Dimming Hopes for Nuclear Power: Quantifying the Social Costs of Perceptions of Risks

The preferences expressed in voting on nuclear reactor licenses and the risk perceptions of citizens provide insights into social costs of nuclear power and decision making in energy policy. We introduce an analytical model which shows that where people?s risk perceptions affect their stand on nuclear power, a perceived probability of accident results in external costs. These costs consist of disutility caused by unnecessary anxiety - due to misperceived risks relating to existing reactors - and where licenses for new nuclear reactors are not granted, delayed or totally lost energy production. Empirical evidence is derived from Finnish surveys eliciting explicitly the significance of risk perceptions in respondents? preferences regarding nuclear power and their views on its environmental and economic impacts. Various model specifications show that the estimated marginal impact of a high perceived risk of nuclear accident is statistically significant and that such a perception considerably decreases the probability of a person supporting nuclear power. The public?s risk perceptions translate into a significant social cost, and are likely to affect the revenues, costs and financing conditions in the nuclear power sector in the future.