nuclear proliferation

Two important, though not particularly cheerful, goings-on to mention. 

The first is a new paper that suggests climate change is likely to occur much more quickly, and to be more severe, than previously predicted.  This finding underscores a central limitation of so many efforts to analyze highly complex things:  we often discover there are really important parts of the system that we didn't understand or didn't even know about, and those gaps matter greatly.  This is one reason, perhaps, why the cure for this or that cancer seems always to be "just" five years down the road.  Indeed, when a system has as many feedback loops as our earth does, the impact of our blind spots on the accuracy of our predictions is greatly magnified. 

You can read the full paper1   here; or a summary of the core issues it raises in this New York Times write-up.  Or, if you just want the bottom line, here's my take: 

Remember all of those predictions about how humans were going to screw up the planet, making parts of it unlivable for your descendents, but only long enough after you died so that you wouldn't really know the people who were suffering?  Well, now those things are going to happen to descendents you actually do know:  your children and grandchildren.  Oh, and the changes might come really fast so that there is not very much time to adapt to them.

And you thought economics was the dismal science.

Moving from global destruction to dirty bombs, the latest nuclear security summit is going on in Washington this week.  It's core purpose is to contain the risks of nuclear weapons proliferation around the globe, with a particular focus this year on preventing non-state terror groups such as ISIS from getting access to radiological weapons. 

The agitation over terror groups with nuclear strategies was heightened by the discovery of surveillance footage of Belgian nuclear plants that surfaced during searches carried out at apartments related to the recent ISIS-claimed attacks in Brussels.   Even more worrying, a guard at one of the nuclear plants was also killed and his badge stolen. 

US officials seem to be down-playing the find:

But in a briefing with reporters Tuesday, Holgate [Laura Holgate, the White House's senior director for weapons of mass destruction and terrorism] said there was no indication the video surveillance was part of a "broader plan" by ISIS to acquire nuclear materials.

Yup, no worries here.  Clearly it makes sense for Holgate to avoid sharing the real data or the fears of the US government on this issue.  But the connection between nuclear power and terror worries is hardly new.  The UK Parliament did a detailed review in 2004.  Here's a more general compilation of documents related to nuclear detection and prevention of clandestine movements of nuclear material from The National Security Archive at GWU going back decades. 

Equally long-reaching is this database of historical attacks on nuclear facilities around the world.  Created by Gary Ackerman and James Halverson (both at the University of Maryland), the Nuclear Facilities Attack Database is a sobering reminder that nuclear power plants have been targeted many times in the past, and will likely continue to be.  Yes, the acronym for their dataset really is "NuFAD," as though there aren't a slew of other fads we ought to try to jump start over attacking reactors...

So: accelerating climate change and nuclear attacks by non-state actors can really threaten the globe.  What now?  There's a few interesting connections between these issues that warrant some discussion; it would be a shame if attempts to address climate change end up making the proliferation risks materially worse.

1)  If you've got big climate troubles then build nuclear? 

James Hansen is the first author of the paper on increased climate change risks, and also a leading advocate for a massive buildout of nuclear plants around the world to solve the problem. 

On the one hand, if you are concerned about the end of the world, it makes sense to focus on any solution you think can stem the damage.  The problem is that the nuclear pathway is slow, expensive, and would greatly expand the risks we face from nuclear proliferation.  These challenges, along with references to the related supporting research, are described here.  It is critical to remember that both delays in when ghg-reductions are delivered, and strategies that cost more per unit of abatement, both have large opportunity costs in terms of mitigating global risks.

The link above goes through these issues in a fair bit of detail.  But I want to focus more on the proliferation angle here.    

Far from decrying the need to ramp up reactors quickly, the Brussels attacks are a clear reminder of how lucky we are that the envisioned Nuclear Renaissance of ten years ago has moved at a glacial speed (in its pre-global warming original meaning, not the accelerated melting we're seeing now...)  Personally, I am glad the we did not see a blossoming of a reactor in nearly every country, as seemed a feature of the push for ever-more new-builds in the mid-2000s that was hyped by governments and reactor manufacturers alike.  

For a trip down memory lane, the chart below summarizes which countries were looking into getting their first nuclear power generation capabilities at that time, and how ill-prepared they were to enter this realm.

The chart is mostly from Squassoni (2009),2 although some additional countries were added based on a report for the US Department of State by their independent International Security Advisory Board (2008).3  

A first key takeaway from this table (larger version available here) is that the gaps in capabilities to handle the complexities of the reactors were huge.  Most of these countries had not signed on to existing safety and security agreements, let alone possess the capabilities and intent to effectively implement them.  Most had no formal plans on how to handle their radioactive waste, and all had fairly weak accident liability coverage or none at all.

Which nations were teeing up new nuclear capacity in 2008 and 2009 that we should be glad didn't get it? 

Most of the countries roiled by unrest and civil war following the Arab Spring (including Syria), for a start.  And Venezuela, which has sadly but steadily been failing to provide more and more basic state functions and faces endemic corruption.  And parts of the former Soviet Union that are certaintly not democracies, and have low government transparency and accountability.  Consider these bullets dodged; and another reminder of why global nuclear expansion is not at all the same thing as scaling up solar panels. 

But don't we have an obligation to offer all of these countries -- indeed, any country that wants it -- access to nuclear technologies and power under the Nuclear Nonproliferation Treaty?  Most likely "no" -- particularly when other non-nuclear approaches to address both energy needs and climate change are cheaper.

2)  Taxing greenhouse gases sure would be a whole lot simpler

There really ought to be bipartisan consensus on doing simple things that start us along the path of addressing climate change by sending better price signals to markets.  This can be a first step of a system that gets refined over time; but the inability even to take that first step is quite troubling.

