Letter from France

By Alan Kirman

For the RES Newsletter, January 2012, Online Issue 1

In France, which generates most of its electricity from nuclear sources, the recent accident at Fukushima has provoked strong reactions. In his latest letter, Alan Kirman explains how the French electoral system is likely to turn the future of nuclear energy into a critical political issue.

France is a strange country. This has been a year of economic upheaval, the EU has had many ‘last chance’ meetings, and Sarkozy has done his very best to convey to the world the idea that the leaders in the EU are France and Germany. The rating agencies have threatened to downgrade France’s rating. The EU failed on December 9th to reach an unanimous agreement and Britain stood to one side provoking the ire of all and sundry. The ‘Entente Cordiale’ disappeared, as the resentment in France at the UKs stance boiled over and the governor of the Banque de France announced that if any country should be downgraded it should be the UK and not France. This was reinforced by similar remarks by the French prime minister and the outcry in the British newspapers was predictable with headlines categorising Noyer the governor of the Banque de France as a grade AAA idiot. In any event the putative agreement, does not seem, at the time of writing to have been enough to calm the crisis of the euro. The treaty has to be ratified by the governments or parliaments of the countries in question and it is the improbability that this can be done rapidly that contributed to Fitch’s pessimism. Curiously enough, the U.K. may be a necessary participant in this process given the EU rules.

Some French economists are now starting to join the many who express concern about the survival of the euro. Despite the rather optimistic assertions of Angus Deaton in his Letter from America, as ex-Governor Trichet said, he felt ‘abandoned by economic theory’ and all that he and other policymakers had to go on was ‘wisdom and experience’. This may be the result of bad communication between good economists and the ECB but might also reflect the fact that our current macroeconomic models have little to say about real crisis periods. With little consensus on what are the appropriate policies to adopt by those who are supposed to understand what is going on, market prices continue to reflect a pessimistic outlook.

On top of this, France is heading towards presidential elections next year and there are many serious and gloomy things to discuss. The whole short term future of the French economy may be in jeopardy. However, is this what has been the predominant preoccupation of the French in recent days? Not at all. We have had headlines about how the life of French citizens was going to be ‘bouleversé’ on December 11th and headlines with the equivalent of this is ‘DDay-n’ appeared. What was this imminent domestic Tsunami? Well, it was the first major overhaul of the SNCF timetables in years. 85 per cent of train times were to be modified. This was to rationalise the timetables to make them easier to understand and remember, (the train from Besancon to Lyon will leave at 7 and 37 minutes past the hour for example). It also added a significant number of trains.

But the reaction was remarkable and immediately taken up by the press, radio and television backed up by blogs and petitions on the internet. There was an interview with a man who explained that he had built his life around one train and his existence was being shattered by the SNCF’s arbitrary decision to remove this train. The press explained that all the small towns near Paris needed most trains when people left to go to Paris and similarly in the evening. The new timetable did not achieve this and several mayors were taking action! A new association was set up on the internet for the victims of the change to protest and it proudly announced that it had 600 members, which, given the millions who use the trains daily seemed underwhelming! However, France is a country with a strong tradition of complaining and those who gained from the changes were unlikely to express their opinions. One transport economist was asked on the radio to confirm that this radical change was unnecessary and harmful, and when he started to argue that for the majority of people, it was beneficial, the interviewer counter-attacked by asking why the changes could not have been made progressively!! When he started to explain about the interdependence of trains, connections and so on, he was thanked for his time.

This should indicate the sort of order of priorities in France and therefore it would be of little use to add to the millions of words that have been written about the eurocrisis here and I am in an uncomfortable position to comment on the Franco-British spat. I might just add that Francois Fillon tried to pour oil on troubled waters with Cartesian logic. As he pointed out, his argument that the UK should be downgraded was conditional on some country suffering that fate. Since, in his view, no EU country was in that situation he was not therefore, actually criticising the state of the UK economy! In his view the austerity measures already taken by la France were more than enough to guarantee its future success. In any event, ‘passons’, and let me come to my main theme, France’s nuclear dependence.

Why should this be of current interest? Let me offer a brief explanation. France is heavily dependent on nuclear power, 75 per cent of its electricity is generated by nuclear power plants. The accident at Fukushima has focused attention on this and no presidential candidate could afford not to take a position. The current president is now committed to maintaining the nuclear industry but with new ‘stress tests’ and the closing of some older plants. Across the border Germany has committed itself to denuclearising. The most likely rival in the second round of the presidential elections for Sarkozy, Francois Holland, has a more ambivalent position. He has decided that a national debate should be organised on the future of the nuclear industry but does not feel himself committed to the agreement signed by the socialist party with the ‘Verts’, the ecologists, to reduce the number of nuclear power plants according to a fixed timetable. I will come back to this but this is a key element in the discussion.

As to the problem itself, many people have asked why the economists cannot come up with a clear answer as to the relative costs and benefits of going non-nuclear or of reducing France’s dependence on nuclear power. To the readers of this letter it will immediately be clear that no unambiguous answer is possible, the problem has so many dimensions and even the basics such as the appropriate discount rate to use are the subject of huge dispute. But let me mention a few of the most salient aspects of the debate. What are the costs and the benefits? For the latter, it is usually argued that nuclear power plants are, and have been, non-polluting in terms of greenhouse gas emission and their existence has made compliance with the Kyoto agreement much easier. Furthermore, as oil prices have climbed nuclear power has become a relatively cheap source of energy. Added to this is the fact that France’s trade balance is significantly more favourable in this regard than those of its oil and coal importing neighbours. In addition France has built up a substantial nuclear industry and AREVA the major firm in this area contributes substantially to French exports. The nuclear industry in France employs 410,000 people, and has 450 firms with a total value added of 12 billion euros (approximately 0.7 per cent of GNP) according to one report in 2009. All of this would, of course, be subject to substitution in other areas but some of the obvious substitutes such as the development of alternative renewable energy sources are now threatened by the current austerity measures.

