President-elect Donald Trump has signaled an appetite for change with his new Department of Government Efficiency and various cabinet picks. While many federal programs and regulations need an overhaul, childcare policy is an overlooked area that is ripe for a new approach.

For parents of young children who utilize formal childcare, childcare is one of the most significant child-rearing costs. At the high end, annual infant care costs are quoted at an eye-popping $24,243 in Washington, DC, and $20,913 in Massachusetts. Historically, federal policymakers have tried to solve childcare affordability issues by doubling down and expanding childcare subsidies. Recently they have dug their heels in on this approach.

This fall, Representative Ro Khanna (D‑CA) proposed a bill capping childcare costs at $10 per day for all families earning less than $250,000 annually. Over the summer, Senators Tim Kaine (D‑VA) and Katie Britt (R‑AL) proposed expanding various existing childcare subsidies, including the Child and Dependent Care Tax Credit (CDCTC).

Meanwhile, the Biden administration unsuccessfully proposed fully subsidizing some families’ childcare and capping other families’ childcare costs at 7 percent of income. Biden’s plan would have the government subsidizing childcare demand and supply (although the American Families Plan failed, some of the childcare ideas were rolled into a subsequent Biden executive order).

Proposals like these are enormously costly, raise the market price of care, and favor working families that use childcare over working families that don’t, like families with stay-at-home parents. Government policy should be neutral regarding family work-life decisions rather than favoring the dual-earner model.

The new administration would be smart to take a different approach and refocus on the root cause of high costs and waiting lists. A significant portion of access and affordability issues in the childcare sector are driven by restrictive local regulations, sometimes encouraged by federal policy. A variety of regulations are undoubtedly to blame, but research indicates that educational requirements for staff and staff-to-child ratios are especially important.

A simple comparison of state regulation and cost data supports this idea. For instance, as educational requirements increase for daycare center directors, the average cost of care nearly doubles. The average cost of infant care is $10,018 in states with no or minimal educational requirements, while the average cost is $19,354 for states that require a bachelor’s degree for daycare center directors.

The cost of childcare is also higher in states with restrictive educational requirements for daycare center teachers. The average cost of infant care in states without educational requirements is $9,586, and the average cost grows to $18,285 in states that require an associate’s degree for center teachers.

Just as greater educational requirements for would-be carers limit the supply of childcare staff, restrictive child-to-staff ratios and maximum group sizes limit the supply of “seats” at childcare centers. Data also support a link between these regulations and costs: the average cost of care nearly doubles as the child-to-staff requirement moves from 5 children per staffer to 3 children per staffer.

Regulators claim that these and other childcare regulations increase the quality of care. For instance, when Washington, DC, recently implemented a rule requiring that childcare providers have a college degree, supporters and officials argued that it would benefit DC’s disadvantaged children and that educational requirements would increase staff pay.

But increasing requirements so that some staffers lose their jobs is an ill-considered strategy for “raising” staff pay. More importantly, research indicates that regulating daycare reduces options for low-income families, who respond by sending their children to lower-quality home-based care. 

Rather than doubling down on failed policy, the incoming administration should focus on rolling back costly regulations that limit supply and access. It can revoke Biden’s childcare EO and use its influence to refocus the conversation on local government policy. 

For its part, Congress should eliminate federal laws that worsen credentialism in the childcare sector. It can start by removing the requirement that Early Head Start staff have a CDA and be trained in child development and that half of Head Start teachers have at least an associate’s degree in early childhood education or a related area. Local policymakers have admitted that federal policies like this have encouraged them to implement more restrictive childcare regulations locally. 

These reforms would constitute a radical change in the direction of childcare policy, and paired with serious efforts to reform local regulation, they would make a difference. 

Full Republican control of Washington creates an opportunity to repeal many of the previous administration’s most costly laws and regulations. The misleadingly named Inflation Reduction Act (IRA) should be at the top of the list, not only because it is a disastrous environmental policy but also because it will be a necessary offset for a fiscally responsible extension of the expiring 2017 tax cuts.