Yes, theoretically one could massively build out reactors across the globe, using gobs of public money over decades and decades.  But you could not do so without crowding out less expensive ghg abatement; and you could not do so without dramatically ratcheting up the concerns over dirty bombs, near-bomb-ready nations, and diverted materials.

In contrast, taxing carbon could pretty much start immediately in the United States.  And even though prices of carbon-intensive fuels would rise, resultant energy prices would still be lower than they were a few years back.  Revenues raised would be large (the US Congressional Budget Office estimated about $120 billion per year), though absent revenue recycling, the tax would be regressive.

But revenue recycling could and should allow the carbon taxes to displace other taxes that are more distortionary, improving the cost-benefit ratio of the approach significantly.  In its review of the many options to recycle revenues, the CBO found there was quite a large variation in the degree to which different schemes would boost welfare, productivity, or mitigate the economic costs from carbon taxes on affected parties. 

One general conclusion was that reductions in the tax rates on businesses and individuals would mitigate a sizeable portion of the impacts of a tax.  But that

using the revenues to cut marginal tax rates on corporate or individual income would  benefit the economy more broadly but would probably have limited value to low-income households, who  typically owe little, if any, income tax (p.12).

This conclusion seems premature:  income taxes are not the only deduction from the take-home pay of low-wage workers.  Indeed, since many of these workers owe little or no income taxes (due to provisions such as the earned income tax credit), it is these other fixed charges that likely comprise the biggest contributors to the spread between the gross cost of labor to an employer and the after-tax funds that employees end up with to live on. 

Mandated contributions for social security and medicare are an example of this class of deduction.  These costs include not only the amounts deducted from employee paychecks, but also the share "paid" by employers.  The economic incidence of the employer portion is generally believed to fall on workers (depressing equilibrium wages) even though the employer actually writes the check.  Increasingly, mandated medical benefits would fall into this category as well. 

Revenue recycling by reducing these fixed charges at the low-end of the wage scale could be an attractive option, and making up lost contributions to these important programs using carbon tax proceeds.  Such a shift could further boost the benefits to the welfare of low wage workers from any of the discussed increases in minimum wages.  Alternatively, it could partially offset the wage increase needed to reach a target standard of living.  Because conservative groups often oppose boosting the minimum wage, some type of trade such as this could achieve the same level of after-tax wages for lower income workers while facilitating the implementation of carbon taxes in the US.

3) Climate deniers want certainty on human contributions to climate change before taking any action; yet routinely act under uncertainty in their personal financial portfolios

While the logic of a carbon tax with revenue recycling is quite strong from an economic efficiency perspective, any type of carbon constraint doesn't work politically if people simply don't believe climate change is happening, or (the increasingly common argument for inaction) that humans and human-related activities are causing the observed changes. 

Few things in this world have absolute certainty.  But it is certainly strange that the same people who routinely dismiss concerns over warming and the need to take any action by arguing that the science isn't "settled" also routinely do take action in their own financial portfolios despite a great deal of unpredictability and uncertainty.   In their financial dealings, they know they will be much worse off by doing nothing.  But the exact same logic applies to our climate system.

Here's a look at two prominent legislators who adamently deny a need to deal with climate change, and for whom the Center for American Progress has already done the legwork in finding strident "quotes of denial".   I've put their quotes first, followed by a review of their financial portfolios as disclosed via their Personal Financial Disclosure Forms.

Senator, and Presidential Candidate, Ted Cruz

The last 15 years, there has been no recorded warming. Contrary to all the theories that they are expounding, there should have been warming over the last 15 years. It hasn’t happened … You know, back in the ’70s — I remember the ’70s, we were told there was global cooling. And everyone was told global cooling was a really big problem. And then that faded.” Sen. Cruz has continued to raise doubts about climate satellite data, and he held a Senate hearing titled “Data or Dogma: Promoting Open Inquiry in the Debate over the Magnitude of Human Impact on Earth’s Climate.”[New Republic, 11/6/14 ||| Washington Post, 1/29/16]

So the answer to uncertainty on the human impact on climate is, well, do nothing.  But in his personal finances, Cruz has adopted a widely distributed portfolio of funds to keep costs low while diversifying all sorts of financial risks into thousands of underlying positions that vary by type of asset, industry, company size, and geography. 

Also of interest -- in the very few places where he continues to make concentrated bets on individual stocks, this is almost entirely with sizable holdings in oil and gas firms.

Here's Senator Cruz's most recent financial disclosure form filed in July 2015.  All of these are accessible on the extremely useful Open Secrets website.  What we see:

• Because Cruz's wife works at Goldman Sachs, it's not a big surprise that nearly all of the funds he's in are Goldman-run.  Without the family connection to Goldman, he'd likely be able to find equally good but lower cost options to accomplish the same financial goals (e.g., Vanguard and Fidelity).
• Cruz's diversification in fixed income (bonds) is broad and includes both corporate and municipal high yield and regular bonds, adjustable rate bonds (often many financial firms), international bonds, and shorter-term instruments that carry less interest rate risk. 
• Cruz's diversification in equity funds is similarly wide, including domestic stocks with some specific allocations to growth companies and to smaller cap firms.  Internationally, he has both developed and emerging market stocks, as well as a targeted stock fund for Asia.  A Japan-only fund from earlier filings is no longer in his portfolio.
• Targeted portfolios are also a central part of his planning strategy.  These funds include a mix of growth-oriented assets (i.e., more stocks) until a certain point in time such as the start of college (via 529 plans) or target date retirement funds.  As the target date (at which cash will start to be withdrawn) approaches, the portfolio manager ramps down the share allocated to higher risk equity assets and replaces it with more cash and short-term bonds.  Cruz uses low-cost providers such as Fidelity and USAA, mostly in aggressive growth portfolios, for his childrens' college funds.  His retirement vehicles include a mix of diversified domestic and international stock portfolios, as well as two target date retirement funds, one for 2035 and one for 2040.
• The oil and gas sector has been among Cruz's largest campaign donors.

