The Case for Combating Climate Change with Nuclear Power and Fracking

Joseph B. Lassiter explains why he believes that nuclear power and shale gas are on the right side of the fight against climate change, and why markets have a better shot at winning the fight than governments do.
by Carmen Nobel

If you ask any given environmentalist to identify the biggest threat to the planet, you may expect to hear about man-made climate change, consumerism, or overpopulation. But if you ask Harvard Business School's Joseph B. Lassiter, he'll toss in another: single-issue myopia.

First, there's the oft-discussed issue of temporal shortsightedness—the very human tendency to focus on present-day concerns without considering how our actions will affect the future. But there's also ideological myopia—a failure to realize that compromising a little is better than staying stuck in the present path.

"Right now we're letting the ends of the ideological spectrum and the entrenched power of legacy interests stalemate a path to the future," Lassiter says. "That's a thing worth fighting."

“Right now we're letting the ends of the ideological spectrum and the entrenched power of legacy interests stalemate a path to the future.”

Lassiter, the Senator John Heinz Professor of Management Practice in Environmental Management, has spent several years studying the intersection between entrepreneurial finance and environmental concerns. He recently sat down with Harvard Business School Working Knowledge to discuss the core challenges of fighting global carbon dioxide emissions in a shortsighted, ideologically polarized environment.

To his mind, both in Europe and in the United States, government efforts to regulate carbon emissions have been costly and ineffective so far, an outcome often ensured by extreme politicking from the legacy energy, transportation, farming, and environmental lobbies.

"It's time for politicians, regulators, and voters to give markets—and the price signals that they send to producers, consumers, and entrepreneurs—a try at doing something that is both environmentally meaningful and economically sustainable," he says.

Lassiter's Market-based Proposal

His proposed market-based solution? "I think each energy source—oil, natural gas, wind, nuclear, solar, etc.—should have a market price based not only on its production costs, but also, in part, on its unique public costs reflected by revenue-neutral taxes: a carbon emissions tax, a security-of-supply tax, a catastrophe insurance tax, and even a local emissions abatement tax," he says. "While people hate the thought of paying more taxes, we are in truth paying most of these 'taxes' today. Unfortunately, the political process allows these taxes—or subsidies—to be hidden in rules, regulations, and foreign policy decisions.

Nuclear power can reduce emissions from coal power plants."The resulting market prices for energy should be enforced in international trade with border tariffs," Lassiter continues. "And we should let markets go to work for us. I think that markets will do a much cheaper, faster job of attacking our energy and environment problems than having politicians and regulators try to solve them by selecting technologies or drafting complex rules and regulations that simply hide the costs from consumers and producers alike. The likelihood that what I just said will actually happen is vanishingly small. But I'm an old man, so I should keep on emphasizing completely obvious solutions."

Like many people, Lassiter is concerned that the massive carbon emissions from today's coal plants and transportation sector pose a major danger to mankind through the effects of rapid climate change. Less typically, he's more bullish on nuclear power and hydraulic fracturing, or "fracking," than he is on solar energy or wind power for addressing the worldwide carbon emissions problem. It's not that he has anything against renewable energy. It's that he hasn't seen evidence that renewable energy sources will get cheap enough, fast enough to slow global carbon emissions, particularly those from coal-fired power plants in China and India.

"The Chinese and Indians are going to clean up their local pollution problem—particulates and sulfur emissions—from coal plants, but the carbon emissions are an entirely different matter. To have a dramatic impact on those carbon emissions, you need to find something that beats a traditional coal plant in their countries on straightforward energy economics, and that's really, really hard to do," he says.

The Case For Fighting Coal With Nuclear And Fracking Technology

Given the absolutely clear evidence that electricity significantly betters human life in the developing world, Lassiter worries that attempts to squelch nuclear and fracking efforts will just give rise to more and more coal plants around the world. "When it comes to carbon emissions, nearly anything is better than a traditional coal-fired power plant," he says.

Lassiter argues that the world has allowed nuclear to become virtually an "orphaned technology," despite its potential to attack the problems of carbon emissions. And in spite of recent concerns about the tragedy at Japan's Fukushima plant, he maintains that nuclear power "is a scalable technology that has significant room for technological improvement, safety enhancement, proliferation resistance, regulatory redesign, and, yes, cost reduction."