The energy and climate provisions of the IRA are already burning through taxpayer dollars at rates much higher than initially projected. These subsidies will likely cost over $1 trillion by 2032 and as much as $4 trillion by 2050, and some of the most lucrative tax credits have no expiration date.

If Republicans are serious about ending federal intervention in energy markets, repealing the entire IRA energy subsidy framework—including for existing projects—is the only way forward. Full, retroactive repeal will make it harder for future federal subsidy schemes to take root. On the other hand, partial repeal will leave the IRA framework in place for a future Congress to pick up where the Biden administration left off.

The 119th Congress has a fleeting opportunity to dismantle the IRA’s energy infrastructure and level the playing field so that consumers, not bureaucrats, can drive future energy innovation. Anything short of full IRA repeal should be seen as a failure. Like extricating a cancer, leaving portions of the law behind will only temporarily halt its infectious growth.

Full IRA Repeal Will be Painful for Rent-Seekers—Good

Reformers will face significant opposition to a full IRA repeal, from industry groups and environmentalists and within their own ranks. Earlier this year, 18 House Republicans wrote to support the IRA tax credits, arguing they are critical to “ensuring certainty for industry and the energy sector.” Industry lobbyists have repeated the talking point that much of the IRA-related spending is occurring in many conservative districts of IRA critics.

This is by design. The flood of taxpayer money into new projects across the country obscures the real costs of tying American jobs to federal subsidies while ignoring the hidden burdens placed on businesses and taxpayers.

But repeal should be a bipartisan priority because IRA-induced investment and new jobs are a mirage. Since the original flurry of announced new manufacturing projects in the year after Joe Biden’s industrial and climate policies were passed, the Financial Times reports that over 40 percent of them have been delayed, paused, or canceled. And the jobs that have been created cost taxpayers an estimated $2 million to $7 million each.

If the subsidies aren’t ending up in workers’ pockets, where are they going? Corporate owners and executives—not taxpayers or workers—are the primary beneficiaries of federal favoritism. Politically connected corporations like NextEra Energy and First Solar, Inc. have received billions at taxpayers’ expense. Additionally, more than $1 billion of Biden’s IRA subsidies are also going to Trina Solar, China’s largest solar manufacturer.

Rent-seekers will fight hard against the full repeal of the IRA. But why would the 119th Congress want to ensure certainty and stability for the failed investments flowing to foreign companies at American taxpayer expense? Lasting reform requires the opposite. It requires a decisive shift away from politically directed energy investments. 

Subsidies don’t just incinerate taxpayer dollars; they incentivize private investment to shift toward politically popular energy sectors and away from cost-effective and reliable ways to supply energy to American consumers. Attempts to centrally plan markets through subsidies or other industrial policies will stifle true innovation and limit prosperity because many productive entrepreneurs will become subsidy harvesters.

Repealing all IRA energy subsidies—including for existing projects—may be painful for well-connected firms that have decided to build their businesses on the backs of American taxpayers. This is not an argument for palliative “certainty” for existing subsidized industries. Subsidy-dependent industries should get the clear message that the taxpayer-funded gravy train is over. Ripping out subsidies root and branch will clearly signal that, in America, markets will drive the energy sector forward.

The short-term project disruptions will be far less damaging than continued and never-ending market interventionism through government subsidies and favoritism. If this malignancy isn’t cut out now, the rent-seeking enabled by the IRA will continue to infect healthy markets, weakening the American energy sector for decades.

As one IRA supporter recently wrote, “Clean energy is now big business, and influential companies stand to lose billions if the Inflation Reduction Act is repealed.” Yes, and these big businesses deserve to lose the billions of taxpayer dollars they hoped to gain from the IRA—it was never their money to begin with.

The Path Forward

Free and competitive energy markets that allow for innovation and entrepreneurship have been and always will be the best path forward for energy security, reliability, and cost-effectiveness. Government subsidies like the IRA increase inefficiencies and result in cronyism among businesses and government leadership.

