^aDepartment of Management and Engineering, Linköping University, Linköping SE-581 83, Sweden. E-mail: goran.skogh@liu.se

^*I am grateful for comments by two referees, Karine Fiore, Michael Faure, Tom Vanden Borre, Helen Forslind, Erik Lenntorp and Hong Wu. Financial support from "Statens Energimyndighet" (The Swedish Energy Agency) is hereby acknowledged.

Abstract

The compensation to victims of nuclear accidents is based on a Paris (OECD) and a Vienna (UN) convention. A problem with the system is that a strictly liable, but insolvent or uninsured plant owner leaves victims without compensation. In this paper, it is argued that a system could be better organised by, for example, the European Union (EU). A State that permits a nuclear reactor on its territory should be strictly liable. Benefits are: (i) States are able to compensate large damages; (ii) theory suggests that stepwise modified risk-sharing could be made beneficial for risk-averse States; (iii) the EU can enforce sharing agreements by Member States; (iv) a State can limit its financial burden by redressing some liability to the domestic nuclear industry. The incentive created hereby, as well as regulations on location and safety may prevent accidents. A European nuclear accident pool will have a collective interest in accident prevention.