“When it comes to carbon emissions, nearly anything is better than a traditional coal-fired power plant.”

And what are we to do about the problem of radioactive waste, a byproduct of nuclear power generation? Lassiter points to three young companies—Martingale, Inc., of Tavernier, Florida, Transatomic Power of Cambridge, Massachusetts, and TerraPower of Bellevue, Washington. Each is working on new nuclear reactor designs to harvest and run on radioactive waste fuels, such as thorium (a waste product of rare earth mining), and depleted uranium (the waste product left in spent nuclear fuel rods). In other words, these new nuclear designs could actually consume and be fueled by materials largely considered to be radioactive waste today.

"The world probably has enough spent nuclear fuel lying around to power reactors for hundreds of years, and there is literally four times as much thorium on the planet as uranium," Lassiter says.

Building a prototype of any one of these new nuclear designs may take 5 to 10 years and cost upwards of $1 billion, which suggests that they're in danger of falling into the financing "valley of death," the stage between researching a product and actually going to market with it. Even so, TerraPower has received multiple rounds of funding—and its chairman, Bill Gates, is the wealthiest person on earth. (Last year, Lassiter coauthored a business case about TerraPower's funding issues, along with HBS colleagues William A. Sahlman and Ramana Nanda and James McQuade [HBS MBA 2011].)

"What would our world look like if we could have US levels of electricity available at affordable prices for every person on the planet for 1,000 years?" Lassiter says. "We should be working on nuclear like there is no tomorrow. We should do everything we can to encourage new nuclear and drive it to costs that are competitive with traditional coal. We need to insist that the world's governments allow and encourage entrepreneurs to pursue nuclear with both rigorous testing and real urgency. And we need to always remember that if new nuclear or any energy alternative doesn't match coal on straight-up cost, it won't do much to solve the worldwide carbon emissions problem."

Lassiter also supports shale gas, produced through fracking. He likes it because the market likes it. The shale gas boom in the United States has driven down the cost of natural gas, which has increased secure, domestic supplies. The global unconventional gas market, valued at $93.95 billion in 2012, is expected to reach $126.93 billion by 2019, according to a recent report by Transparency Market Research. Coal's market share is expected to decrease accordingly.

"Shale gas has produced a ton of great companies, and the 'clean energy' cost gap versus coal has narrowed because of shale gas," Lassiter says. "A lot of people say, 'But, no, no, no, that's not clean energy.' Well, I say that if a gas-fired plant has lower emissions than a traditional coal plant, it's at least cleaner energy, and it buys us more time to find a zero-carbon emissions alternative."

Coal combustion emits nearly twice as much carbon dioxide per energy unit than natural gas, with crude oil combustion falling between the two, according to the Energy Information Administration. But fracking comes with its own environmental risks, not the least of which is wastewater production. Again, Lassiter points to a market-based solution: Select Energy Services in Houston is among many companies turning their attention toward fracking water management. The frack water treatment market is expected to grow ninefold to $9 billion in 2020, up from abourt $1 billion in 2012, according to a Lux Research Report issued last year.

Carbon Emissions Are Acting Globally, So Why Aren't We?

We need a cutline for this image.Lassiter also warns of geographical myopia—discounting how local action or inaction will affect the whole world. In his lectures, he often incorporates a slide from Robert Hargraves, an energy policy instructor at Dartmouth College, which forecasts a hypothetical but startling scenario for the world's electricity consumption. [Click the image to see the slide.]"Even if we were capable of cutting US per capita electricity usage in half by 2050 and the rest of the world only rose to that hypothetical level of US per capita consumption by 2050, the world will have a tremendous growth in electricity usage and with that the associated carbon emissions," Lassiter says. "So, unless we impact carbon emissions, particularly in China and India, nothing we do in the United States much matters. To do that, the world needs to show them an alternative for electricity that beats coal on price."

