Comments on: The Nuclear Liability Bill: What lies Beneath http://www.criticaltwenties.in/nationalpolitics/the-nuclear-liability-bill-what-lies-beneath Powered by Webshore Sun, 22 Aug 2010 23:00:48 +0000 hourly 1 http://wordpress.org/?v=3.0.1 By: Vipul http://www.criticaltwenties.in/nationalpolitics/the-nuclear-liability-bill-what-lies-beneath#comment-19 Vipul Wed, 18 Aug 2010 21:40:43 +0000 http://www.criticaltwenties.in/?p=325#comment-19 I agree with you, but I would lay emphasis on it from a different angle. I don't have anything in principle against nuclear energy, and the question of whether the benefits of having nuclear energy are worth the risks of catastrophe is a question of cost benefit analysis. The fact that private investors and their insurers are unwilling to put their money into nuclear energy without explicit liability caps indicates that, in their computation, the costs of catastrophe are higher than the benefits (profits) that they can generate. While this private cost benefit analysis by potential investors may not give conclusive results about the cost benefit trade-off to society, it comes pretty close. I am not saying that nuclear energy is unsafe in an absolute sense -- it could be made very safe. But safe nuclear energy is more costly. My guess is that, especially in India, highly safe nuclear energy is simply not profitable. Cost-cutting to reduce safety would mean that the probability of accidents and catastrophes goes up. Liabilities and damages are a way of making sure that the investors bear (a large part of) this cost personally -- so that they don't compromise safety unnecessarily. Economists would call this the internalisation of externalities. Liability caps destroy this incentive, and re-externalise externalities, so to speak. I agree with you, but I would lay emphasis on it from a different angle. I don’t have anything in principle against nuclear energy, and the question of whether the benefits of having nuclear energy are worth the risks of catastrophe is a question of cost benefit analysis. The fact that private investors and their insurers are unwilling to put their money into nuclear energy without explicit liability caps indicates that, in their computation, the costs of catastrophe are higher than the benefits (profits) that they can generate. While this private cost benefit analysis by potential investors may not give conclusive results about the cost benefit trade-off to society, it comes pretty close.

I am not saying that nuclear energy is unsafe in an absolute sense — it could be made very safe. But safe nuclear energy is more costly. My guess is that, especially in India, highly safe nuclear energy is simply not profitable.

Cost-cutting to reduce safety would mean that the probability of accidents and catastrophes goes up. Liabilities and damages are a way of making sure that the investors bear (a large part of) this cost personally — so that they don’t compromise safety unnecessarily. Economists would call this the internalisation of externalities. Liability caps destroy this incentive, and re-externalise externalities, so to speak.

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