tools to describe how the risks of nuclear accidents can be anticipated, prepared for,
and somehow mitigated in case an accident occurs. This paper will thus focus on
the economic assessment of the risks of nuclear accidents. We will emphasize on its
major drawbacks and on the policy guidelines this assessment entails.
Risks of accidents are often quantified by the assessment of their expected
costs [1]; that is the product of damage by the probability of occurrence. In the case
of nuclear power, this definition is particularly inconvenient. Estimating the probability of a nuclear disaster is subject to high uncertainties, and so is the assessment
of its damage. Yet, this assessment serves two purposes. First, ex ante cost
assessments provide policy-makers with guidelines regarding hazardous activities;
such as choosing among various technologies for electricity production, or setting
efficient safety standards. Ex ante assessments are thus economically driven.
Second, ex post cost assessments allow victims to be compensated according to
their losses. This assessment takes place after the accident. It focuses on the
evaluation of the different damage to individuals, to society and to nature. Such ex
post assessments are usually legally driven (see BP Deepwater Horizon or TEPCO
Fukushima-Daiichi payouts).
One major difference between the ex ante and ex post approaches is that the
former is confronted with much more uncertainties. The future is less known that
the past and the accident is only one possible outcome. The cost to consider is thus
an expected cost. Generally speaking, the probability of an event is derived from its
observed frequency. Some authors also increase this product by a coefficient to
account for risk-aversion. This canonical method in the economics of accident is not
easy to apply to nuclear catastrophes. Probabilities cannot be derived from observed
frequencies and psychological biases regarding dreadful events are not simply
risk-aversion. These issues will be addressed in the first part of this paper, which is
divided into two parts. The first part deals with the limitations of observed
frequencies and of the so-called Probabilistic Safety Assessment (hereafter, PSA) as
a method to estimate the overall probability of nuclear accidents. It argues that
knowledge from observed occurrence of accidents and knowledge from safety
engineers and experts have to be combined. The second part focuses on the gap
between the probabilities of nuclear accidents as calculated by experts and the
probabilities of nuclear accident as perceived by individuals. It shows how
psychological biases in estimating probabilities are amplifying the perceived risk of
nuclear accidents.
Numerous assessments of the cost of a nuclear accident have been performed
over the years. This paper will review some of these assessments and present their
very different results. We argue that these differences are not peculiar from an
economic standpoint. Similar differences are also observed in other hazardous
activities, such as car accidents, oil spills or climate change. We then try to identify
the origins of the discrepancies in the assessments. The uncertainty characterizing
these results stems from three sources: existing studies have a very different scope;
they rely on either past data or probabilistic safety assessments (PSA); and they
assess the consequences of the accident and their monetary costs with different
methodologies. Second, we highlight the fact that most studies focus on damage
80
R. Bizet and F. Lévêque
and somehow mitigated in case an accident occurs. This paper will thus focus on
the economic assessment of the risks of nuclear accidents. We will emphasize on its
major drawbacks and on the policy guidelines this assessment entails.
Risks of accidents are often quantified by the assessment of their expected
costs [1]; that is the product of damage by the probability of occurrence. In the case
of nuclear power, this definition is particularly inconvenient. Estimating the probability of a nuclear disaster is subject to high uncertainties, and so is the assessment
of its damage. Yet, this assessment serves two purposes. First, ex ante cost
assessments provide policy-makers with guidelines regarding hazardous activities;
such as choosing among various technologies for electricity production, or setting
efficient safety standards. Ex ante assessments are thus economically driven.
Second, ex post cost assessments allow victims to be compensated according to
their losses. This assessment takes place after the accident. It focuses on the
evaluation of the different damage to individuals, to society and to nature. Such ex
post assessments are usually legally driven (see BP Deepwater Horizon or TEPCO
Fukushima-Daiichi payouts).
One major difference between the ex ante and ex post approaches is that the
former is confronted with much more uncertainties. The future is less known that
the past and the accident is only one possible outcome. The cost to consider is thus
an expected cost. Generally speaking, the probability of an event is derived from its
observed frequency. Some authors also increase this product by a coefficient to
account for risk-aversion. This canonical method in the economics of accident is not
easy to apply to nuclear catastrophes. Probabilities cannot be derived from observed
frequencies and psychological biases regarding dreadful events are not simply
risk-aversion. These issues will be addressed in the first part of this paper, which is
divided into two parts. The first part deals with the limitations of observed
frequencies and of the so-called Probabilistic Safety Assessment (hereafter, PSA) as
a method to estimate the overall probability of nuclear accidents. It argues that
knowledge from observed occurrence of accidents and knowledge from safety
engineers and experts have to be combined. The second part focuses on the gap
between the probabilities of nuclear accidents as calculated by experts and the
probabilities of nuclear accident as perceived by individuals. It shows how
psychological biases in estimating probabilities are amplifying the perceived risk of
nuclear accidents.
Numerous assessments of the cost of a nuclear accident have been performed
over the years. This paper will review some of these assessments and present their
very different results. We argue that these differences are not peculiar from an
economic standpoint. Similar differences are also observed in other hazardous
activities, such as car accidents, oil spills or climate change. We then try to identify
the origins of the discrepancies in the assessments. The uncertainty characterizing
these results stems from three sources: existing studies have a very different scope;
they rely on either past data or probabilistic safety assessments (PSA); and they
assess the consequences of the accident and their monetary costs with different
methodologies. Second, we highlight the fact that most studies focus on damage
80
R. Bizet and F. Lévêque