Somewhat wryly, Lassiter acknowledges that the threat of climate change may be overstated for some—inasmuch as he thinks that it's probably happening slowly enough for the planet's wealthier residents to adapt successfully. But that's not the case for nations in sub-Saharan Africa like Sudan, which has been in ecological crisis for years. (UN Secretary-General Ban Ki-moon is among those who have cited climate change as a culprit in inciting the Darfur conflict.)

"It is pretty bad in some parts of the world today," Lassiter says. "And with rapid climate change, it's absolutely going to get worse and worse over time. There will be more extreme events; there will be islands that go under water. But, thank you very much, they'll put another few meters onto the seawalls of the Amsterdams, Londons, and New Yorks of the world, and things will appear to be perfectly OK.

"Most of the time, wealthy people figure out a way to do OK, and it's the poor people who get hammered," he continues. "In my mind, there are some ethics there that each one of us needs to worry about, and today we are each making a de facto decision through our collective inaction. But even the wealthy need to do some soul-searching. If the upper extremes of potential climate changes materialize, I…no, we don't know what will happen. There is a material risk that we will all go into a world where no one knows the consequences to our food supply, our cities, or our society. With every pound of CO2 emitted, we pass a piece of that incalculable risk on to our children each and every day. "

Read Joe Lassiter's update to this article.

About the Author

Carmen Nobel is the senior editor of Harvard Business School Working Knowledge.
    • Brian Flanagan
    • Writer, Word Association
    Brilliant -- poison the earth and all who live on it.
    • Mark Uhran
    • Strategic Communications, Oak Ridge National Laboratory
    Well done. "Single-issue myopia" is a form of cognitive dissonance -- the inability to hold a position that differs from life-long personal beliefs, or as Einstein put it, "Most people cannot express with equanimity an opinion that differs from the prejudices of their social environment; in fact, most people are incapable of even forming such opinions."

    The solutions you pose are reasoned and objective. However, I would also ask you to consider if they are somewhat near-term, while a sustainable far-term solution is also imperative.

    The scientific proof-of-principle for power production by hydrogen fusion has already been demonstrated (Princeton TFTR, 1994 and Culham JET, 1997). In order to achieve sustained energy generation, the engineering reduction-to-practice is next needed. This is the mission of ITER -- an international partnership among China, Europe, India, Japan, Korea, Russia and the United States to construct a 500 megawatt, industrial scale, hydrogen fusion reactor in southern France ( This experimental facility is already rising up out of the ground and components are in production worldwide. While many scientific and engineering challenges remain, they are no greater than the challenges humankind has encountered and successfully overcome in the past through focused and concerted efforts.

    However, due to the far-term (i.e., 20+ yr) nature of the R&D mission, public funding is the only available solution. Without sustained public funding, sustained burning hydrogen fusion plasma will forever remain proverbially "40 years in the future". Hydrogen fusion is no longer science constrained; it is cash constrained.

    At the dawn of fusion research, the Russian plasma physicist Lev Artsimovich was asked when fusion energy would be available to all. His prescient reply: "Fusion will be ready when society needs it."

    That need is now at hand. The time has come to "Bring a Star to Earth" as the U.S. National Research Council characterized it in their 2003 Report on Burning Plasma.
    • Glenn Hall
    Very interesting concepts. Thanks for the great article.

    What is generally not recognized about climate change is that the oceans have approximately 1,000 times the heat capacity of the atmosphere and, in fact, have approximately 1,000 times as much retained heat. This is all too frequently overlooked because of the lack of good historic data, but more recent data shows pretty compelling evidence that is where the heat is going. The well developed information about the dramatic loss of ice cover in the Arctic is consistent with a significant increase in the amount of heat retained in the oceans. That ice cover plays an important role in reflecting heat. If we keep losing more of that ice cover, things could get exciting enough quickly enough that it becomes essential to take dramatic steps like those described in this article to curtail further anthropogenic global warming.
    • Anonymous

    Here is a plan that does exactly what's needed. Society has a tendency to be myopic to extremely large changes that AGW demands that we do. All present technologies combined from today is all we need to make this work.
    • Tony Farrell
    • Marketing, Lieberman Productions
    In college, I remember asking a roommate how regular camping differed from "snow camping." And he had a simple reply: "With snow camping, you can't (mess) up." That's how I feel about nuclear. Chernobyl and Fukushima nearly wiped out large swaths of Europe and Japan for centuries. Given the nature of humans, catastrophe would seem certain if nuclear expands. Today's arguments to the contrary are indistinguishable from such arguments made before those events--and therefore are, to me, not credible.
    • Jim Winkelmann
    • Manager, Blue Ocean Portfolios, LLC
    Here is a link to a recent BBC feature on fusion.