No Republicans voted for the IRA in 2022. Rather than take a scalpel to the law, Congress has a rare opportunity to undo all of it. A weak, partial repeal of the IRA will only perpetuate interventionist policies for years to come. The IRA is a watered-down Green New Deal, and the response can’t be further dilution—it needs to be a full rejection.

The window for Democrats in Congress to pass the partisan IRA two years ago was narrow and fleeting. The window to undo this poorly conceived legislation through full repeal is just as narrow. The new Congress should waste no time in rejecting the Green New Deal-lite.

In September 2023, a Food and Drug Administration (FDA) advisory panel informed the agency that, 50 years after the FDA certified phenylephrine hydrochloride as a safe and effective oral decongestant, the evidence suggests it works no better than a placebo. The advisory report came several years after a couple of academic pharmacists had reviewed the research behind the 1970s FDA claims and determined the evidence of efficacy sorely lacking. As I wrote in a blog post that month and a month later in a USA Today column, stomach and intestinal juices break down ingested phenylephrine, rendering it inactive. I hypothesized that, despite the pharmacists’ warnings, the FDA dragged its feet reviewing phenylephrine’s efficacy because it didn’t want to undermine another federal agency’s efforts to wage war on methamphetamines.

When the Combat Methamphetamine Epidemic Act went into effect in 2006, the Drug Enforcement Administration (DEA) ordered all oral decongestants containing pseudoephedrine removed from pharmacy shelves and placed behind the pharmacist’s counter. The DEA also required pharmacists to register customers who bought pseudoephedrine so that law enforcement could monitor their purchases. Furthermore, the DEA put strict limits on the amount of pseudoephedrine a customer could purchase during a 30-day period. This was because many meth dealers at the time were converting pseudoephedrine products they legally purchased into methamphetamine in clandestine labs.

The DEA moves chilled customers who ordinarily purchase products containing pseudoephedrine, which remains an effective decongestant when taken orally. Drugmakers began offering consumers oral decongestants that substituted phenylephrine for pseudoephedrine to help them avoid the queues, surveillance, and stigma of buying pseudoephedrine at the pharmacy counter. More than half of American households trusted and used oral phenylephrine, accounting for an estimated $1.76 billion in sales in 2022.

Of course, we all know what happened next: Mexican drug cartels got into the meth-making business and found more cost-effective ingredients, such as phenyl-2-propanone or P2P, and meth-related deaths soared a whopping 1,400 percent from 2006 to 2020, proving once again that prosecuting the war on drugs is like playing a game of whack-a-mole.

The FDA remained silent when the advisory panel announced its findings 14 months ago. Today, it finally responded. It announced a proposal to order phenylephrine removed from the market as an active ingredient in oral decongestants once it concludes a request for comment period. That period runs from November 8, 2024, until May 7, 2025.

The private sector has been much more agile, as usual. Within a month of the advisory panel’s report, the CVS pharmacy chain announced it was taking oral phenylephrine decongestants off its shelves and would no longer sell them.

CVS, a private company, didn’t want to risk its reputation by keeping customers in the dark about the money they were wasting on oral phenylephrine products. In contrast, the FDA remains in no hurry to inform the public.

Libertarians believe that drug prohibition is costly and ineffective. Prohibition encourages violence, since participants in banned activities cannot use legal, peaceful means to resolve disputes. Moreover, people who transact drugs are already hiding from authorities and thus are less concerned about employing violence. Underground markets also increase overdoses and poisonings since quality control is difficult. Prohibition reduces respect for the law, inhibits medicinal use of various drugs, promotes racial profiling and infringements on civil liberties, and spreads violence and corruption both domestically and in source countries.

In 2020, Oregon decriminalized possession of small amounts of hard drugs such as fentanyl, heroin, cocaine, and methamphetamine. Earlier this year, however, Oregon recriminalized drugs in response to high rates of overdose deaths and open-air drug use. Free-market skeptics claim the state’s unsuccessful policy experiment is evidence supporting prohibition.

