What is the cost of a reactor accident?

29 September 2000

Predicting the economic consequences of a nuclear accident has been a much disputed area. Now the Nuclear Energy Agency has studied the likely costs.

What is the economic cost of a nuclear accident? A large number of studies were carried out during the early 1990s, but they diverged by several orders of magnitude in their estimate of the externalities of nuclear energy generation . The Nuclear Energy Agency (NEA) felt that this was unacceptable, and created a group to study methodologies for assessing the economic consequencies of reactor accidents. The group has now produced a report,"Methodologies for assessing the economic consequences of nuclear reactor accidents”.

The first conclusion that the group came to was that it is difficult to compare results, as slight changes in the assumptions dramatically affect the outcome. It examined in detail the elements involved in estimating total off-site costs, and the boundaries and limitations which constrain assessment.

Not surprisingly, the group decided that there is no single cost of an accident. It found that the methods used to combine these cost elements depend greatly on the objective of the cost study, and the intended use of the resulting accident cost. The group, therefore, chose to investigate methodologies for calculating costs from three perspectives:

Preparedness and management The objective of calculating the cost from this perspective was to optimise the planning and implementation of both short- and long-term countermeasures. This cost has been studied from the early days of this type of accident consequence assessment, and is well understood. In terms of results, however, the costs vary considerably depending upon local details.

Compensation The public may expect that the operator who caused the damage would provide compensation for all consequences of a nuclear accident. However, it was observed that the compensation systems set up under the existing international conventions and national legislation did not completely fulfil this.

Power generation choices Cost is a key factor when assessing the options for electricity generation. External costs – which are economic consequences not explicitly recognised in the price of electricity – are difficult to quantify. The group suggested using effective methodologies to quantify these costs, which should be based on full-scope, site-specific probabilistic safety assessment (PSA) studies. Such an approach would account for the relative costs of all accidents, which can be modelled using PSA studies for the specific plant. Obvious shortcomings of this approach included the burden of producing very detailed PSA studies, the inherent uncertainties of these PSA studies, and inherent uncertainties in the micro- and macro-economic effects of wide-scale contamination and societal disruption.

The group believes that 'input-output' methods should be used. The difficulty with these methods is the compilation of suitable tables. The group proposed additional work on the following:

•Future efforts should focus on the detailed assessment of cost elements,especially in the area of health effects, where the alternative costing approaches (human capital approach and willingness to pay) should be better understood and justified.

•A more consistent definition of the cost elements which are relevant to each consequence assessment perspective should be sought, with their perspective-specific characterisation and relative order of importance, and with particular attention to the assessment of externalities.

•Existing accident consequence assessment codes should be further developed to better integrate medium- and long-term impacts.

•Management decision-making in post accident situations must be supported by the development of models that more accurately reflect the post-accident economic impacts, especially with regard to the reorganisation of living conditions, farming and production in the affected communities.

What did the group study?

The group only studied the economic aspects of off-site consequences. These consequences include: the health effects on the exposed population and its descendants; direct and indirect effects on the environment and on the economy of the affected area (which may include areas not directly touched by contamination); the social disruptions which follow such an event; and the associated implementation of protective countermeasures.

The amount of radioactive material potentially released may range from trivial quantities up to a significant fraction of the radionuclide inventory. The economic consequences depend on both the amount and type of material released, and features of the area as disparate as demographics, economics and the prevailing meteorological conditions at the time of the incident.

Fortunately, the group had few accidents that it could draw on for experience. The group only considered Three Mile Island (TMI) in 1979 and Chernobyl in 1986.

The level of difficulty in making assumptions about the conditions surrounding an incident and the few examples on which to draw meant that the group felt that it could only give a report of a generic nature. The most important aspect of the study was that of economic consequence assessment methodologies. The group felt that the methodology chosen for cost assessment would depend greatly upon the intended use of the resulting cost figures.

Cost elements

What is the 'true cost' of an accident? Cost is defined as benefits forgone, measured by the amount of money required to restore affected individuals to their pre-accident state. However, while this would imply compensation paid to all affected individuals, it should not be assumed that this compensation is actually paid. The cost being discussed is simply a cost to society as a whole.

