers as a result of sound economical and political policies and their fast growing domestic markets. Even though both countries seem relatively unharmed by the current financial climate, India appears to lose terrain to its Eastern neighbor.

China success

Currently, China profits from its powerful international profile and strong domestic market. Before the crisis commenced, the central leadership from Beijing was considered a disadvantage, as it interfered with daily issues in business and the personal life of the Chinese. Nowadays, although especially social issues remain questionable, China profits from its strong central leadership. A firm government creates stability for domestic as well as international businesses, investors and customers. The new state owned newspaper Global Times, published to strengthen China’s international profile, emphasizes this new trend.

China has recently received a significant amount of international attention because of its continuously growing economy and enhanced international influence. The foreign assets of the government have accumulated enormously over the past decade, and the U.S. financial system has partially become dependent on Chinese policy. Furthermore, the Chinese have extended their international influence by rising acquisitions and trade agreements, especially with Africa, a continent which is often approached with skepticism by the traditional large economies.

Additionally, China can counterbalance the decline in global demand by its rapidly growing domestic market. Over the past years, the country has developed significant economies of scale, which now proves to be helpful as competitive export products can be offered. The growing international importance of the Shanghai Stock Exchange is another confirmation of China’s current economic success.

India Failure
India on the other hand, seems to have profited less from the new global economic up rise, and now pays the bill during the recession. Unlike China, the country has no strong central leadership. Although India distinguishes itself as the largest democracy in the world, its superior system is currently blocking efficient economic response to the crisis. Central authority lacks the power to implement nationwide reforms and initiatives, at the cost of its sustainable advantages. The weak international profile has resulted in far less international attention compared to China, and thus less influence.

Furthermore, compared to China, India made a significant lower amount of international acquisitions and mergers, and has far less financial foreign assets. China’s main focus is on production, whereas India focused on the service sector, especially outsourcing services. As the world economy is shrinking, firms cut back on outsourced projects, whereas basic production remains relatively untouched. Recently, tensions between the two super powers rose, as a Chinese state firm witnessed spectacular rises in the sales of telecom products in India: a clear example of the new situation.

Recommendations India
In order for India to narrow the gap with China, strong action is required. Improvements in the central leadership from New Delhi, in order to be able to initiate nationwide political and economic reforms. Strengthening of India’s international profile, in order to gain influence, respect and stimulate new investments and export. Finally, a switch from offering outsourcing services to creating fundamental innovative services.

With its highly educated and fluently English speaking workforce, India can do far better than just taking orders. Enormous prospects lie ahead in development, research and innovation. India can never be China, but can at least attempt to economically match the red giant.