Abstract/Summary

Access to a safe and inexpensive source of energy is one of society’s essential needs that helps to support economic growth and development. Yet, there are a number of current challenges in the developed world that pose a threat to its energy security such as the high import dependency in Europe from politically unstable regions and the long term environmental risks from greenhouse gas (GHG) emissions. Based on scientific estimates from the United Kingdom Atomic Energy Authority’s (UKAEA) fusion research and development site, fusion power could generate high volumes of decarbonised electricity that could begin to replace electricity sources from oil, gas and coal during the middle and latter half of this century. However, fusion power currently exists in a non-commercialised state and so the use of robust techno-economic and econometric models are required in order to estimate the role that fusion power could play within the context of a future energy mix. The single equation, autoregressive distributed lag (ARDL) model of cointegration analysis is used to estimate the nuclear fission-GDP-CO2 nexus. Nuclear fission is used as the guide for fusion power due to the similarities in energy-releasing nuclear reactions and complex power plant technology. A comparative analysis between nuclear fission and environmental taxes is performed within a multivariate framework. The UK Government’s 2050 Energy Calculator is subsequently recalibrated in order to generate projections of the future energy mix with fusion power included. Multiequation econometric analyses are performed using Johansen’s maximum likelihood (ML) estimator of cointegration analysis and the vector error correction model (VECM), with the latter used to estimate projections of economic variables to 2050. The 2050 estimates are fed into a computable general equilibrium (CGE) model and shocks from the different energy mix pathways are applied to the CGE model, with policy response adjustments and wider economic implications estimated for future policy consideration. It was found that environmental taxes have a stronger long run relationship with CO2 emissions abatement than electricity generated from nuclear fission, with the implication that commercialised fusion power would need a consistent and safe level of electricity generation in order for it to have a strong long run correspondence to CO2 emissions abatement. The next empirical chapter finds that a configuration of the UK’s future energy mix that includes fusion power is able to meet the 80% emissions reduction target in 2050 based on 1990 levels, while providing a cheaper cost of the entire energy system than the expert pathways that were developed by multinational organisations. Finally, it was found that the shocks on aggregate capital investment in the CGE model from the Fusion Pathway and the respective policy response adjustments produce a more stable economic environment in 2050 than the shocks and policy response adjustments from a competing expert pathway, with the latter producing distortionary increases in overall prices, indirect taxes and its environmental tax constituent.