The consequences as a whole result from:

•The application of countermeasures to reduce doses.

•Radiation-induced health effects in the exposed population.

•Psychological effects.

•Impact on the activity with which the installation is associated.

•Impact on economic factors – employment, revenue, loss of capital.

•Long-term social and political impact.

•Environmental and ecological

The economic effects associated with these consequences can be classified into direct and indirect categories.

It is not, however, possible to evaluate the economic impact on the loss of image that the company, region or country would suffer as a result of loss of investments and loss of intrinsic wealth from depreciation of the nation's currency.


There are several limiting conditions on evaluating the cost of nuclear accidents.

Some of the cost elements only last for a short time, while others can continue to be relevant for a long period, or can emerge a long time after the accident (eg latent and hereditary health effects).

For the latter, discounting is the usual technique to establish the amount of money required to cover the full cost after a given number of years. However, economists do not agree on the validity of discounting environmental damage in risk assessments.

Past experience at TMI and Chernobyl shows that for small-scale accidents like the first, it is relatively easy to account for all the off-site costs caused by the accident. For large-scale accidents like the second, the only possibility is to assess country-by-country costs.

Additionally, some effects are more directly calculated using micro-economic models, which essentially sum up all the individual items of which the cost is composed. An example is food disposal, which will depend on the amount to be disposed of. At the other extreme are effects that are harder to quantify, like the secondary impacts of countermeasures. These are better evaluated using macro-economic methods, combining results from separate assessments. In this case, care must be taken to avoid double counting.

Finally, 'unquantifiable' effects, by definition, are not easy to take account of, and usually impose a forced boundary on assessments.

Cost of countermeasures

Countermeasures that may be required include population movement, agricultural restrictions, and decontamination. The costs associated with population movement include transport away from the affected area, temporary accommodation and food, supervision of the evacuated area and monitoring of people, loss of income for people unable to reach their workplace, lost capital value and investment on land and property, and the psychological effects.

The costs relating to agricultural restrictions arise from restrictions on the production or consumption of foodstuffs. The usual units by which the consequence of food restrictions are expressed are the amounts of agricultural produce that are lost or restricted. There will be a gradual recovery of the economy even if food restrictions continue for a prolonged period. Farmworkers will find alternative employment, for example.

Decontamination is used to allow a more rapid reduction of ambient radioactivity towards pre-accident levels. The costs of decontamination consist of the costs of the cleaning process, of labour, and of health effects induced in the workforce.

Decontamination costs can differ markedly, depending on the level of decontamination or dose rate reduction desired.


Compensation is one aspect that has proved to be contentious. In the 1950s, many governments saw the need to ensure that victims of nuclear damage would be equitably compensated. It was soon recognised that ordinary tort law was not suitable for nuclear accidents. Under such tort law, victims would encounter major difficulties in trying to determine who was legally liable. At the same time, governments wished to ensure the growth of the nuclear industry would not be hindered by an intolerable burden of liability for nuclear damage. It was generally accepted that those persons who could, in law, be liable for nuclear damage should not have to be exposed to an unlimited liability for which they could not obtain full insurance coverage.

These two goals have led to the development of special international regimes to govern civil liability for nuclear damage incurred by third parties. These regimes are reflected in a number of international conventions, most notably the Paris, Brussels and Vienna Conventions. The amount of compensation available to victims of nuclear damage in various OECD countries are in the table.

External costs

The external costs associated with normal operation of nuclear plants are small. Past external cost studies have concentrated on hypothetical severe accidents. Chernobyl has had special prominance due to the large number of estimated delayed fatalities and other serious health, environmental and social impacts.

The calculation of external costs associated with rare severe accidents is the same as the method for calculating external costs, with some specific characteristics related to the random nature of the events. The main parts are identifying the types of accident, evaluating the resulting physical impacts, and assessing the frequencies associated with the consequences of accidents of different magnitudes.

However, different studies give different results.

The group concluded that there was no single cost of an accident, and that far more work is required. In particular, assessment of the cost of health effects needs greater attention. There are two different approaches to assessing health costs – the human capital approach and the willingness-to-pay approach.

Amounts of compensation available in Special Drawing Rights (SDR) as defined by the International Monetary Fund.

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