So:  very wide diversification across and within asset classes to hedge his investment risks.  This includes many bets outside of US markets, despite what one could assume is Cruz's primary allegiance to US firms and US jobs.  Cruz does have some actively-managed investment funds via Goldman Sachs, so believes that Goldman will outperform the market even in highly liquid and transparent sectors such as US equities. 

Other than shares held in Goldman Sachs itself, the only individual stocks he owns are all in the Oil and Gas sector.  (Goldman Sachs, by the way, very much believes that climate change is real, and has targeted capital investments of $150 billion by 2025 into mitigating strategies such as clean energy.)  

• Holdings of $15,000-$50,000 per firm:  One Gas, Inc.
• Holdings of $50,000-$100,000 per firm:  Oneok, Inc.; Chevron Corporation; Plains GP Holdings LP.
• Holdings of $100,000 - $250,000 per firm:  Exxon Mobil Corporation; Enterprise Products Partners, LP. 

Cruz's first financial disclosure filing in 2011 shows that many of these firms were in his portfolio prior to his first run; and also lists many of this clients prior to running for Congress which is interesting in its own right.  However, it is notable that nearly all individual stocks outside of oil and gas have been sold in the intervening four years, while nearly all oil and gas holdings have not been.  Individual stock positions in 2011 not showing up in his 2015 filing include:  Dominion Resourses, AT&T, McDonald's, General Electric, Coca Cola, Pfizer, Microsoft, Verizon, JP Morgan, Bank of America, and Costco. 

Summary:  If Cruz applied a similar hedging strategy to our climate as he does to his personal wealth, he would accept a moderately-sized carbon tax as a way to more effectively align market decisions on all sorts of long-lived energy-related investments with what even he would likely agree is a non-zero probability that human activity is affecting climate systems.  One doesn't need certainty to begin to take prudent, hedging actions.

It is also likely that the preponderance of individual stocks being in oil and gas firms (total value as high as $750,000) may contribute to his inaction. 

Senator, and Senate Majority Leader, Mitch McConnell

“For everybody who thinks it’s warming, I can find somebody who thinks it isn’t.” More recently, when asked whether he agreed that human activity was driving climate change, McConnell responded, “I’m not a scientist.”[Cincinatti Inquirer, 3/7/14 ||| ThinkProgress, 10/3/14]

McConnell states he's just not certain about what's happening with the climate; maybe it's a problem, maybe it isn't.  But the same inability to have perfect knowledge in his finances (maybe emerging market stocks are going to implode; maybe they are going to surge as growth expands) hasn't stopped him from engaging with the market and hedging the uncertainty through widespread diversification. 

Similar to Cruz, the vast majority of his holdings (as of 2014) were in mutual funds and exchange traded funds spanning domestic and foreign stocks and bonds; small, medium, and large cap sizes; and gold.  Gold investments do best when economies are in turmoil; McConnell has invested in gold to diversify the risks of his portfolio, despite his likely goal and direct responsibility for helping the United States and the global macroeconomy stay healthy.

The focus on well diversified funds has been a constant in the McConnell portfolio since his first filing in 1995. 

He and his wife (she appears to hold the bulk of the combined net worth) do continue to believe in the ability of active funds to beat the market index in a wide range of equity segments despite the higher fees and tax cost of these active strategies.  Unlike Cruz, McConnell makes greater use of the lowest-cost Vanguard funds,4 and shows no holdings in individual oil and gas firms.  Potential conflicts of interest would come via corporate services provided by, and directorships held by, his spouse.  However, these are not in the oil and gas sector so do not see relevant to the global warming issue.  

Summary:  McConnell is hedging uncertainty in financial markets using a widely diversified, low cost investment strategy.  Applying this approach to climate change, he should also support the introduction of a moderate carbon tax to hedge climate risks to the economy, and to allow that hedging to occur in the most cost-efficient manner possible.

• 1Hansen et al., Ice melt, sea level rise and superstorms: evidence from paleoclimate data, climate modeling, and modern observations that 2 degrees C globalwarming could be dangerous, Atmos. Chem. Phys., 16, 3761–3812, 2016, doi:10.5194/acp-16-3761-2016.
• 2Squassoni, Sharon. "Nuclear Power: Ho w Much More?" working paper prepared for the Nonproliferation Policy Education Project, March 2009.
• 3International Security Advisory Board, Report on the "Proliferation Implications of the Global Expansion of Civil Nuclear Power," April 7, 2008.
• 4Increasing empirical evidence shows that active fund managers across a wide range of asset clases are unable to beat the market over any extended period of time; and that their higher management fees along with the higher taxes that their frequent trading triggers for investors, result in lower after-tax returns to investors than simply owning a low-cost index fund or ETF.

The promised progress from the Iranian nuclear deal appears still to be far from materializing.  The deal, or more formally, the Joint Comprehensive Plan of Action, was signed on July 14, 2015.  On September 10th, the last attempt to block the deal in the US Congress failed.  Almost immediately, a magical array of coincidences began.

1)  September 12:  Iran finds an "unexpectedly high" reserve of uranium.  According to Reuters, extraction will begin soon.  Prior assumptions by the West were that Iran had an insufficient domestic supply of uranium, and would soon need to import.  The ability to influence import routes was implicitly viewed as a natural brake on cheating.  That brake is gone.

"I cannot announce (the level of) Iran's uranium mine reserves. The important thing is that before aerial prospecting for uranium ores we were not too optimistic, but the new discoveries have made us confident about our reserves," Iranian nuclear chief Ali Akbar Salehi was quoted as saying by state news agency IRNA.
 

