February 2017

Comment

A big dump

By Richard Denniss
Why is the South Australian government so enthused about a nuclear waste dump?

“It took 12 months, but the state finally has a vision which will genuinely have people gasping.”

So stated Adelaide’s Advertiser in February last year. The newspaper was referring to the South Australian government’s plan to spend $145 billion of taxpayers’ money building a dump to bury the rest of the world’s high-level nuclear waste.

According to the Advertiser, if the dump were to proceed, “SA could amass a state wealth fund of $445 billion … We’re talking Scrooge McDuck levels of cash which the state would be swimming in.” What an opportunity! The local ABC was slightly more restrained, reporting that “a nuclear waste facility could bring in $257 billion to the state” and, of course, some jobs.

The problem is that the claimed “benefits” of burying other countries’ radioactive waste are as fictitious as a Disney character.

Nevertheless, the outlandish economic claims went almost entirely unquestioned in the media, and few journalists even raised the health risks of importing 138,000 tonnes of such a dangerous substance. The problem wasn’t “post-truth” in politics so much as “post-scrutiny”. (As the price of dishonesty has been lowered, should we really be surprised there’s more of it?)

The plan was no mere thought bubble from a backbencher. Not only is the South Australian premier, Jay Weatherill, an enthusiastic supporter but he has also put $13 million of taxpayer money behind it. He initiated the Nuclear Fuel Cycle Royal Commission, headed by Rear Admiral (ret.) Kevin Scarce; in its final report, released in May, the royal commission enthusiastically endorsed the potential benefits of a dump then went on to recommend that the state spend a further $600 million examining the idea.

The royal commissioner focused on the potential financial gains from building a nuclear waste dump, and downplayed the potential costs to human and environmental health. No estimates of the impacts of nuclear waste storage or accidents on tourism, property or agriculture were considered. Put simply, rather than conduct a cost–benefit analysis, the royal commission spent $13 million conducting a benefit–benefit analysis.

In evaluating the largest and riskiest public infrastructure project in Australian history the royal commissioner sought just one economic analysis. Remarkably, the team he chose to help evaluate the project included Charles McCombie and Neil Chapman, the president and vice president of a peak body for promoting the benefits of building underground storage of nuclear waste dumps.

There is no doubt that McCombie and Chapman have experience in the nuclear industry. Before taking on their current roles, both worked for a company called Pangea Resources that secretly tried to build support for a nuclear waste dump in Western Australia back in the 1990s. (The plan, and the $600 million spent devising it, evaporated when details were leaked to, and aired by, ABC’s Four Corners.)

But experience spruiking nuclear waste dumps is not the same thing as the ability to accurately predict the world price of nuclear waste storage or the level of demand for such storage. And, unfortunately for the premier and the royal commissioner, it doesn’t take a lot of scrutiny to reveal that the assumptions that McCombie and Chapman made were as implausible as they were optimistic.

Economists can’t accurately predict the price of oil or coal or even interest rates in six months’ time, yet the royal commissioner felt sufficiently confident to rely on one consultant team’s report to estimate the price of nuclear waste disposal in 50 years’ time, despite the fact that, to date, no nuclear waste has ever been bought or sold.

The estimate of the demand for nuclear waste disposal was already out of date by the time the royal commissioner’s final report was released. Ukraine, named as a likely customer, was already planning its own nuclear waste dump at arguably the most appropriate site in the world, Chernobyl. A further two potential customers have since jumped ship, with Vietnam abandoning plans to develop nuclear power, and Taiwan explicitly contradicting South Australian government claims that it was likely to export nuclear waste to the state under the terms recommended by the royal commission.

Despite the assumption that developing countries would pay South Australia more to dispose of their nuclear waste than Switzerland and the US currently pay to store their own, and despite the fact that the royal commission’s only economic consultants thought that countries building their own storage facilities would pay to use South Australia’s, the most ridiculous notion accepted by the royal commissioner was that the enormous profits a dump would supposedly earn would not encourage any other country to seek to dig a deep hole as well.

When Apple invented the (very profitable) iPhone, it stimulated imitation. Tesla has shown that there is a big market for electric cars, and now many other car companies are trying to break into that market. Nevertheless, South Australians were told, by a royal commission they funded, not only that a nuclear waste dump would make them a fortune but also that their fortune was safe from other countries cutting their lunch.

Three professors of economics (me included) made submissions to the royal commissioner, arguing that the assumptions about the price, quantity and benefits of a waste dump were optimistic. None of us was called to give evidence. The royal commissioner based his entire report on the assumptions made by two men who work for a self-described advocacy group for underground nuclear storage.

What’s more, the premier ignored the recommendations of an elaborate, and expensive, series of public consultations that he initiated. In order to gain an informed perspective on community sentiment, the state government funded a multi-million-dollar “citizens’ jury”, in which 350 randomly selected South Australians spent three weekends together reading materials, hearing from experts, and discussing the pros and cons of spending $145 billion on a nuclear waste dump.

Unlike the royal commissioner, 80% of the jurors found the claimed economic benefits implausible and more than two thirds of the jurors “do not wish to pursue the opportunity under any circumstances”. Government surveys of the broader community found similar levels of opposition. Despite saying at the outset of the citizens’ jury that public support for the dump was key to its success, the premier, like the royal commissioner, has turned a deaf ear to those who do not share his vision.

It is entirely unclear why Weatherill is so keen on building a nuclear waste dump. While there is much talk about its potential to create jobs, the facts are that there are 59,600 unemployed people in his state and, according to the royal commissioner, when construction employment peaks in 21 years’ time the project will employ 5000 people before declining to 600. Surely a $145 billion plan to tackle unemployment should do more than make a small dint in the number of unemployed in two decades’ time?

Across Australia, big projects such as the proposed waste dump have become a substitute for visions of the kind of country we want to build. The Adani coalmine, the proposed gas pipeline from the Northern Territory to Queensland and the Ord River Irrigation Scheme Mark IV all promise to create jobs and prosperity in exchange for large injections of public money.

Power has many manifestations, but one of its most important is also one of its least visible: the ability to narrow the range of choices we face.

The enormous amounts of time and money wasted talking about big projects such as these come at the cost of a genuine conversation about what kind of society citizens want to build, and the kind of risks that can be tolerated to get there.

Public investment in public transport, a fibre-optic broadband network or renewable energy would create jobs and lasting benefits. As would cracking down on multinational tax avoidance and spending the extra revenue on labour-intensive sectors such as aged care, child care and education. Closing the tax loopholes favoured by the wealthiest and spending the money on public housing would improve the distribution of income, increase housing affordability and create construction jobs all in one go. But, let’s face it, none of those options is going to be considered by a royal commission.

Those who run the country – and I’m not just referring to politicians – believe that the people can’t be trusted to choose from a longer menu lest we pursue “populist” measures such as carbon taxes, mining taxes and wealth taxes. And then, God forbid, demand the money be spent on amenities and services.

If the political class is serious about national wellbeing, or simply keen to stave off the threat of Trump-esque populism, it needs to persuade the public that, of all the options available, and based on the best evidence, its preferred option is the best way forward.

Rather than always crying poor before eventually finding money for their pet projects, political leaders – whether in South Australia or elsewhere in the Western world – need to admit that the old strategy of narrowing the options and then forcing voters to choose is clearly not working anymore.

Richard Denniss
Richard Denniss is the chief economist at the Australia Institute.

February 2017

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