Unlimited Tepco Liability A Mistake: U.S. Think Tank Chief

TOKYO (Nikkei)--Saddling Tokyo Electric Power Co. with limitless liability for damages from the accident at the Fukushima Daiichi nuclear plant would be a misguided policy that could lead Japan to lose its position as a global leader in the field, writes John Hamre, president of the Center for Strategic and International Studies, in this piece for The Nikkei:

I understand the anger that Japanese citizens and Japanese politicians feel about the nuclear disaster in Fukushima. But poorly conceived policy responses now could create even greater long-term damage.

America has a strong interest in how Japan deals with this nuclear crisis. After our Three Mile Island nuclear crisis, America's nuclear power industry has systematically worked to rebuild its credibility and acceptance in American society. We are on the forefront of what many of us hope will be a "nuclear renaissance" in America. Naturally, the disaster at Fukushima has ignited anti-nuclear sentiments again here in America. So how Japan proceeds with this crisis has a direct and immediate impact on America.
Presently the Diet is considering legislation that would establish a Nuclear Damage Compensation Scheme for Japan that effectively would establish unlimited liability for nuclear power operating companies. And it is likely to be applied retroactively to Tepco. Japanese politicians need to take a deep and long breath before proceeding with this legislation.
Placing an unlimited liability on Tepco and other nuclear power utilities might be good politics, but it is deeply flawed public policy. Unlimited liability will effectively shatter these utilities' credit ratings, both in Japan and around the world. No investor will tolerate the risk associated with unlimited liability. So Tepco's credit standing could collapse overnight. So too would Japan's nuclear industry. Japan has become one of the key global suppliers of nuclear technology and components. This leadership could disappear overnight.
In the cold light of morning, it is clear that Japan needs a new approach to nuclear power. There is no doubt that Japanese governmental authorities did not exercise the independent supervision of the nuclear power industry that was warranted in light of the crisis we have experienced at Fukushima. Japan now needs a comprehensive new approach to nuclear energy. That new approach must entail stronger independent regulation of existing nuclear power facilities, strengthened structures of financial liability and indemnity, intensified efforts in research to improve safety and reliability.
Japan will hurt itself a second time if it cripples its nuclear industry in a misguided effort to punish Tepco after the fact. This is a time for careful and deliberate action, not hasty legislation. The government should charter a blue-ribbon commission of internationally recognized leaders to provide a comprehensive plan to go forward. This plan should include a well-designed system for damage compensation. There are models to consider, including the Price-Anderson Act which we adopted in the United States. These models balance the incentives that rightly need to be placed on the nuclear industry to create the strongest possible culture of safety and reliability, without creating company-threatening risks that frighten away investors.
Yes, this is a time for anger, but not for action. We need time to reflect on this situation and design a solution that solves the problem without making it worse. Japan needs this, and America does too.
(The Nikkei May 12 morning edition)