Addressing Gaps in a Liability Regime for the Energy Sector

Abstract

Two recent events in the energy sector – the Macondo well blowout in the U.S. coastal waters and a series of equipment failures at the Fukushima I Nuclear Power Plant in Japan – have shown that current definitions of who pays for accidental pollution damage and third parties’ losses are ambiguous. Using methods of economic analysis, this paper identifies potential deficiencies in the current liability regimes for the energy sector and proposes certain measures, introduction of which would increase efficiency of some liability regimes.