Sunday, January 5, 2020

State support for nuclear power

Tyler Cowen responded with an interesting  post to my query,
"I don’t see just why nuclear power needs “state support,” rather than a clear workable set of safety regulations that are not excuses for anyone to stop any project."
 (Tyler, originally wrote,
"State Capacity Libertarians are more likely to have positive views of infrastructure, science subsidies, nuclear power (requires state support!), ...," 
I interpreted "state support" as  massive subisdies to be added to the massively regulated system we have now, adding nuclear to (say) windmills, rooftop solar, and housing. Tyler had something quite different and interesting in mind:
"in general American society has become far more litigious, and it is much harder to build things, and risk-aversion and infrastructure-aversion have risen dramatically....So the odds are that without a Price-Anderson Act [which starkly limits nuclear company's liability exposure] America’s nuclear industry would have shut down some time ago, with no real chance of a return. "
A society that allows its lawyers to nearly bankrupt Toyota and Audi over non-existent auto defects, and now is shutting down Bayer over completely unscientific claims that Roundup causes cancer, is obviously going to quickly destroy any nuclear company over harms real and imagined.  If we're going to have nuclear, we need some limitation on this kind of adventurism, along with the legal and regulatory knots that make it almost impossible to build any infrastructure in the US today.

I file this in the "lack of state capacity" department. A good (adjective) Libertarian wants clear property rights, and a sensible tort system that pays some vague attention to scientific evidence.  That is part of state infrastructure. When we say "infrastructure" people envision roads, but good courts, laws, regulations, property rights, and so forth are perhaps the most essential state-provided infrastructure.

Tyler went on a bit, to comments that made a bit less sense to me:
I am not sure which level or kind of liability should be associated with “the free market,” especially when the risks in question are small, arguably ambiguous, but in the negative scenarios involve very very high costs.  Which is then “the market formula”? 
The free market does involve property rights and payment for actual damages. Airlines, drug companies, car companies, all can function in a free-market property-rights libertarian view (another good adjective!) Of all the problems of nuclear, especially the promising small scale new technolgy nuclear, properly bonding and paying for actual (as opposed to imagined) harm does not seem impossible.

But now we're falling in to another libertarian trap, that of discussion which cloud of libertarian nirvana is better. We're pretty far away from designing tort law for free-market property-rights society.


  1. Big subject, one first, big, slice: US society is not litigious. There are rules in place that make it profitable, on average, for lawyers to sue everybody in sight. Nuclear is merely a special case. What are efficient liability rules? When, where, in what kinds of situations?

  2. The Price Anderson Act is a subject that seems to cloud men's minds, even superbly intelligent and analytical minds like that of Tyler Cowan. PAA is not a subsidy to the nuclear industry. To understand why read on. It is a bit complicated.

    The base line of liability for any incorporated business is the capital of the corporation. Once the capital is exhausted claims cannot be paid.

    There are some circumstances where a controlling shareholder can be mulcted for additional funds. But, since the Public Utility Holding Company Act of 1935, almost all utilities do not have controlling shareholders.

    What would happen in the absence of the PAA, if there were Fukushima or Chernobyl type incident in the US? People who suffered personal injury or property damage could sue the utility.

    If the utility were able to pay the claims from a nuclear incident its capital would be depleted and it would be forced to raise its rates to pay for additional funding to stay in operation.

    But, if their claims exceeded the capital of the utility, it could file a Chapter 11 bankruptcy proceeding in Federal court and the claimants would be paid a prorata portion of their claims. Ex-hypotheis, the utilities assets were destroyed in the incident and its capital would therefor be severely impaired.

    What about insurance? What insurance? When PAA was passed in 1957, there wasn't any insurance available for nuclear accidents.

    PAA addressed this problem by imposing on nuclear plant operators an obligation to purchase liability insurance. It allowed the creation of an entity, n/k/a American Nuclear Insurers, which is a pool of large domestic property-casualty insurance and reinsurance companies, to sell the coverage. The required insurance is now $450 million.

    But, wait there is more. If the damages exceed $450 million, every licensed nuclear plant operator would be required to contribute to a fund to pay those claims up to $131 million. The total amount of these contributions is currently about $12.9 billion. There is an additional required surcharge if those funds are depleted of up to 5% of the original contribution. The act provides for federal court jurisdiction to prioritize payments.

    Does the act protect the utility companies? Not really. They are protected by their corporate charters. No, it protects the rate payers from being forced to pay extra to replenish the utility's capital so that it can stay in business. It also creates an industry funded mechanism for paying claims promptly and fulsomely.

    If you want to learn more, you can do so at the Federal Nuclear Regulatory Commission's website:

  3. Many libertarians suggest an elimination of the regulatory state to be replaced by a system of torts. But show me a court system anywhere on the planet that doesn't become completely bogged down in paperwork and delays and which serves judges and lawyers but hardly the broader economy or public interest.

    I am told that thorium nuclear reactors are a very good idea, as are some small designs. The good news is we have plenty of natural gas and can produce electricity fairly cheaply anyway,


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