Through the magic of flying machines, Iran discovers it really does have big uranium deposits.

Yup; a little magic from flying machines, and all of a sudden Iran found Uranium.  Of course, pretty much every country on earth prospects its territory for valuable natural resources, and does so all the time.  The US Geological Survey, for example, was founded way back in 1879.  It has been looking for valuable minerals ever since.  Given how focused Iran has been on the nuclear fuel cycle, the idea they just discovered a new deposit is laughable.  Alas, it is hardly the only example of laughing.

2)  October 10:  Iran tests a nuclear-capable ballistic missile, in clear violation of UN Security Council resolution 1929.  The resolution was adopted in 2010; it remains in effect until the Joint Comprehensive Plan takes effect.  But even after that,

Iran will still be "called upon" to refrain from undertaking any work on ballistic missiles designed to deliver nuclear weapons for a period of up to eight years, according to a Security Council resolution adopted in July.

Countries would be allowed to transfer missile technology and heavy weapons to Iran on a case-by-case basis with council approval.

However, in July a U.S. official called this provision meaningless and said the United States would veto any suggested transfer of ballistic missile technology to Iran.

Somebody ought to email John Kerry that no "transfer" will be needed before there's a problem, and that perhaps "calling upon" Iran not to take action isn't the best strategy to contain proliferation. 

3)  October 15:  Iranian underground missile bases enable surprise launches.  In the off chance that maybe Iran mines and enriches its own uranium and loads it into a warhead in its own ballistic missile, it's good to know that they have undergound launch bases to "store and covertly fire surface-to-surface missiles."  Although the exact location of this facility is not known, Iran is quite proud of its underground lair and published some big glossy photos.  The location shown supposedly has a complex system of very large underground tunnels, and the potential to fire the missiles through surface vents, making advance detection more difficult.  Iran has stated it has many of these underground installations, which may or may not be true.

4)  Plutonium pathways and the Joint Agreement:  unsung or not so much?  As highlighted by the New York Times, a major benefit of the deal (they term it the "unsung concession") is Iranian agreement to redesign their Arak reactor so it can't be used to produce plutonium. The Times notes that

some nuclear experts voice incomprehension at what they see as a lopsided focus on uranium in evaluations of the deal reached with Iran — under which Tehran would forsake the production of plutonium.

Greg Jones, who as worked with both the RAND Corporation and the Nonproliferation Policy Education Center (NPEC), has a somewhat less sanguine take on this part of the deal:

The reactor's original design utilized natural uranium fuel, heavy water as the moderator and had a power level of 40 MW.  This reactor would have produced nine to ten kilograms of plutonium per year.  Under the terms of the Iran nuclear deal (the Joint Comprehensive Plan of Action, JCPOA) the reactor will be redesigned to use approximately 3.5% enriched uranium fuel and have its power level reduced to 20 MW.

The reactor will still produce significant amounts of plutonium, about one to one and one half kilograms of plutonium a year.  Though Iran is required to export the spent nuclear fuel containing the plutonium, Iran is allowed to keep the fuel for at least one year, which would allow Iran to accumulate at least two to three kilograms of plutonium, enough for a nuclear weapon.  Though the Administration claims that the JCPOA blocks Iran's plutonium path to a nuclear weapon, this clearly is not the case.

While reducing the amount of plutonium produced by this reactor would seem to be an important accomplishment, it is not. The JCPOA will accelerate the completion of the Arak reactor and the start of its plutonium production by having the IAEA and countries such as Russia provide technical, material and financial assistance.

Indeed, Russia and Iran do seem to be BFF's these days.

5)  Closing the potential channel of bomb material from power reactors.  Henry Sokolski, the Executive Director of NPEC, has another interesting angle of this core issue of containing Iranian access to fissionable material.  He points out that the negotiating team has inadequately addressed the potential for military diversion from Iran's light-water power reactor (LWR) at Bushehr.  Is this a big deal?  Sokolski thinks so:  in the early 1990s, this reactor was a "key focus of international concern."

The administrations of Bill Clinton and both the Bushes initially did all they could to prevent its completion, not only because it was serving as a cover for other nuclear-weapons-related activities (e.g., uranium enrichment, the transfer of weapon design information, and heavy-water-reactor technology and hardware), but also because the reactor itself was seen as a potential source of nuclear-weapons-explosive plutonium. When it became clear, however, that Bushehr was likely to be completed and that any hope of securing Russian assistance in limiting Iran's uranium-enrichment and heavy-water-reactor projects turned on grandfathering Bushehr, top Bush officials decided in 2007 to make the concession. After this, what was done at Bushehr was treated as an intrinsically "peaceful" activity. Even the politicians and governments most suspicious of Iran and critical of the Iran deal - George W. Bush, the French, and Benjamin Netanyahu - now accept the legitimacy of Iran's present and future "peaceful" power reactors. Because such critics of the deal did not demand that there be additional surveillance of Bushehr, those focused on closing the deal didn't ask. After all, LWRs were deemed to be unambiguously "peaceful."

He notes that LWRs have long been a concern, and that lightly irradiated fuel poses the largest risk.  Three years ago, "Iran emptied all of the fuel from Bushehr after only a few months of operation," a fuel load with enough weapons-grade plutonium to make as many as 24 weapons. 

Conversion requires a chemical processing plant, but there remains a concern that such a clandestine plant does exist within Iran.  While preventing this proliferation venue entirely may not be possible, it can be greatly reduced fairly simply:  by tracking the spent fuel at all Iranian reactors via round-the-clock monitoring.  The Joint Agreement included this for most Iranian facilities; but it did not include such monitoring at Bushehr.  Sokolski quite reasonably argues it should.

