The oil spill in the Gulf of Mexico and the Bhopal tragedy have brought back into focus the issue of industrial accidents, contractual liabilities and questions of operator liability, notes Manoj Kumar and Lydia Powell in an Observer Research Foundation study, which will be published in a three-part series. Here goes the first part:
The Bhopal tragedy, which is closer to Indian hearts, has engaged the Indian government and courts for over 26 years and yet a solution acceptable to victims and other stakeholders is proving to be elusive.
Every step from the government and the courts has been welcomed only with exasperated cries of 'not enough', 'too little' and 'too late'.
Many questions remain unanswered: who was liable to compensate the victims of Bhopal Gas Tragedy? What ought to have been done to ensure immediate compensation to the victims? Could a structured legal regime have made the difference? Should there have been a liability regime in place before allowing units of the likes of Bhopal to be set up? Did India pay for the absence of a liability regime in terms of human lives, livelihoods and irreversible environmental degradation?
The world saw the Bhopal Gas Tragedy (1984) and the Chernobyl accident (1986) follow in quick succession to each other. Though both accidents had different backgrounds, they opened up appreciation of the magnitude of damage and loss such tragedies could cause, especially nuclear tragedies which do not recognise any geographic or temporal boundaries.
Damage caused by ionizing radiation to human cells may remain latent for a long time before manifesting itself. Even the best of safety standards cannot completely exclude the possibilities of nuclear accidents and in this light, the need to have a legal regime to compensate for damage and losses arising from nuclear accidents in India becomes evident.
Increasing energy availability in general and electricity availability in particular is not merely an economic pursuit for India but a social necessity.
Enriching the quality of life of millions of 'energy poor'. Indians while also facilitating the integration of their livelihoods into the formal economy is not possible without the supply of electricity.
Nuclear energy is particularly attractive for electricity generation in India as India has entered a resource intensive high economic growth path just as the world has begun to acknowledge natural limits in the supply of cheap and easily accessible fossil fuels along with the consequences of green house gas emissions that result from the combustion of fossil fuels.
The status of nuclear power generation in India
India currently has 19 operational nuclear power plants with the total capacity of 4.5 GW. Four more reactors under construction would add another 2.7 GW.
Russia has traditionally been the major source of nuclear fuel to India since the early 1990s. Dwindling domestic uranium reserves and sanctions on supply of fuel following India's nuclear weapons tests restricted nuclear fuels availability and thus limited power generation capacity to a mere 3 percent of total installed power generation capacity.
According to optimistic estimates, nuclear power generation capacity in India is expected to increase to about 35 GW by 2020 when the demand for power is projected to stand at about 350-400 GW.
The waiver from the Nuclear Suppliers Group in September 2008 has facilitated the entry of India into international nuclear trade and India has already signed nuclear deals with several countries including France, United States, United Kingdom, Canada, Namibia, Mongolia, Argentina and Kazakhstan.
In February 2009, India also signed a $700 million deal with Russia for the supply of 2000 tonnes nuclear fuel. India now envisages increasing the contribution of nuclear power to overall electricity generation capacity from 3 percent to 9 percent in the next 25 years.
The case for nuclear power
The world's population is expected to increase from the present 6 billion to about 8 billion over the next 25 years, and perhaps 10 billion later in the century.
Such a dramatic increase in population will have a dramatic impact on energy demand. At the very least, energy demand is expected to double by 2050, even if developed countries adopt effective energy conservation policies that reduce their growth in energy demand to zero.
Global coal reserves are estimated to be abundant but how much of it would be mined and used for power generation in the future is uncertain given that combustion of coal is among the most important sources for GHG emissions, the most probable cause of 'climate change'.
Coal accounts for only about 25 percent of total global primary energy supply but it contributes over 42 percent of energy related carbon emissions.
The energy density of uranium compared to that of coal and other fossil fuels also adds to the attractiveness of nuclear power. Assuming a thermal efficiency of about 33 percent, a 1 GW power station would consume roughly 3.1 million tonnes of black coal each year while a nuclear power plant of the same capacity would consume only about 24 tonnes of enriched uranium.
In other words, ten trucks filled with coal will be required to make 380,000 trips to fuel the power plant while just a single trip by ten trucks carrying uranium will be sufficient if the power generator was based on nuclear fuel.
If the energy required by the trucks is factored in, the net energy gain or the return on energy invested in a coal based power plant reduces substantially.
The merits of nuclear power cannot however mask the grave risks involved in harnessing that power. Both coal and uranium require intensive mining which invariably use 'human energy' which is not registered in any energy balance sheet.
This risk shrinks in significance when compared to the risk of accidents in nuclear reactors due to mishandling of nuclear material or a fault in the nuclear reactor.
Since 1950, there have been 23 nuclear accidents in nuclear reactors around the globe with the latest occurring in 2006. Out of these the biggest was the Chernobyl disaster which claimed more than 4000 human lives.
The long-term storage of radioactive waste is yet another factor that adds to the risk of nuclear power generation. Nuclear damage has such a wide range that when nuclear installations are built close to national borders, the fall out from a nuclear accident cannot be confined to national borders.
Despite the magnitude of risks that harnessing nuclear energy entails, very few countries have the luxury of not including nuclear power as one of their key energy options for the future.
The geological limits to the availability of fossil fuels such as coal, oil and natural gas and the risk of climate change make it necessary that energy poor countries such as India invest in harnessing nuclear energy.
International nuclear liability regimes
The nature and magnitude of liability regimes varies widely across nations. Before 1997, the international liability regime was embodied primarily in two instruments namely; the International Atomic Energy Agency's Vienna Convention on Civil Liability for Nuclear Damage of 1963 (entered into force in 1977), and the OECD's Paris Convention on Third Party Liability in the Field of Nuclear Energy of 1960 which entered into force in 1968 and was bolstered by the Brussels Supplementary Convention in 1963.
These conventions were linked by the Joint Protocol adopted in 1988 to bring together the geographical scope of the two. They are based on the concept of civil law and share the following main principles:
· Liability is channelled exclusively to the operators of the nuclear installations;
· Liability of the operator is absolute, i.e. the operator is held liable irrespective of fault, except for 'acts of armed conflict, hostilities, civil war or insurrection';
· Liability of the operator is limited in amount. Under the Vienna convention the upper ceiling is not fixed; but it may be limited by legislation in each state.
· Liability is limited in time. Generally, compensation rights are extinguished under both conventions if an action is not brought within ten years;
· The operator must maintain insurance or other financial security for an amount corresponding to his liability or the limit set by the installation state, beyond this level the installation state can provide public funds and can also have recourse to the operator;
· Jurisdiction over actions lies exclusively with the courts of the contracting party in whose territory the nuclear incident occurred;
· Non-discrimination of victims on the grounds of nationality, domicile or residence.
States with a majority of the world's 440 nuclear power reactors are not yet party to any international nuclear liability convention, and each State relies on its own arrangements.
Beyond the international conventions, most countries with commercial nuclear programmes also have their own legislative regimes for nuclear liability which vary from country to country. There are three categories of countries in this regard:
· Those that are party to one or both of the international conventions and have their own legislation;
· Those that are not party to an international convention but have their own legislation (notably USA, Canada, Japan, South Korea);
· Those that are not party to a convention and are without their own legislation (notably China).
This Observer Research Foundation brief has been prepared by eminent lawyer and corporate counsel Manoj Kumar and energy sector expert and senior fellow at the ORF, Lydia Powell
Stay tuned for the second part which discusses at length the loopholes of the Nuclear Liability Bill, 2010.