    Are the odds of developing safe, efficient and scalable fusion technology must be better than global policy coordination? My bet is on fusion technology!
    • Jim Cabot
    • Energy Group Leader, Rasky Baerlein
    Great Article:

    Seems to be a flaw in the logic though. If we want to let markets drive our energy choices, then why doesn't the market fund the R&D for advanced reactors? The concept of the Valley of Death is in itself an acknowledgment that markets may not be functioning properly. For sure policy makers need to focus on how to harness market forces to achieve outcomes like low/no carbon energy and Professor Lassiter's tax proposals are a potential way to do that. However government can and should also play a role in creating greater efficiency in the R&D process. This could be done in a number of ways ranging from creating a pilot testing facility at a DOD site to relief on decommissioning to shared resources with the national labs. In short, we need to create the correct market signals and provide government support in the R&D process.

    Now, don't even get me started on the political challenges of carbon taxes!
    • Rob Houck
    • Partner, Eaton & Van Winkle
    I am all for market forces. Without them, we just have regulations, uneven enforcement and resentment. And of course externalities. But how do we make people pay the full cost of their energy? How much of our fleet is a cost of our long oil pipeline? How much do we charge for government insurance against nuclear catastrophes? How do we weigh a dollar spent here on fracked natural gas which may pay the dry cleaning bill against a dollar spent on oil in Saudi Arabia which we will never see, unless for a Boeing fighter? And what is the value of eastern forests not cut up by drilling sites, chemical holding ponds and pipelines? Good luck.
    • Murray Kenney
    • At home caregiver, at home
    I agree with the Professor that fracking will help us get away from coal in the short run and should be pursued. I disagree with him on nuclear. At the end of the day, the nuclear waste problem is unsolvable, and the cost of an accident is uninsurable by the very private markets that he refers to. How can we quantify the costs of Fukushima? Of Chernobyl? And he is proposing that we vastly increase the number of plants worldwide? I would propose that the ultimate problem with nuclear is a management one, not a technological one. No technology will be foolproof, and the potential costs of one disaster are great. Having hundreds of reactors will spread the management and control resources too thinly, and lead inevitably to an accident somewhere.
    • Oscar Martinez
    Dr. Lassiter may like natural gas because the market likes it but even the environmentalists are taking a second look and he should too. While lower in C02, natural gas releases methane, which according to the EPA is "more efficient at trapping radiation than CO2. Pound for pound, the comparative impact of methane on climate change is over 20 times greater than CO2 over a 100-year period." A comment forum is not the place for this debate but a well-informed paper may lead to a more impactful recommendation. Natural gas is not a bridge to "a zero-carbon emissions alternative."
    (Source for EPA quote:
    • Hugh Quick
    • home, none
    I think I have made this comment before but I don't understand why humans think that they are so significant in a world which many believe has been in existence for 50 million years
    • Dominique
    • NED, Various
    Interesting ideas, but to my opinion a bit too black and white.
    It is true to say that government have failed, but markets aswell so I would recommend a integrative approach where all stakeholders would need to agree on how to proceed.
    Nuclear energy has failed to prove that the by-products can be stored safely and markets have lied about that since too long, consumer never got the truth, so we need to resolve that in order to make sure we can use that energy source safely. Fukushima is not the key issue even if we can't afford that kind of accident, it should not have happen (markets Tokyo Power has failed)
    Fracking...we are at the start and we should not run too fast like we did for OGM's where we let markets decide and now it is too late despite the facts that we don't need OGM's to feed the planet.
    Agriculture has a vast impact on climate change...more than transportation and we need to fix that one in order to decrease it's negative impact on the planet...and stop feeding consumer with the wrong products (a total failure of the markets + a disastrous impact of lobbyist on government policies)
    The graph about the US carbon emission is misleading do you account for goods produced in China...but consumed in the US? Also the point on Africa is biased as we (the leader from the Western emisphere) have generated many of the issues we see there...
    Again I could go on for a while...but as in mathematics it is not because the coal plants are bad..that fracking is right. We need a radical change NOW, markets, government and NGO's together can pave the way to a sustainable future where our kids will flourish and be happy.
    • Terry Floyd
    • Owner, Planet THorium/LFTR Advocate
    My I introduce you to the late Dr Alvin Weinberg,
    Nuclear Reactor Wizard. The Wigner/Weinberg Thorium
    Molten Salt Breeder Reactor Technology is comprehensive as it uses Nuclear weapons and LWR "spent" Fuel as fuel to generate CO2 free thermal and electrical power. These reactors are as good as it gets due to the resolution of the Nuclear Waste Legacy {scratch Yucca Mountain 10,000 year storage}, being
    a Small Modular {size of the 40 foot containers} Reactor SMR. They can be sited at existing waste
    storage locations reducing terrorist diversion.
    • Michael Adamson
    Markets and government exist on the same planet. It's not either/or. In fact, markets make a very useful tool by which government can affect change. I'm talking about a carbon tax, the much discussed and never implemented method by which government can push the markets in a non-carbon direction. Raise the price of carbon and then watch the market find the best solution given the new tax realities.

