Following the great east earthquake in Japan in March 2011, 5 years ago now, the subsequent accident at the Fukushima nuclear power plant shocked the world and triggered fierced debates on the future of nuclear energy in many countries. Not so long ago yet another earthquake took place close to the same area, reminding the potentially devastating effects of tsunamis, but especially of nuclear accidents.

In the 1960s international conventions were created of which the main goal was to protect the (American) owners of the nuclear material that was delivered to European nuclear operators. Since liability was exclusively channelled towards operators in Europe only operators and no longer other parties could be held liable for potential damage. The international conventions imposed very low caps on the liability of the operator. After the Chernobyl accident (which happened on 26 April 1986) new conventions came into being that were supposed to increase the amount of compensation. Although Chernobyl already is more than 30 years ago, most of those new conventions have not entered into force yet. Moreover, when they will enter into force the amount available will only be 1,5 million Euro. Recent estimates of the damage caused by the Fukushima incident hold that the total amount of the damage could be as high as 170 billion Euro. This clearly shows that operators today are not liable for the consequences of the accident. Moreover, an important part of the damage is compensated through public funding, which means that the general public (the tax payers) pay the compensation.

This financial limit on the liability of nuclear power plant operators has several negative effects. One problem is that obviously insufficient compensation will be available for victims if a nuclear accident happens. A second problem is that since operators are not fully exposed to the total costs of the accidents they may cause, they also will not demand insurance cover for those amounts and hence they de facto pay too low premium. A third related consequence of this subsidization of nuclear power is that the relative price of nuclear power is too low, as nuclear operators are not forced to incorporate the full social costs of their activity into their prices. This may constitute a distortion of competition towards other energy forms that do not enjoy similar subsidies. Given the high subsidies the price of nuclear power also does not reflect the social costs as a result of which the demand for nuclear power will be too high. Finally and perhaps most importantly, the fact that nuclear operators are not fully liable for the consequences of a nuclear accident may lead to too low investments in prevention. In a provocative article Harvard Professor Mark Ramseyer argued that the Tokyo Electric Power Company (TEPCO), the operator of the Fukushima plant on purpose built the nuclear facility in an earthquake area, knowing that they are protected through the limited liability and can hence throw the consequences of their activity on society.

In many countries the life time of the first generation nuclear power plants has been extended. That can undoubtedly also increase the risks. Policy-makers should realise that times have changed: whereas in the 1960s an argument could be made that the newly established nuclear industry needed a support from the regulator in the form of a limitation of liability the same argument cannot be made any longer 60 years later, especially after the experiences with Chernobyl and Fukushima. The lesson from Fukushima should therefore be clear: the limitations on the liability of nuclear power plant operators whether they appear in national legislation or in international conventions should be abrogated and power plant operators should be fully exposed to unlimited liability in case of a nuclear accident, of course supported with financial guarantees.

Read more: Liu, J. and Faure, M., “Compensation for nuclear damage: a comparison among the international regime, Japan and China”, International Environmental Agreements, 2016, Vol. 16, 165-187 and Faure, M., Liu, J. and Wibisana, A., “Industrial accidents, natural disasters and ‘Act of God’”, Georgia Journal of International and Comparative Law, 2015, Vol. 43, 383-450.

^{Image: Fukushima, IAEA fact-finding team leader Mike Weightman visits the Fukushima Daiichi Nuclear Power Plant on 27 May 2011 to assess tsunami damage and study nuclear safety lessons that could be learned from the accident. Copyright: IAEA Imagebank. Photo Credit: Greg Webb / IAEA.}

 Published on Law Blogs Maastricht