This view is incorrect. First, recent research found that fentanyl saturated Oregon’s illegal drug market around the same time that decriminalization went into effect. The study found that this spread of fentanyl caused the increase in deaths, which would have happened regardless of decriminalization.

Second, Oregon’s policy failed not because it legalized possession but because it failed to legalize supply. Under decriminalization, drug users must still buy from the underground market. This leaves the negatives of prohibition in place, including the incentive for suppliers to lace drugs with fentanyl to minimize the volume of contraband.

Decriminalization reduces penalties for use, which is presumably good for drug users, but this may exacerbate the negatives of prohibition because reduced penalties for possession might increase demand for drugs, implying a larger underground market and more of the attendant ills. Thus, if policymakers legalize only one side of the market, the right approach is to legalize supply rather than demand. This would reduce violence in the underground drug market and allow consumers to protect themselves against laced substances through legal channels.

Indeed, successful decriminalization experiments like Portugal’s relaxed supply-side enforcement. Since 2010, the proportion of people serving sentences for drug offenses has fallen, and the number of heroin and cocaine seizures has declined despite rising throughout Europe. Penalties for trafficking and dealing drugs have also lessened. At the same time, the crime and homicide rates have dropped by 1.13 per 100,000 people since 2000, suggesting that their policy changes reduced supply-side violence.

Beyond these points, effective legalization must repeal federal prohibition. While state-by-state legalization is valuable, in part because it signals popular opposition to prohibition, state legalizations leave many issues in legal limbo. Many banks refuse to work in the marijuana industry, leaving cash-only dispensaries vulnerable to theft while complicating their transactions. Moreover, the federal tax code bars dispensaries from deducting typical business expenses from gross profits. Until federal prohibition ends, the clash between state and federal regulations will prevent the marijuana industry—and society at large—from reaping the full benefits of legalization.

This article appeared on Substack on November 6, 2024. Jonah Karafiol, a student at Harvard University, assisted with the production of this post.  

On October 6, Brazil held its municipal elections. Over 150 million citizens—a number that is roughly 40 percent of the population of the US—were eligible to vote for their local leaders. On a national level, the Brazilian legislature is considering regulations to mitigate perceived risks that social media and artificial intelligence pose to the political process. These proposed regulations mark a notable shift towards the European-style approach of technology regulation and an overcaution around technology risks. 

Currently, Brazil is considering several regulations that would change the technology landscape of the most populous country in Latin America. In 2022, Brazil introduced Bill 2768 to regulate digital platforms, similar to the EU’s Digital Markets Act. This bill aims to identify certain companies as “gatekeepers” of the technology industry; however, the threshold is only $14 million in revenue to reach the designation, thereby looping in not only the largest US Big Tech players, but many more US companies, global companies and, ironically, startup unicorns in Brazil that the regulation seeks to aid. 

Success stories in Brazil like QuintoAndar, a platform to find housing, as well as the e‑commerce platform Nuvemshop are swept up in the broad threshold.

The Brazilian congress is also debating Bill 2630, known as “PL das Fake News” or the “Fake News Bill.” The bill establishes content moderation guidelines for social media platforms, including — as its name suggests — the criminalization of a type of content referenced only as “untrue facts.” 

On the flip side, the bill has a vague must-carry obligation for “journalistic” content and content posted by “public interest” accounts. While the EU’s Digital Services Act does not supply a definition of what constitutes illegal content online, it does defer to the member states’ individual laws and holds platforms liable for not removing content reported as illegal through the notice and takedown process. 

Both regulations encourage platforms to remove content that may violate provisions. This overcautious approach will influence the experience of American users.

As with Europe, Brazil’s movement towards a more restrictive regulatory regime has reduced its citizens’ access to technology. Earlier this year Meta decided to suspend its generative AI tools due to disagreements over the company’s privacy policy, and X terminated its service in the country because of a judiciary disagreement. 