When getting out of the nuclear business is in question, one has also to calculate the costs of dismantling the existing nuclear plants and making them inoperative and secure. Here the cost is extremely difficult to assess, particularly as security standards are being tightened up, ( it has recently been suggested that all nuclear installations in all countries should be inspected by the UN atomic energy authority). The UK estimate for the dismantlement of a plant is 10 times that of the French estimates for example, though this depends heavily on the type of plant in question.

But what about the costs of the nuclear industry? First and foremost in most peoples’ minds is the possibility of a nuclear accident and the assessment of its consequences. This sort of ‘black swan’ event has been, of course, the subject of a considerable literature in economics. There seems to be no obvious solution to the quantitative assessment of such an event which would achieve even a minimal consensus. The consequences in terms of human life and sickness of Chernobyl, for example, are still far from being completely quantified, in terms of numbers, let alone in terms of value or diminished welfare. In addition to the intrinsic measurement difficulties there is also the fact that the nuclear industry, in France in particular, has always been far from transparent in its communication. Again there is the spectre of a terrorist attack. However, one has not to forget the steady loss of life and the increased frequency of respiratory disease due to thermal power plants, but it is part of human nature and the livelihood of the press to emphasise spectacular losses of life rather than their slow accumulation. To the negative aspects of the nuclear industry must be added the problem of radioactive waste, its treatment and storage. This debate will continue in France as in other countries but the nuclear industry is unlikely to disappear and many still pin their hopes on fusion with the installation of the international fusion experiment (ITER) in the South of France.

What about the cost of getting out of the nuclear business? The current official estimate of doing this by 2022 is 750 billion euros, but this is obtained by using, as a basis, the German figure put out by the Kfw of 250 billions for shutting down 17 reactors which includes the creation of new generating capacities and the increased import bill for oil and gas. Since there are 58 reactors in use in France the amount has to be scaled up. However, none of these figure is likely to be even close to the real cost and it is not even clear what precisely that cost should include. A more interesting and important figure is that of how much could be saved by improving energy efficiency in buildings and transport. However, with the crisis the idea of investing in improvements to economise on energy use, by building with better insulation for example, together with the idea of investing in renewable energy sources has disappeared from current plans.

Why is all this important now in France? The nuclear issue has suddenly come to the forefront, partly because of the Fukushima accident but also because of the French presidential elections which will take place at the end of April and the beginning of May 2012. But why is this issue so relevant to the latter?

The party which has emphasised the importance of the nuclear issue in France is the ‘Verts’. They have been a force in the past but their importance has been growing with the importance of the environment in the political debate. They have always had a strong anti-nuclear position but have also been traditionally associated with the left. With a view to being properly represented in parliament after the election of a president, (preferably one from the left) they undertook negotiations with the socialists. The agreement that they reached was on the following points:

  • Pass a law by 2013 on the future transition of energy to clean and renewable sources;
  • Impose a carbon tax;
  • Reduce the share of nuclear generation in electricity production to 50 per cent from 75 per cent by 2025;
  • Shut down the oldest nuclear power plant now with 24 more to follow;
  • No new nuclear power plant project will be initiated;
  • Put in place measures to ensure 600,000 new jobs in renewable energy production.

Whilst this might not seem remarkable, it provoked immediate reactions from the candidates of the two parties. Francois Holland of the socialist party said he did not feel bound by the agreement and Eva Joly of the Verts said that only a complete withdrawal from nuclear power was acceptable.

The ruling UMP party took the opportunity to categorise all of this as ‘irresponsible’, but what is behind these manouevres? Firstly, you have to remember that the Verts are a significant force in France and this is particularly important given the voting system. If no presidential candidate has an absolute majority, only the top 2 go through and everyone in France remembers the election where Jean-Marie Le Pen of the Front National beat Lionel Jospin of the socialist party into second place. The result was an overwhelming victory for Jacques Chirac in the second round but the left was traumatized by this experience. Currently Francois Holland leads the polls with around 28 per cent ahead of Nicolas Sarkozy with 24 per cent. But Marine Le Pen the far right candidate has been credited with as much as 20 per cent in some polls. There is a centre right candidate with some 11 per cent and a far left candidate with 6 per cent. In this fluid situation the current 6 per cent of the Verts are extremely important. The objective of the Socialist candidate is twofold, not to lose the centre voters, who are not strongly anti nuclear, but also to hang on to as many ecological votes as possible. Hence the ambiguity of Holland’s position. Eva Joly, however believes she must be faithful to the historical and philosophical position of her party and therefore must maintain an anti-nuclear position. Her party however, had an interest in assuring themselves of as many seats as possible in parliament if the socialists win, (they have been promised 25-30) hence their willingness to compromise with the socialists. Almost anything can happen and the negotiations over the nuclear issue may have very significant consequences for the outcome.

From issue no. 156, January 2012, pp.3-4 and 11.

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