1) Official fact sheet on agreement suggests many business-as-usual policies will remain.  Harvard Kennedy School of Government's Belfer Center translated a Farsi fact sheet on the agreement that was released by the Iranian Foreign  Ministry.  There appears to be a fair bit of wiggle room here.  Some excerpts:

...The package containing these solutions does not have legal binding and will only provide a conceptual guide for calibrating and assessing a Comprehensive Plan of Joint Action. On these grounds, the drafting of a Comprehensive Plan of Joint Action based on these solutions will begin in the near future...

According to the framework of existing solutions, none of the nuclear facilities or related activities will be stopped, shut down, or suspended, and Iran's nuclear activities in all of its facilities including Natanz, Fordow, Isfahan, and Arak will continue...According to the reached solutions, Iran will continue its research and development on advanced machines and will continue the initiation and completion phases of the research and development process of IR-4, IR-5, IR-6, and IR-8 centrifuges during the 10 year period of the Comprehensive Plan for Joint Action.

These centrifuges are faster than the existing ones in use, and therefore would shorten Iran's breakout time to a bomb.

On sanctions, the fact sheet reads:

According to the reached solutions, after the implementation of the Comprehensive Plan of Joint Action, all of the UN Security Council resolutions will be revoked, and all of the multilateral economic and financial sanctions of the EU and the unilateral ones of the US including financial, banking, insurance, investment, and all related services, including oil, gas, petrochemicals, and automobile industries will be immediately revoked. In addition, nuclear-related sanctions against real and legal individuals, entities, and public and private institutions, including the Central Bank, other financial and banking institutions, SWIFT, shipping and aviation industries of the Islamic Republic of Iran, oil tanker companies, will be immediately removed. Also, the P5+1 member countries are committed to restraining from imposing new nuclear-related sanctions.

With such a level of distrust already on Iranian implementation, a phased removal would seem to make more sense and provide continued leverage for cooperation and compliance.  The immediate removal of all sanctions leaves little room to address future cheating -- and based on current statements, cheating seems a near certainty.

2)  Top Iranian officials quoted as saying faster centrifuges will go into production the day the agreement is signed.  FARS is the semi-official news agency of Iran.  Full article is here. 

Iran has said that its IR-8 centrifuges enrich uranium 20 times faster than the IR-1 centrifuges it currently uses.

According to the FARS report, "Iran's foreign minister and nuclear chief both told a closed-door session of the parliament on Tuesday that the country would inject UF6 gas into the latest generation of its centrifuge machines as soon as a final nuclear deal goes into effect by Tehran and the six world powers."

It said that Foreign Minister Mohammad Javad Zarif and Atomic Energy Organization of Iran (AEOI) head Ali Akbar Salehi made the promise when they briefed legislators on the framework agreement, and claimed the move was permitted under the terms of the deal.

The use of faster centrifuges is not allowable according to the US interpretation of the framework.

3) Places to hide nuclear work remain, as military sites declared exempt from inspections.  Of course, when a country knows certain locations are free of oversight, any illicit work naturally migrates there.  Here's the lowdown from the Iranian Minster of Defense:

Iranian Defense Minister Major General Hossein Dehqan said there has been "no agreement on inspecting Iran's military facilities and no visits will be allowed."   He made the remarks on Wednesday in answer to reports that during Iran's nuclear negotiations in Lausanne, Tehran agreed to have its military centers inspected.  Dehqan underlined that access to the country's military centers is among the Islamic Republic's red lines.

The word out of Switzerland yesterday was that "Iran and and six world powers had agreed on the outlines of an understanding that would open the path to a final phase of nuclear negotiations but are in a dispute over how much to make public."  What exactly is the dispute over?  The AP noted that

Pressured by congressional critics in the U.S. who threaten to impose new sanctions on Iran over what they say is a bad emerging deal, the Obama administration is demanding significant public disclosure of agreements and understandings reached at the current round. But the officials say Iran wants a minimum made public.

Iranian leaders are opposed to two agreements, saying previous two-stage negotiations were detrimental to their interests.

If we have an agreement and nobody knows the details, we can always claim compliance

Earlier today, word of a framework agreement being reached spread over the internet.  The original AP article flagging the areas of dispute pretty much disappeared from everywhere, heading down the memory hole (nearly everywhere; I found one paper still displaying the earlier report and took a screen shot). 

In its place, AP's newest update on the successful agreement could be seen.   But descriptions of the deal remain vague, and the narrative on the disputes over disclosure disappeared.  Time will tell how these concerns were resolved, or if they were just papered over. 

Thank goodness for "Congressional critics" on this one, and let's hope the negotiators get it right before the sanctions are lifted.  While US sanctions can be implemented again should Iran fail to live up to its side of the agreement, reinstituting sanctions from the broad array of countries now participating will be near impossible.

The transparency issue remains quite important and should not be ignored even if the narrative in the press reports has shifted. There is a rather morbid irony in a country with a special police force (the Basij) focused on identifying and punishing people for the most personal of breaches of a state-defined code of morality,1 arguing that the fundamental terms of an agreement to prevent nuclear proliferation in this important region of the world should be private.  The entire line of argument is ludicrous.  What you wear, who you are with, and what you read or watch on TV?  State business.  Basic commitments to prevent nuclear weapons development?  Nobody's business.

I mean, why should the rest of us worry that Iranian consent to an agreement with invisible clauses won't actually be followed?  Greg Jones of the Nonproliferation Policy Education Center has been tracking the Iranian nuclear effort for quite some time.  Probably his documentation of past non-compliance, even when the expectations were visible, should be ignored as unimportant. We should also overlook the examples Jones' presents where Secretary of State John Kerry said there was Iranian compliance, but objectively there was not.  I'm sure that behavior won't be a factor in the current negotiations, and Kerry has learned from his past over-optimism. 