Brazil judge Alexandre de Moraes issued a court order to take down specific accounts, which X declined to follow. After threats to arrest X’s legal representative if the platform failed to comply with the court order, X removed all staff from the country and ceased operations. Ultimately, the platform agreed to block the accounts de Moraes flagged, reinstated the company’s legal representative, and paid a $5.2 million fine to operate again in the country.

However, the saga still highlights the negative consequences that arise when the government uses a heavy hand in its regulatory powers over tech companies.

All of this marks a notable shift from the more American style and less regulatory approach to technology policy previously seen in Brazil. One of the most important examples of this prior approach is Article 19 of the Brazilian Civil Rights Framework for the Internet, reminiscent of “Section 230” in the United States. Article 19 protects platforms from civil liability in the case of content generated by third parties — except if the platform violates a court order to take down a specific, identifiable, and locatable piece of content within a determined period. 

While not as concrete as Section 230, Article 19 sets up an important system of immunization for platforms that host third-party content, supporting an important pillar of the Internet: a culture of free expression.

Unfortunately, the power of Article 19 erodes as the branches of government in Brazil take issue with the freedom the rule grants to technology companies, calling to chip away or entirely remove the shield with proposed legislation and resolutions. The Supreme Court of Brazil even held a public hearing on the constitutionality of Article 19. These actions are not unlike those of the United States, where Congress has considered a bill that would sunset Section 230 or proposed the No Section 230 Immunity for AI Act, which would carve out immunity in cases that involve generative artificial intelligence. 

Because of the nature of technology regulation, proposals such as the ones in the US and Brazil affect not only the users within those countries, but the global social media experience. The social media landscape will look different due to regulatory obligations that incentivize companies to be overcautious in their removal of content.

In both the United States and Brazil, with elections top of mind, many observers are discussing the potential impact of AI. Unlike the US, Brazil started regulating the use of AI in political ads earlier this year in advance of their municipal elections with resolutions by the court. Per Resolution 23.732 by Brazil’s Superior Electoral Court, political candidates may not use artificial intelligence to “create, replace, omit, merge or change the speed” or “superimpose images or sounds on [a] person.” It also bans the use of “robots” that simulate dialogue. 

As a result of those resolutions, Google updated its policy in May to remove many political ads on its platforms in Brazil. This illustrates what could happen in the US following a variety of legislative and regulatory proposals at a federal, state, and local level.

Brazil’s current and proposed actions have and will affect the technology ecosystem. If the United States creates a similar regulatory structure around artificial intelligence, they could likewise see a stifling of content. While the First Amendment prohibits regulation that may be legally allowed in other countries, it is still up to the regulator to interpret the definition of protected speech. This, in turn, could cause a chilling effect. 

Brazil’s recent response to worries about technology, including a shift to a more regulatory approach to policy provides further notice of the pitfalls. Platforms will limit their options in markets that choose to undergo broad regulatory decisions. Users will be left uncertain as to what their rights are online. These consequences impact not only large US companies but also local innovators who will struggle with new burdens to entrepreneurship and consumers who will lose the benefits of such innovation. 

As Brazil aligns with a more European approach to technology regulation, one wonders if other countries in Latin America will follow suit behind the largest economy of the region. Either way, the United States should be wary of the outcomes of Brazil’s technology policy stances as it looks to codify the same positions in regulation.

Like most libertarians—and most sane Americans—David Friedman looks upon the Trump v. Harris contest with dread:

My opinion of the election is “a plague on both your houses.” Kamala Harris is an extreme representative of an ideology I have opposed for most of my life. Donald Trump has three major positions on two of which, immigration and trade, he manages to be even worse than his opponent. While I have some sympathy for his views on the third [foreign policy], I do not trust him to execute a consistent and competent alternative. His disinterest in whether what he says is true, extreme even for a politician, I find offensive.

