Economic and environmental implications of the nuclear power phase-out in Belgium: Insights from time-series models and a partial differential equations algorithm

Abstract

By 2025, Belgium will phase-out nuclear power. Unassessed so far, this policy reform may modify the economic and environmental channels through which energy and society interfere in this country. In this paper, we investigate whether this structural energy change may adversely impact the growth of the Belgian economy (i) and its ability to meet its long-term greenhouse gas emission targets (ii). A multivariate model comprising production factors (labor, capital, and exports), nuclear and renewable energy uses, total primary energy supply, economic growth, and CO2 emissions from the power and heating sector is combined with real time-series data spanning the 1974–2019 period. The analysis consists in sequentially assessing two distinct nexuses (energy-economy and energy-economy-environment) over reduced- and augmented frameworks (excluding and including nuclear energy), and through a two-stage empirical strategy: time-series econometric estimations (Toda-Yamamoto causality test, Impulse Response Functions (IRFs), and the Auto-Regressive Distributed Lags (ARDL) and Machine Learning (ML) experiments with a Partial Differential Equations (PDEs) algorithm. For robustness purposes, we conduct two seminal tests which relate to dynamic predictive processes (T-Mat and Verticality tests). Besides confirming the time-series findings, our ML results highlight the necessity to timely manage the process of nuclear phase-out, along with a progressive deployment of installed renewable energy capacity. This should avoid additional economic costs, energy security threats, and undermining of climate targets. In doing so, this study combines macro-level nexus investigations with the politics and institutional determinants of nuclear energy reliance and seeks to bring inclusive knowledge on this topic.