Fukushima Nuclear Disaster: Socializing Risks, Privatizing Profits

Last week, the inevitable finally happened.

Last week, the inevitable finally happened. The company responsible for the Fukushima nuclear disaster, Tokyo Electric Power Company, or TEPCO, has been nationalized. Japan's trade and industry minister Yukio Edano announced a de facto state take-over of the company with a further injection of $12.5bn, bringing the total of state capital in TEPCO to $33.2bn. Edano has said that: "Without the state funds, (TEPCO) cannot provide a stable supply of electricity and pay for compensation and decommissioning costs".

The Fukushima Daiichi catastrophe has cost TEPCO over $100bn in estimated costs, which includes compensation and clean-up costs. However, the actual costs are much bigger. Many Japanese are bearing the brunt of the damages in their daily lives with most of their claims and losses going uncompensated and most of their suffering unrecognized.

The nationalization of TEPCO, together with a legal practice called "channeling of liability" in which all liability related to the Fukushima nuclear disaster has to be channeled to TEPCO, means Japanese taxpayers and ratepayers will foot most of the bill.

An infuriating aspect of this story is that in a recent presentation by General Electric (GE) about its "success" over the past 50 years, there was not a word about the Fukushima disaster and nothing approaching an apology. Yet the Fukushima disaster was affected by well-known problems related to GE's Mark 1 design, which was used at all four troubled reactors. Furthermore, GE was involved in maintenance throughout the four decades of the plant's operation and had 44 on site at the time of the accident.

GE, together with its corporate mates from Hitachi, which is responsible for the construction of Fukushima Daiichi Unit 4, and Toshiba, which delivered Reactor No. 3, as well as Ebasco, Kajima, Areva and many others, have mostly kept mum about their involvement.

The Prime Minister orders venting

Prime Minister Naoto Kan had to order venting the day after the disaster. Without venting the containment might have given way to the rising pressure, which is a problem identified 30 years ago by several GE whistleblowers. It was not easy to give the order. Workers would risk potentially lethal doses of radiation and the evacuation around Fukushima had not even started. Venting would expose thousands of people to radiation, but the alternative of an exploding reactor would create even more havoc. TEPCO, GE, Hitachi, and Toshiba knew that this could happen. Not one of them ever demanded the closure of the reactors. By closing their eyes to their obviously faulty product they have spread the impression that people are safe.

Socializing risks, privatizing profits

TEPCO is different than Chernobyl where the state owned and operated the reactor. A private enterprise developed the Fukushima Daiichi's Mark 1 reactors and GE, Hitachi, Toshiba and other companies made huge profits building and servicing the power station. If this were a car, these companies would recall all their nuclear reactors and compensate customers for the costs and losses incurred.

But this is not a car. This is the nuclear industry and these companies continue as if nothing has happened to them. They are saved by TEPCO's bankruptcy and nationalization, and they are saved by the unique liability regime surrounding the nuclear industry where profits are privatized but accident liabilities are socialized.

It is clear why we don't see GE, Hitachi and Toshiba rush to put hundreds of millions of dollars into the Fukushima compensation fund. If they did, they would be admitting some kind of guilt and could open up an avenue for making compensation claims against them. Their share prices would plummet and it would force them to rethink their involvement in the nuclear sector. And who wants that?

Well, I want it.

I think that what we see now is an utter shame and outrage. Elsewhere, Hitachi and GE are trying to convince the Lithuanian government to pump almost $9bn into a new nuclear reactor, and accept a liability regime that is capped at $160m. Toshiba, with its sub-group Westinghouse, is wooing Czech CEZ to buy two reactors with the cap on liability in the Czech Republic at $450m. Hitachi is also actively lobbying Turkey with a cap of $24m, and Vietnam with a $230m cap to buy one of its reactors.

At the same time, I hear of people struggling to make ends meet after they fled the Fukushima region, of suicides because the hardships are too much to bear, of families split apart because they do not dare let their children grow up in the contaminated areas even though the father's work is still there, and of companies gone bankrupt because their resources are suddenly taken off the market due to contamination.

First, all victims need to get the compensation they deserve. The nationalization of TEPCO is a step that could improve the situation. But this should not mean that those who profited from the risk that Fukushima Daiichi clearly posed and those that are profiting from all the other uncovered risks from nuclear power in the rest of the world should escape their responsibility. Paying up and accepting responsibility could help prevent a disaster like this happening again.

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