Fukushima accident

Cost of Subsidizing Fossil Fuels Is High, but Cutting Them Is Tough

...Moreover, citizens and companies that rely on fossil fuels usually do not pay the full cost of resulting environmental  problems like oil spills, sludge from coal mines and greenhouse gases, and for health problems from polluted air.

Estimates of the cost of these effects — or “externalities” in the ungainly jargon of economists — vary.

Natural gas fracking well in Louisiana

1,000,000 - Number of years for there to be a radiation-related fatality at a Japanese nuclear plant according to the goals put forth by the Japanese Nuclear Safety Commission in 2003.1

8 - Number of years into the million year period before the Fukushima accident in Japan.

$2.1 billion - Maximum amount of liability borne by Tokyo Electric Power Company (Tepco) for an accident at one of its reactors under Japan's nuclear liability laws.  (WSJ pegs this figure at only $1.5 billion).2

$0 - Actual amount Tokyo Electric Power will likely have to pay in damages to people and property, including its own workers, since accident was caused by an earthquake.3 Update:  There are competing views on Tepco liability, and the ultimate exposure remains uncertain.  Merrill Lynch has prepared a good overview of this.  Japanese politicians have stated that they did not think the accident would be characterized as an "exceptional disaster" that would exempt Tepco from liability.  However, that same article by Reuters notes that:

Insurers of the stricken nuclear plant have already cited Japan's 1961 Act on Compensation for Nuclear Damage to signal that claims would be unlikely.  Chaucer, one of the world's leading nuclear-risk insurers, has said it expected the act to absolve the operator of liability.  Nuclear Risk Insurers, the underwriting agent for all UK nuclear insurers, has also cited the 1961 act in stating that it did not "anticipate significant losses from this event."

Tepco has indicated it expects financial distress.  However, there are many elements of the liability, some of which are purely business-related such as damage to the plant and power interruption.  In addition, were Tepco to be nationalized (as has been discussed), the accident liability would also rest with Japanese taxpayers.

$17.5 billion - Current Japanese government estimate of compensation to businesses and individuals for damages from the nuclear accident.  This estimate does not include direct government response costs to the accident.  Estimates in the Japanese media put costs much higher, and more than $30 billion has been erased from Tepco's market capitalization since the accident.

$40.9 billion - BP loss reserve to cover its estimated costs from the Horizon blow-out in the US Gulf of Mexico, an accident that had a small number of fatalities and occurred far from human population centers. 

$386 billion - Estimated mortality costs from a nuclear accident near New York City in a 2009 paper by economists Geoffrey Heal (Columbia University Business School) and Howard Kunreuther (Wharton School, University of Pennsylvania).  Business interruption costs would be an additional $50-100 billion.

$12.7 billion - Gross value of insurance pool to cover off-site damages to people and property from an accident at a US nuclear power plant under the Price-Anderson Act.  Amount is paid in over nearly seven years.4

$8.5 billion - Present value of Price-Anderson pool to cover losses offsite for a nuclear accident in the United States.

5 - Number of hurricanes since 1990 where US insured losses (total losses were much higher since not all damage is insured) exceeded the $8.5 billion pool available for a nuclear accident.5   Hurricanes obviously involve no radiation.

$2.1 billion - Maximum amount of liability coverage available outside the United States to compensate for a nuclear accident under the main international conventions on nuclear liability (Table 13-1).

$453 million - Total present value at-risk amount for each reactor to cover third party liabilities from an accident at its own plant, as mandated under Price-Anderson.   US operators routinely purchase more than 10x this level of coverage to protect their own assets in an accident, including both property coverage and replacement power.

$1,123 - Total available insurance payment (present value) for each person in the Baltimore-Washington metropolitan statistical area under the terms of the Price-Anderson Act, should there be an accident at the Calvert Cliffs plant in Lusby, MD.  Funds would need to cover mortality, morbidity, and property damage.   Allowability of pool to compensate for economic losses and natural resource damages is less clear.

$60 - Portion of the $1,123 in per capita coverage that will be paid by the accident-affected plant itself under the terms of Price-Anderson.  Price-Anderson provides the largest private insurance pool in the world to cover offsite damages from a nuclear accident.

$12 - Value per resident of the "payment for their troubles" offered by Tokyo Electric Power to the town of Naime, severely affected by the Fukushima accident.  Tepco has insisted this is merely an initial payment and not instead of compensation for damages the accident has caused.  However, the town as rejected the payment as being far to small to make up for the drastic reduction in their quality of life and ability to earn a living since the accident.

(Thanks to Simon Carroll for providing links to the Japanese nuclear liability laws)

  • 1The specific wording used by the NSC was "The mean value of acute fatality risk by radiation exposure resultant from an accident of a nuclear installation to individuals of the public, who live in the vicinity of the site boundary of the nuclear installation, should not exceed the probability of about 1x10-6 per year. And, the mean value of fatality risk by latent cancer caused by radiation exposure resulting from an accident of a nuclear installation of individuals of the public, who live in the area but some distance from the nuclear installation, should not exceed the probability of approximately 1x10-6 per year."  Nassim Nicholas Taleb, author of The Black Swan and professor of risk engineering at NYU, notes that "...we are incapable scientifically of measuring the risk of rare events. We tend to underestimate both the probabilities and the damage."
  • 2The WSJ cites Ower Brown noting that the $2.1 billion payment (120 billion yen) is not a formal cap. Section 16 of the Act on Compensation for Nuclear Damage states that "Where nuclear damage occurs, the Government shall give a nuclear operator (except the nuclear operator of a foreign nuclear ship) such aid as is required for him to compensate the damage, when the actual amount which he should pay for the nuclear damage pursuant to Section 3 exceeds the financial security amount and when the Government deems it necessary in order to attain the objectives of this act." The "and" clause does suggest such a payment is not mandatory, and indeed the government must be "authorised to do so by decision of the National Diet." However, the language indicates such payments are likely.
  • 3See section 3 of Act on Indemnity Agreements for Compensation of Nuclear Damage (Act No. 148 of 1961, as amended in 2009).
  • 4This statistic and the following ones are from Doug Koplow, Nuclear Power: Still Not Viable Without Subsidies, February 2011. See pages 80-82.
  • 5Scroll down page to reach table titled "The Ten Most Costly Catastrophes, United States."