…but then comes this confession:

That is my intellectual view of the matter. It is not my emotional view. Reading news stories and observing the effect on my feelings, I note that I am reacting like a Trump partisan. Poll results that look good for him make me happy, poll results that look bad for him make me sad.… If Harris wins I will feel disappointed. If Trump wins I will feel relieved, at least until the first outrageous thing he does.

Many such cases!

David Friedman’s libertarian bona fides should be beyond question (for my money, his Machinery of Freedom remains the best introduction to radical libertarianism). Even so, in some libertarian circles, what he’s let slip—an “emotional” preference for a Trump victory?!—could get you read out of polite company.

As it happens, I think you can make an intellectual case for Friedman’s forbidden feelings. And since I think polite company is overrated, I’m going to make that case here.

To be clear, this isn’t an argument about whom libertarians should root for, much less vote for. Like Friedman, I believe that when confronted with a choice between two people who have absolutely no business being president, sitting it out may be the most responsible option. Instead, it’s an argument about which of two electoral outcomes libertarians should dread more, and it focuses on the administrative state and the courts.*

*I’ve left foreign policy out of this assessment because, like Friedman, I lack confidence that Trump’s occasional paeans to restraints are a reliable guide to what he’d actually deliver. 

“Our Democracy,” such as it is, has degenerated into a judicial-executive dyarchy. We’re mostly governed by people nobody voted for: bureaucrats and judges. Who gets to be president matters because he or she makes judicial picks, staffs the commanding heights of the regulatory state, and uses “the pen and the phone” either to extend bureaucratic control—or gum up the works. It shouldn’t be that way, but it is.

A Democratic victory on Tuesday means that the party of government retains administrative power and gets four more years to enact its ideological manias on an unwilling public. Because I believe that would be very bad indeed for individual liberty, free markets, and limited government, I can’t pretend to be sanguine about the prospect.

In a November 4 blog, I discussed the economics of nuclear power in light of recent nuclear deals by Google, Amazon, and Microsoft. While optimists envision an important role for nuclear power in a transition to clean energy, historical and recent experience with nuclear power and its continued high cost suggests that a more skeptical view is warranted. 

Of particular importance is the fact that though efforts to reduce the regulatory burden on nuclear power are showing some signs of success, subsidies to nuclear remain high. I argued that both unnecessary regulations and subsidies to nuclear and other energy technologies should be removed.

Given growing concerns about climate change, the key question for nuclear is whether its societal benefit as a zero-carbon electricity source is worth its large construction costs. If the answer is yes, then the benefits may justify subsidies or other government interventions to support the building of new nuclear power plants. A definitive answer to this question, though, requires knowledge of the actual damages of carbon emissions, which continues to be debated. 

In our 2020 working paper on the economics of nuclear power, Peter Van Doren and I ask an alternative question: What level of carbon damages would justify construction of a nuclear power plant instead of an alternative fossil fuel power plant? With the recent flurry of nuclear activity and legal and regulatory changes, it is worthwhile to revisit our calculations.

To do so, I compare the levelized cost of electricity (LCOE) of a new nuclear power plant and a new natural gas combined cycle (NGCC) plant under different assumptions. The LCOE is an estimate of the lifetime costs of a power plant expressed in cents per unit of electricity produced (kilowatt-hours, kWh). The calculation accounts for the construction costs, construction time, financing, fixed and variable operations and maintenance, and fuel costs.[1]

The assumptions for nuclear are based on a recent Department of Energy (DOE) report on nuclear power, though my assumptions differ in a few key ways.[2] In my last blog, I outlined why the DOE report is overly optimistic, which is reflected in its estimates of future nuclear LCOEs (see Figure 3 on page 4). Most importantly, it commits a common error made by many pro-nuclear projections. It describes the high cost of recent projects, outlines vague ways in which these costs will be reduced in the future, and then simply waves its hands and assumes substantially lower costs. 

