Risk aversion and the external cost of a nuclear accident

✍ Scribed by L. Eeckhoudt; C. Schieber; T. Schneider

• Publisher: Elsevier Science
• Year: 2000
• Tongue: English
• Weight: 137 KB
• Volume: 58
• Category: Article
• ISSN: 0301-4797
• DOI: 10.1006/jema.1999.0314

✦ Synopsis

The external costs of fuel cycles used in the production of electricity can be defined as those imposed on society and the environment, that are not accounted for by the producers and consumers of energy. Within the evaluation of the external cost of the nuclear fuel cycle, the estimation of the external cost of a severe nuclear accident is one of the major topics to be addressed. For this purpose, the usual approach consists of calculating the expected value of the cost of various accident scenarios. The main criticism of this approach is that there is a discrepancy between the social acceptability of the risk and the average monetary value required for paying compensation to each individual affected by the accident. This paper proposes a methodology, based on the expected utility approach, for integrating risk aversion into the evaluation of the cost of a nuclear accident, as well as a numerical application based on French data.

Although a wide range of values have been published for the coefficient of relative risk aversion, it seems reasonable to adopt a value of 2 for the specific case of nuclear accidents. This leads to an estimated multiplying factor of approximately 20, to be applied to the expected external cost of a nuclear accident corresponding to a release of about 1% of the core. In this case, the external cost of the nuclear accident is estimated to be 0Ð046 mEuro kWh 1 . This represents about 50% of the total external cost of the nuclear fuel cycle without accident (estimated at 0Ð1 mEuro kWh 1 with a 3% annual discount rate).