TEPCO

When the World Nuclear Association (WNA), the nuclear industry's global cheerleader, describes potential damages from a reactor accident, they do so in a strategically simplistic way:

Operators of nuclear power plants are liable for any damage caused by them, regardless of fault. They therefore normally take out insurance for third-party liability, and in most countries they are required to do so.

The potential cross boundary consequences of a nuclear accident require an international nuclear liability regime, so national laws are supplemented by a number of international conventions.

Liability is limited by both international conventions and by national legislation, so that beyond the limit (normally covered by insurance) the state can accept responsibility as insurer of last resort, as in all other aspects of industrial society.

To paraphrase here:  we've got you covered even if contamination came in across national boundaries; and in the tiny, tiny, tiny chance of an accident where our pot of money isn't big enough to cover, we have the backing of our governments.  No, this backing is not "special" (and therefore a subsidy).  It is simply what every other industry in an "industrial society" gets so the countries can get on with the business of economic growth and development.

Unfortunately, when there are real accidents and real money is at stake, WNA's happy town starts to break down.  As Rick Wallace writes in The Australian:

In terms of sheer chutzpah, Tokyo Electric Power Co's claim that it no longer owns the radioactive isotopes that spewed out of its Fukushima Daiichi nuclear plant in March takes some beating.

In defending a lawsuit from a Fukushima Prefecture golf club, lawyers said the radioactive cesium that had blighted the Sunfield Nihonmatsu golf course's fairways and greens was the club's problem. The utility has taken a similarly hard line defending claims from ryokan (inn) and onsen (spa) owners.

TEPCO's lawyers used the arcane legal principle of res nullius to argue the emissions that escaped after the tsunami and earthquake triggered a meltdown were no longer its responsibility. "Radioactive materials (such as cesium) that scattered and fell from the Fukushima Daiichi nuclear plant belong to individual landowners, not TEPCO," the utility told Tokyo District Court.

The chief operating officer of the prestigious golf course, Tsutomo Yamane, told The Australian that he and his staff were stunned: "I couldn't believe my ears. I told my employees, 'TEPCO is saying the radiation doesn't belong to them', and they said 'I beg your pardon'."

That's right:  the radiative cesium "belongs" to whomever it lands on.  Luckily, the court rejected TEPCO's argument, though still dumped the liability on the municipality to clean up.

Compare and contrast to Monsanto and similar "aerial drift" issues.  In that case, it wasn't radioative cesium that clearly came from TEPCO's plant, but "Roundup-ready" (Roundup is a Monsanto pesticide) Canola seeds that clearly came from surrounding farms that were planting the stuff to boost yields.  Some of these seeds drifted in by air to a nearby farm that had neither licensed them or sought to plant them.  That farmer didn't rush to pay royalties to Monsanto for the unasked-for plants; nor did he pull them up one-by-one.  Unlike TEPCO, Monsanto did not conclude that these emissions "belonged to the individual landowners" on which the seeds fell.  Rather, the firm sued for copyright infringement (Monsanto v. Schmeiser, nicely summarized in this article by Stephanie Bernhardt).  The case went all the way to the Canadian Supreme Court, which ruled that intent didn't matter and that Monsanto deserved payments.  Monsanto had launched 138 "seed piracy" suits in the United States alone through 2009; no word yet of any "cesium piracy" suits bubbling up in Japan.

An obvious question here is what happens when the aerial drift of Monsanto's seeds spreads not benefits, but harm.  After all, organic produce requires certification, and obtains premium market prices.  Contamination with genetically modified seed attributes can destroy both.  These are not theoretical problems: the USDA views such contamination as unavoidable.  Further, USDA's national organic certification does not require testing for GMOs, and by removing the economic pressure to avoid it, the USDA loophole actually makes the spread of such cross-contamination more likely.  Indeed, this Austrialian apple farmer has already suffered damages. 

Facing both the risk of damages to crop value from crop contamination and the ironic risk that Monsanto will then sue them for violating crop genetic copyrights, a consortium of organic farmers launched a pre-emptive suit against Monsanto in March 2011.  Monsanto has argued the case should be summarily dismissed; oral arguments will begin later this month. 

Residents surrounding reactors ought to take note of both the TEPCO and Monsanto cases, as it is clear that WNA's happy assurances about industry responsibility for accidents are 90% symbolic.

The Japanese Parliament has just passed a new law that pumps the equivalent of $26 billion into a fund to pay for damages caused by TEPCO's Fukushima disaster.  This is an "initial" contribution, so more could be on the way.  Rather than viewing this massive bailout to nuclear power as a failure in all dimensions of the regulatory oversight and financial assurance system of Japan, the payment is characterized as a "major step forward" by Yukio Edano, the chief cabinet secretary.

From the perspective of victims of the accident, it is a step forward -- since otherwise they would have received virtually no compensation for the damages the accident has caused to their health, their jobs, and their lives.  But this should not by any means obscure the fact that clearly nuclear power has been wildly mispriced in Japan; and that had it been properly priced their energy system could well have evolved in very different ways.  Further, other countries ought to look to this example as Exhibit A on why they need to fix their own nuclear liability regimes.

This type of bailout certaintly won't change the minds of "see-no subsidy" groups who can rationalize any level of pork as somehow not really a subsidy-- here's the World Nuclear Association ("Nowhere in the world is nuclear power subsidised per unit of production.  In some countries however it is taxed because production costs are so low.")  But the hope is that more open-minded folk will look a bit more realistically at the economics of various energy options inclusive of subsidies, and adjust policy and investment decisions accordingly.  

According to the US Energy Information Administration, Japan generated roughly 6,650 billion net kWh of nuclear power for the time period covered by EIA's data (1980 through 2009).  This single bailout contribution is equivalent to a subsidy of 0.39 cents/kWh for the entire period, a value that provides a rough proxy for what an actuarily-fair insurance premium should have been.  While there was some generation outside the range captured in the EIA time series (which would reduce the subsidy/kWh), the errors are more likely to understate the subsidy than to overstate it.  First, this calculation assumes break-even; real insurance operates to earn a return and would have set premiums higher in line with that objective.  Further, this "initial" contribution is well below the cost estimates of the accident. 

To provide a more robust range for the liability subsidy, we can use as a ballpark figure for the liability subsidy the $246 billion estimate put forth by the Japan Center for Economic Research (JCER) for the cost of the Fukushima accident.  The Center is an institution that, according to the Economist magazine, "is heavily financed by a federation of electricity utilities, all but one of which use nuclear power," so would not seem likely to unnecessarily inflate the cost of the accident.  This massive cost will not be financed by TEPCO, which is struggling to survive.  Instead, it is quite likely to be paid by taxpayers.  The full bailout would translate to a subsidy of roughly 3.7 US cents for every kWh generated in Japan between 1980 and 2009.  Clearly, proper pricing of liability alone would have greatly altered the energy landscape of Japan.

(Thanks to Ron Steenblik for the original article link)