And by all means we should also ignore what seemed very much like an April Fool's Day joke headline yesterday -- but unfortunately turned out to be real:  "Iran militia chief:  Destroying Israel is 'nonnegotiable'," quoting the Basij's commander Mohammad Reza Naqdi.  You know how customized those inalienable rights can be across countries... let's just consider this the Iranian version of our own "Life, liberty, and the pursuit of happiness" and move on, shall we?

Proliferation is an externality of nuclear power

Coal power has pollution and mining accidents.  Oil has pollution and spills and security chokepoints.  Wind has bird kills and corn ethanol pesticide runoff, water and soil depletion, and overuse of antibiotics.  Every form of energy has some negative effects, and nuclear is no exception. 

In addition to very significant challenges to manage the radioactive wates and periodic catastrophic accidents, the nuclear fuel cycle has the ongoing externality of proliferation.  It is not, as many nuclear power boosters like to argue, a totally separate issue and one that should be ignored when evaluating the trade-offs and economics of their fairy-tale massive expansions of nuclear reactors worldwide.  Quite the opposite:  it is an issue that has been central to the evolution and expansion of nuclear power since the inception of the industry.

The processes and expertise for building weapons and generating electricity are not exactly the same.  But they don't need to be for there to be problems.  The civilian and the military paths are certainly interlinked, and there is enough overlap that countries frequently use claims about their need for nuclear power as cover for all sorts of other military and geopolitical aims. 

There is a strong logic to this tactic.  Working on power gives them the time and space to develop equipment, expertise, and professional (or not-so-professional) ties with people in the know.  Activities during these years enable them to build the knowledge and technical base that can easily be extended at a time of their own choosing towards weapons.  It allows them to distribute production capacity, harden production sites, and establish production redundancies that make military action to roll back programs, should the need arise to do so, much more costly in blood and treasure.

And yet the world pretends this isn't happening, and the "right" to develop "peaceful" nukes is somehow sacrosanct -- more so even than the human rights that the current Iranian government so frequently ignores.  This right to peaceful programs is claimed even if the subsidy-free price of nuclear power would be well beyond a level at which the nuclear investments would be justifiable, and at which many other alternatives would easily outcompete nuclear as the marginal source of energy. 

This right is upheld even though more rational reading of the Nuclear Nonproliferation Treaty (NPT) agreement suggests that the "rights" for non-nuclear states to pursue near-bomb capabilities can both be properly limited and properly constrained under the terms of the agreement.  Indeed, doing so could short-circuit what has become a decade-long circus of negotiators arguing about whether or not Iran is doing innocent "research," actually building a bomb, or doing research so they can build a bomb quickly when they decide they want one.

And just for fun, here's an ad from the pre-revolution days in Iran.  The ad clearly illustrates the US role in promoting nuclear power in Iran as though it were little more complicated than plopping down a windmill in a farm field somewhere.  Nuclear is presented as a resource that, with a little government help of course, can soon come to a neighborhood near you. 

Historical artifact?  Not really.  How many countries are playing out this same scenario today -- whether with the US, France, Russia, South Korea, or others as their plant subsidizer?  And without any government subsidies to financing, accidents, land, construction, waste management, and decommissioning, how many of these plants would be built based on their own economic merit?  It is a question well worth asking.

• 1A brief summary from Wikipedia: "In Iran, Basiji act as 'morality police' in towns and cities by 'enforcing the wearing of the hijab; arresting women for violating the dress code; prohibiting male-female fraternization; monitoring citizens' activities; confiscating satellite dishes and `obscene` material; intelligence gathering; and even harassing government critics and intellectuals. Basij volunteers also act as bailiffs for local courts.'

Conventional industries have it easy. Make a good product; invest in technology and engineering to make it better and keep costs in line; then crank up the output and sell it wherever you can.  Unit costs drop.  Word of mouth bolsters your smart advertising campaign to millenials, creating feedback loops on social media, driving customers to buy still more of your product and fueling double digit growth.  Grow production and sales, both in domestically and abroad.  Grow brand recognition.  Grow revenues.  Grow profit.  You are limited only by your skills and your imagination.

Economic pressures conflict with nonproliferation goals in the nuclear sector

Were the world of nuclear vendors so easy!  They've got an industrial structure that begs for high throughput because their upfront capital investment and engineering demands are so great.  More units sold (in theory, at least; FOAK1 -reality has been a good deal rougher) should bring the total cost per delivered product down sharply but for one tiny problem:  their products are linked to nuclear weapons, or the potential for nuclear weapons. 

And so, unlike a toothpaste manufacturer, n-vendors are a bit constrained in ramping up production and selling all they've got.  One can't slap reactors up just anywhere, after all.  And, despite the wishes of shareholders and managers alike, one can't sell "nuclear products" to just anyone.

Thus the dance begins.  The industry continually tries to demonstrate why they should be allowed to sell more stuff to more people, and how it won't really be a problem.  They generate colorful graphics on how everybody else outside the US is already doing what they want to do, and therefore the US firms doing it too won't cause any incremental harm.2   They run more numbers to calculate the grevious financial losses not only to the industry, but to the country overall. Political optics matter:  it is very important that this not just be seen as their problem, but instead be reframed as everybody's problem, and not just now, but in the future as well.  There are losses now from reduced exports and jobs in foreign-owned US plants; but also future costs as the "needless" restrictions on exports bleed investment and squander our technical lead in an industry we created. 