The DOE estimates that the most recent US nuclear project (at Vogtle in Georgia) had a construction cost of $15,000 per kilowatt of capacity built ($/​kW) and took 11 years to build. It also provides LCOE estimates if construction cost and time are reduced by around 40 percent, to 8,300 $/​kW and 6 years. The most important factors for nuclear LCOE are construction costs and time (which affects the costs of financing), so such a large assumed reduction has a substantial effect.

The DOE also includes the effect of subsidies, including favorable federal loans and investment tax credits created by the Inflation Reduction Act. My calculations ignore these because: 1) the subsidies don’t change the underlying economics of nuclear power, they simply transfer some of the cost to taxpayers; and 2) as long as these subsidies are motivated entirely by climate change, their value is included as a portion of the carbon tax necessary to equate the cost of nuclear and alternative energy sources that I estimate below (i.e., a subsidy to clean energy is a negative carbon tax).

The LCOE of nuclear, at both the cost level seen at Vogtle and after assuming a 40 percent reduction in construction cost and time, are reported in Table 1.[3] Also included are the estimated LCOEs of nuclear’s primary alternative, a natural gas combined cycle plant. While nuclear is dependent on construction costs, the most important variable for NGCC is fuel costs. The LCOE of NGCC is thus evaluated at varying fuel costs based on Energy Information Administration natural gas price projections.[4]

Table 1 also includes estimated LCOEs for NGCC with 95 percent Carbon Capture and Sequestration (CCS). This spring, the Environmental Protection Agency (EPA) enacted a new rule requiring that new natural gas plants operating more than 40 percent of the time must reduce their emissions by at least 90 percent, with the EPA determining that CCS is the best system for reducing emissions. The rule is likely shortsighted and is facing legal challenges. However, if the rule goes into effect as currently envisioned, NGCC without CCS will likely no longer be possible to build. Thus, I also estimate the LCOE of NGCC with 95 percent CCS based on cost estimates from the National Renewable Energy Lab (NREL).

Overall, the picture is clear. Nuclear at either assumed construction cost and time is expensive. NGCC without CCS is much cheaper, and NGCC with CCS is slightly more expensive but still less than nuclear at any assumed fuel cost. How does this picture change if climate damages are considered?

The social cost of carbon necessary to justify building a nuclear power plant instead of the much cheaper NGCC plants is calculated using NREL estimates of the carbon intensity of the modeled NGCC plants.[5] The results, reported in Table 2, make it clear that, at the high-cost level recently seen in the United States, nuclear’s clean energy benefit does not outweigh its large costs. 

For example, for the construction of nuclear at the high assumptions (LCOE of 22.3 cents per kWh) instead of an NGCC with low assumed future natural gas prices (LCOE of 4.1 cents per kWh) to be justified by climate change the estimated damages of carbon emissions would need to be more than $400 per ton.

The estimates of the carbon tax needed to equate the LCOEs of NGCC without CCS and nuclear at the assumed low-cost level are closer and in line with recent federal estimates of the social cost of carbon ($190 per metric ton in 2020 dollars), though the assumptions behind those estimates are up for debate. Of course, whether those construction costs and times are even achievable is also doubtful.

When NGCC with CCS is considered, the required assumed costs of carbon damages are enormous because the modeled natural gas plants are emitting only 5 percent of the carbon emitted by the plant without CCS. Of course, CCS technology is still unproven, so the cost estimates are theoretical (and highly controversial in their own right) and exclude important factors like the transport and storage of the captured carbon emissions. Ironically, prospects for either CCS or nuclear may end up depending on how economically infeasible the other is.

Overall, this analysis highlights two points. First, nuclear will require substantial cost reductions before it is worth investing in, whether its clean energy benefit is considered or not. Second, our current web of subsidies and regulations makes it difficult to evaluate the benefits and costs of various energy sources. The complexity restricts our ability to optimize energy sources considering a range of factors including cost, reliability, and environmental damages. We should stop favoring certain sources through subsidies and punishing others through regulation, and, if necessary, find ways to directly price in unquantified costs and benefits.