European Challenges to Promoting International Pooling and Compensation for Nuclear Reactor Accidents
Debate about liability and compensation arrangements for nuclear reactor accidents increased markedly after the 1986 Chernobyl accident. This accident brought into stark relief numerous deficiencies in the existing international nuclear liability and compensation regime. It highlighted that many countries with nuclear power plants were not part of any international liability and compensation agreement, meaning that victims in other countries might receive no compensation at all for damage they suffer after a reactor accident causing damage that crossed national borders. Moreover, the sheer scale of the Chernobyl accident showed that the potential range and scale of damage far exceeded the restrictive definitions and liability and compensation amounts in the current system. In short, the established nuclear liability and compensation system could not cope with tens or hundreds of billions of dollars worth of damage spread over multiple countries.
The subsequent revision of the international nuclear liability and compensation conventions has sought to address these deficiencies by establishing higher liability amounts and broadening the range of compensable nuclear damage, whilst leaving much of the original 1960's nuclear liability and compensation architecture unchanged. Even with these proposed increases in operator liability and compensation amounts, it remains the case that not all the potential costs of a large nuclear accident will be covered by the revised conventions. Moreover, many countries and nuclear power plants remain outside of the regime established by the international conventions, leaving a significant gap in the coverage of accidents having transboundary consequences. The revisions of the nuclear liability and compensation conventions have also highlighted an additional problem in that the nuclear insurance industry seems unable to cover the full range and extent of the newly expanded third party liability of nuclear operators as required, thereby complicating the ratification and entry into force of the revised instruments.
Under these circumstances, governments might be tempted to continue to limit the liability of nuclear operators and rely on the provision of additional compensation from public funds in the event of a reactor accident. However relatively low levels of operator liability and compensation amounts which are markedly less than the possible damage caused by a serious nuclear reactor accident, mean that risks associated with nuclear power are borne by the general public and that the generation of nuclear electricity is effectively subsidised.
Rather than seeking new financial guarantees through government intervention, it is argued in this paper that a better way forward would require that nuclear operators cover the insurance gaps through their own resources. International pooling of operators' funds has been suggested as one such solution. The principal advantage of an operator pooling system is that large sums of private money, as opposed to public funds, can be made readily available to compensate victims of a nuclear accident. There are other potential advantages for the operator, including that this option could be a cost-effective supplement and alternative to other forms of financial security, provided pooling can be organised appropriately. This paper also considers whether such pooling might offer additional benefits, particularly in the European context, for example by realising greater harmonisation in liability and compensation arrangements, addressing the current and evolving structure of the electricity market, and by strengthening nuclear safety.
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1 Pelzer, Norbert (2007), "International Pooling of Operators' Funds: an Option to Increase the Amount of Financial Security to Cover Nuclear Liability? Discussion paper for the IAEA INLEX Group Meeting on 21-22 June 2007", Nuclear Law Bulletin No. 79, pp. 37–55.
2 The analysis and discussion presented in this paper draws on Carroll, Simon (2008), "Perspective on the Pros and Cons of a Pooling-type Approach to Nuclear Third Party Liability", Nuclear Law Bulletin No. 81, pp. 75-97.