The push to sell more is so strong, one might forget that we talking about nuclear equipment, designs, and fuels, and not Crest 3D White Vivid Flouride Radiant Mint flavored toothpaste.  (And, yes, in case you were wondering, this is the first time Crest 3D White Vivid toothpaste and nuclear reactors have been linked in the same sentence, and no doubt Procter & Gamble hopes it will also be the last... Though, in a testament to the ingenuity, or insanity, of humans, radioative toothpaste -- one containing thorium, and another thorium and radium -- was actually sold in the 1950s).  But this dynamic is how we end up with industry-published documents arguing that the US' nuclear export policy should be more like Russia's (see item 2 at the link) and have some people take that argument seriously.

Nuclear cooperative agreements should protect against proliferation, but often don't

It is against this backdrop that recent testimony and related background materials prepared by Henry Sokolski of the Nonproliferation Policy Education Center is so useful.  He focused on many aspects of nuclear cooperative agreements (123 Agreements) for a hearing before the Senate Foreign Relations Committee last month (PDF version here; presentation and background slides here).

Some of the key points:

• Once passed, 123 Agreements offer limited latitude for Congressional oversight. (Testimony by Sharon Squassoni of the Center for Strategic and International Studies also speaks to this issue, highlighting the lengthening of agreement duration and their auto-renewal absent a "no" vote by Congress as examples of the dwindling power of Congressional oversite).  
• Appropriate use of Congressional power prior to passage critical.
• Industry claims about financial ($740 Billion) and job (5-10,000 jobs per $ billion) losses from "overly stringent" export restrictions need to be taken with a grain of salt.  Not only is there the common risk that numbers from self-interested parties may not be so reliable, Sokolski points out that the key companies under discussion are often "American" in name only.  Westinghouse is headquarted in the US, but entirely foreign owned; 80% of the revenues from GE-Hitachi export sales go abroad; enrichment firm URENCO's US subsidiary is entirely foreign-owned as well.  And only a small portion of current exports from these firms are even subject to 123 Controls.

Given these characteristics, why the fuss?  Sokolski argues that the main reason for the "sort-of American" industry to focus on modifying the controls governed by the 123 Agreements has nothing to do with direct exports, but rather with limits on their ability to re-export technology and components to third countries, and to recycle and enrich nuclear fuel. 

If you are foreign-owned, but still reliant on products or intellectual property derived from the US, your freedom of action to ramp up production and sales is severely constrained in two main areas:

• Equipment and design.  Transfer of US-origin nuclear reactor design information critical to other countries' (e.g., Japan, Korea, PRC) manufacture and retransfer of nuclear components to 3rd to other states, (e.g., Vietnam, UAE, Turkey, etc).
• Fuel.  Transfer of US-origin nuclear materials (e.g., yellowcake and LEU fuels) and their subsequent enrichment or reprocessing overseas (e.g., in China, RoK, Japan, etc.) if they are derived via US-exported or designed reactors.

While the industry views this as a flaw of the 123 process, Sokolski sees the restrictions as an important source of leverage to control proliferation -- and one that needs to be used much more than it has been.  Relying on existing IAEA controls is not a substitute, he argues, noting that the IAEA review process did not stop the pursuit of bomb options with reprocessing and enrichment in Iraq, Iran, Syria, North Korea, or Libya.  Weaker restrictions on fuel recycling from US-derived reactors, for example, could generate enough material for many bombs, as the slide below hypothesizes based on the reactor count in China. 

The central driver in whether or not to allow the export of nuclear goods and services from the US must be based on natural security, not commercial interests.  Sokolski:

Generally, these matters have been discussed in the context of promoting nuclear power's further expansion overseas, of increasing the number of jobs or of concluding nuclear agreements and cooperation initiatives more generally. All of these considerations are important. They are not, however, the primarily lens that should be used for weighing these matters... security concerns should be the first business of our government. Certainly, the most profound contributions Congress has made to promoting and controlling truly peaceful foreign nuclear activities were premised on putting U.S. national security first. This was true in 1946 when Congress created the Atomic Energy Commission, in 1978 when it passed the Nuclear Nonproliferation Act, in the 1990s when it conditioned the Nuclear Agreed Framework with North Korea, and today as it considers legislation relating to our nuclear negotiations with Iran.

• 1"First of a kind," is a term frequently used by industry and academics to estimate the overnight costs of new reactors. The average costs of later reactors tend to be projected at much lower costs/kWe due to economics of scale and learning, and FOAK estimates are presented as best-guesses of the first few plants, but not the "real" costs one should focus on when evaluating policy options. In reality, however, the costs of later units have often escalated rather than decreased. This has been due to low production runs of the exact same reactor type limiting scale effects, the discovery of new problems from the early units, variation across sites that makes routinized installation impossible, regulatory or financial pressures that build based on macro factors in the civilian nuclear segment overall, or some mixture.
• 2NEI President Marv Fertel frames it this way in his Senate testimony: NEI "Opposes initiatives to condition U.S. nuclear cooperation on new terms that our potential partners will not accept and other supplier nations will not require." So if our partners (that is, their potential customers) won't accept certain terms, we should drop them?

1)  Poker, North Dakota style.  Using a logic that only an industry trade association could understand, the US state of North Dakota has announced plans to close $50m/year in loopholes to oil and gas.  Great!  End subsidies that make no sense, such as lower taxes on low production "stripper" wells that have been exploited by nearby activities producing at much higher rates.  But no reform is free, so the state officials are offering reduced tax rates on oil and gas in return.  The rub:  the reductions will cost the state an estimated $595m/year in new lost tax revenues, a mere 12x what they expect to get back from subsidy removal.  In what world is giving away $12 in state revenues for each $1 you claw back considered good business?  And it is not clear that even the 12:1 figure includes losses from new drilling incentives the state plans to put in place.  Due to fracking, North Dakota is the country's second largest oil producer, after only Texas. This change is a big deal.  For more information on how US states subsidize fossil fuels, go here.  (Thanks to Ben Schreiber for the ND article link). 