    And if we are going to mention nuclear power and markets in the same breath, then lets first remove the Price-Anderson act which protects the nuclear industry from the market-determined costs of risk. By limiting the liability of the power companies in the event of a melt down, Price-Anderson undercuts a major market force. Let the insurance industry determine the free market cost of that risk. And I would predict that if the market really determined the risk, nuclear power would quickly disappear.
    • Rudolf O. rinze
    • Managing Director, CombuCasa-ORCA
    One can not but agree with Mr. Lassiter's arguments. And indeed, it is now about time to get more defined actions toward enhancing a more robust balance between Government and market/business interests and actions as regards climate and energy related issues. But yes, I also do agree that the matter is with going the global dimension, as quite appropriately Mr. Lassiter calls to attention in Ms. Nobel document's highlights. Of course there are key questions before such global approach, in between, how to lead and streamline it and also who pays?
    • Thaven Naidoo
    • Director, Terrajoule Energy
    The validation of this argument is based on all energy sources having a life-cycle assessment of their true costs built into their pricing. In the prevailing market environment with multiple hidden subsidies and an absence of the true costs of the energy we use, can we afford to take yet another chance with energy sources that have not accounted for their full environmental costs?
    • Tim Niles
    • Retired, Proactive Computing
    I like the idea of using other nuclear fuels, but there exists a question: how will this recovery of thorium etc be accomplished? Will it require vast amounts of carbon based transportation (to fuel reprocessing centers for example)? That's the unquestioned problem with the existing nuclear reactors: to mine and process the uranium into a usable form requires a lot of carbon based mining and transportation as well as reliance on the existing carbon based electrical power to operate the nuclear powered generators. I applaud these new attempts to transform electrical energy from 'waste' nuclear materials, but what are the transformation costs both in resource allocation and carbon emissions?
    • Arthur Williams
    • Physicist and patent agent, ArtWconsulting
    I can't reconcile Professor Lassiter's ongoing concern with nuclear safety with his awareness of Transatomic and other efforts to commercialize molten-fuel reactors. We have lived the implications of Admiral Rickover's victory over Alvin Weinberg ~40 years ago. As indicated by congressman Chet Holifield's famous suggestion, "Alvin, if you are concerned about the safety of reactors, then I think it might be time for you to leave nuclear energy.", we chose and lived the more dangerous nuclear alternative. Efforts like that of Transatomic Power may finally return us to the safe alternative. My point here is that the cost and safety benefits of molten-fuel reactors are not incremental; they are qualitative. Professor Lassiter is in a position to influence many. He should not inaccurately fan the widespread concern about the safety of nuclear power, as it may be the only practical solution to global warming.
    Art Williams, PhD