More than one month after the devastating March 11th earthquake and tsunami, Japan faces an ongoing nuclear crisis as radiation continues to leak from the stricken Fukushima Daiichi nuclear reactor. Japanese authorities recently upgraded the severity of the accident from level 5 on the International Nuclear Event scale to level 7–the same level as the Chernobyl disaster in 1986.

The upgrade is a grim reminder of the scope of Japan’s nuclear catastrophe, but there are some key differences between Fukushima and Chernobyl. First and foremost, the amount of radiation released in Japan is just one-tenth of what escaped in the Ukraine. The reactor at Chernobyl exploded, sparking massive graphite fires that burned for days and spewed radiation into the atmosphere. In Fukushima, the pressure and containment vessels remain essentially intact and most of the radiation is contained to the local area. The Chernobyl incident resulted in 29 radiation-related deaths in the immediate aftermath of the meltdown, while not a single life has been lost at Fukushima.

These differences notwithstanding, the repercussions from the crisis are grave. Much of the arable land near the affected nuclear plant is no longer suitable for farming. Drinking water has been contaminated and thousands of people have been forced to relocate. But the disaster could have been much worse. The Fukushima Daiichi reactor is far more advanced than the one at Chernobyl and Japanese authorities responded to the event far more quickly and decisively than the Soviets did in 1986.

The Fukushima nuclear crisis has given fresh ammunition to US critics of the nuclear energy industry. These critics often argue that it would be wiser to exploit the country’s vast supplies of natural gas rather than build new nuclear reactors. It’s an argument that makes economic sense while the price of natural gas in the US hovers at $4 per million British thermal units (MMbtu).

But natural gas won’t remain cheap forever.

The low cost of natural gas in the US is a product of the shale gas revolution. Extracting this unconventional resource was once a very costly endeavor. But advances in hydraulic fracturing and horizontal drilling have made exploiting the US’ huge shale gas reserves far more economical. New discoveries of additional shale gas formations in recent years have created a glut of natural gas on the US market, transforming the US from a net natural gas importer into a potential exporter. However, exports of natural gas are stymied by a lack of export-oriented infrastructure. The US only has one export terminal for natural gas, and this is slated to close in the near future. Consequently, natural gas is priced on a regional basis, reflecting the dynamics of US supply and demand. This is likely to change soon.

Plans for three new North American export terminals–one in British Columbia and two on the US Gulf Coast–are in the works. Additionally, the operators of two import terminals have proposed converting their facilities to allow liquefied natural gas exports. That increased export capacity would change the pricing mechanism for natural gas so that it more accurately reflects global supply and demand. The price of US natural gas would climb toward the global average of about $11 per MMbtu, significantly affecting the economics of natural gas-fired power plants.

Furthermore, although natural gas-fired power plants are far cleaner than coal-fired plants, these facilities still produce greenhouse gas emissions. The US and other global governments are eager to reduce carbon emissions in order to mitigate climate change. Nuclear energy will be critical to achieving that goal. Not only is atomic power the most efficient and reliable form of available alternative energy, it emits less carbon than any competing technology.

There’s a popular notion that most forms of alternative energy are carbon neutral. That just isn’t the case. Building out solar power capacity–from mining silicon for photovoltaic cells to constructing the facility itself–results in the equivalent of between 30 to 100 tons of CO₂ emissions per gigawatt hour of energy. Wind power installations produce 10 to 20 tons of CO₂ emissions, while biomass power generates 10 to 50 tons of CO₂ emissions.

By contrast, a nuclear reactor generates zero to 30 tons of CO₂ emissions, depending upon how the uranium is mined. If every US citizen were to use only nuclear-powered electricity over the course of their lifetime, this would result in about two pounds of waste per American. However, if all of our electricity was derived from coal–the highest emitter of greenhouse gases–the result would be 68.5 tons of waste for every US citizen. All other forms of energy–save for hydroelectric power–fall somewhere between these two poles.   

Accordingly, the Organization for Economic Cooperation and Development (OECD) estimates that nuclear reactors could supply about 25 percent of the world’s electricity with virtually zero carbon emissions.

Nuclear energy also requires less physical space than competing alternative energy technologies. A nuclear installation requires approximately one square mile of space to produce 1,000 megawatts of energy. A solar installation would require 50 square miles to produce the same amount of energy. An equivalent amount of wind power would gobble up 250 square miles; biomass would require 2,600 square miles. Nuclear energy is dependable–you don’t need to rely on the wind or sun to keep the lights on.

The International Front

The global nuclear power industry has also come under significant international pressure following the crisis in Japan.

German Chancellor Angela Merkel has idled seven of the country’s 17 nuclear reactors for three months for safety reviews. At the time of writing, it remains unclear whether these facilities–the oldest in Germany–will be reactivated. But the odds favor reactivation.

Although Germany has made great strides to implement renewable energy sources such as wind and solar, renewables account for just 17 percent of the nation’s electricity, compared to 29 percent for atomic energy. Should those seven reactors be shut down permanently, Germany will struggle to replace that lost generation capacity and likely experience slower economic growth.

In exchange for extending the lifespan of Germany’s reactors last year, electric utilities in the nation agreed to pay into a fund tasked with promoting renewable energies. That fund is calculated to be worth more than USD24 billion. Additionally, a new tax on nuclear fuel rods was expected to contribute another USD3.3 billion per year to the fund’s coffers.

But German utilities have stopped paying into the fund since the nuclear plants have been shut down. That will hamper the government’s ability to finance the transition to other alternative energy sources and could compel Merkel to reconsider her position.

Finally, there’s the situation in China. In response to the Japanese nuclear crisis, China’s government announced it would suspend approvals for new nuclear power plants while it drafted revised safety rules. But the government didn’t suspend work on the 26 reactors currently under construction. Chinese authorities have insisted that the country’s plan to develop nuclear power resources remains unchanged. These suspensions on new plants are a speed bump and not a red light for the growth of nuclear power in China.

Don’t Exit

The current crisis of confidence in atomic power is a temporary–though serious–setback for the global nuclear power industry. It’s also hurt our position in Market Vectors Uranium + Nuclear Energy (NYSE: NLR), as demonstrated in the graph below.

However, we entered this position with an eye toward long-term growth. Based on our view that this pullback will be temporary, we continue to recommend Market Vectors Uranium + Nuclear Energy. The fund’s value should recover as Japan copes with the crisis and the media attention dies down. Meanwhile, investors have the opportunity to buy into this exchange-traded fund (ETF) at a discount.

We continue to recommend that long-term investors purchase Market Vectors Uranium + Nuclear Energy below 30.

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The Global ETF Profits Portfolio is divided into three sections: Growth, Income & Hedges (I&H) and Short-Term Opportunities.

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The Growth and I&H sections are appropriate starting points for investors seeking to establish positions for the long term. Short-Term Opportunities will be more adventurous. We’ll adjust the ETFs in the Portfolio on an ongoing basis to reflect investment objectives. Our recommendations are sorted in descending order of preference, starting with our favorite pick at the top of each section.

It’s important to buy a cross-section of recommendations–taking into account, of course, your objectives and risk tolerance–in order to gain broad exposure to the themes we’ve recommended and to hedge your long positions.