Upate, May 2, 2013:  The North Dakota House overwhelmingly rejected this proposed change:

North Dakota's House rejected a measure Wednesday aimed at closing an exemption enjoyed by oil companies in exchange for lower tax rates.

The Republican-sponsored bill - one of the most contentious of the legislative session - also would have given the Three Affiliated Tribes a greater share of the taxes collected from reservation oil production.

Representatives crossed party lines and overwhelmingly defeated the measure 71-21.

Democrats, who are the minority in both chambers, have been especially critical of the measure, saying the proposed tax framework would have cost the state hundreds of millions of dollars in lost revenue over the next few years by lowering taxes on oil companies.

2)  NEI thinks US nuclear export rules are too tight; looks to Russia as a model.  The Nuclear Energy Institute's review of problems with our country's restrictive nuclear export regime is nothing if not bold.  Here's their summary:

Compared to the nuclear export control regimes of Russia, Japan, ROK and France, the U.S. regime is, in many respects, more complex, restrictive and time-consuming to navigate and fulfill. Fundamental aspects of the U.S. export control regime were established over six decades ago – more than three decades prior to the creation of the Nuclear Suppliers Group (NSG).

During this time, the U.S. regime has evolved into a patchwork of requirements with layers of modifications. By comparison, the Russian, Japanese and ROK regimes are relatively modern and, in the case of the Japanese and ROK regimes, were recently amended to address post-9/11 nonproliferation concerns.

Now, I'm all in favor of looking to streamline the way government and business interact, but using Russia as a nuclear export model seems a sketchy strategy even for NEI.  After all, Russian nuclear exports have been a bit of an issue for other parts of the US government for quite some time.  But maybe that's the brilliance of the approach!  Adopt Russian nuclear export rules, boost business for US nuclear suppliers (and NEI's members) by allowing quicker, broader nuclear exports; and force a ramping up of government efforts and funding through the State Department and the IAEA to deal with the political implications of expanding nuclear capabilities abroad.  A job creation twofer!

3)  Subsidy Cycles, UK style.   Worried that your oil and gas operator didn't properly manage their environmental issues and taxpayers will be left paying reclamation costs?  No need to be.  Watch and learn from the UK - using subsidies to turn prior negligence into present opportunities!  A Brownfields Tax Credit "rejuvenates" an "elderly" offshore field, allowing Enquest PLC to buy the Thistle field in the North Sea and for production to go on.  No mention of what the government did wrong (poor oversight? inadequate bonding?) that resulted in the field being mismanaged by its prior operator in the first place; or of whether the government is trying to recapture reclamation costs (including the lost revenues due to the Brownfield subsidy) from that operator or its insurers.  (Thanks to Ron Steenblik for the article link). 

4)  State subsidies for job creation:  states are losing the bidding war.  The Job Creation Shell Game, released in January, is a great review by Good Jobs First (a Washington, DC-based NGO) examining job poaching from one state to another.  Not only do states routinely pay tax rebates to move old jobs from one state to another, but they then enter a process where large employers routinely threaten to move, extorting "retention" payments for staying put.  Net job gains are small; net tax losses are big.  And who do  you think is left having to make up the lost tax revenues?  Us, of course.

5)  Relative scale:  fossil fuel subsidies versus spending on international development.  An interesting comparison of the scale of fossil fuel subsidies versus fast start climate spending by Oil Change International illustrates that nearly everywhere they looked, the subsidies to increased use of fossil fuels greatly exceeded the spending to start addressing the effects of consuming so many fossil fuels.  Yes, some subsidies help the poor, and not all climate spending is efficient.  But the gross comparison underscores how important it is for any effort to address climate change to incorporate ending subsidies as a central strategy.

Another useful summary of the proliferation concerns associated with "peaceful" power reactors from Henry Sokolski of the Nonproliferation Policy Education Center:

At first blush, our government’s approach to head off Iranian nuclear weapons with tighter sanctions and military threats seems totally at odds with its continued effort to negotiate a disarmament deal with Pyongyang. Yet, in one key respect, both of these approaches and a broad swath of bipartisan expertise are quite unified—namely, they support these countries’ continued construction and operation of light water power reactors (LWR) for generating electricity, viewing these reactors as benign. This is not only mistaken but dangerous, and not just in the case of North Korea and Iran.

In fact, civilian LWRs can be copious producers of plutonium suitable for nuclear weapons. The argument one often hears, that the plutonium these reactors produce is unsuitable for simple weapon designs, is simply wrong. The suitability of the plutonium for weapons depends on how long the plutonium-containing spent fuel stays in the reactor. The longer the fuel stays in the reactor the more optimal it is for power production but the less optimal it is for use in nuclear weapons. The common assumption is that the reactor’s owner would not tamper with commercial refueling schedules. This assumption is simply silly.

Nonetheless, Obama administration officials and many of their critics continue to describe LWRs as a safe proposition, so long as they are inspected by the International Atomic Energy Agency (IAEA) and are not accompanied by reprocessing facilities to extract plutonium from their spent fuel or enrichment facilities to produce fresh fuel. This mistaken view got its greatest boost from George W. Bush. No friend of Iran, Bush in 2005 said the United States had no problem with the Bushehr nuclear power reactor​—​it was just Iran’s centrifuge enrichment technology that concerned us. Indeed, small centrifuge plants that are claimed by owners to be used for producing low-enriched uranium fuel for reactors are a proper proliferation concern because they could also be used to produce highly enriched uranium for bombs. But building a small clandestine reprocessing plant to extract the plutonium from LWR spent fuel is actually easier than putting up a centrifuge plant. Nonproliferation policy hasn’t been taking this possibility seriously enough.

The full article can be read here.