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The Division of the Depreciation Costs of Nuclear Power Stations Among Energy Providers and the Government. An Acceptable Solution?

Term Paper (Advanced seminar) 2016 18 Pages

Business economics - Business Ethics, Corporate Ethics

Excerpt

Table of Contents

1. Introduction

2. Depreciation costs as a sustainability-dilemma

3. Discussion
3.1 Arguments against financial support by the state
3.2 Arguments pro financial contribution to the companies
3.3 The decision of the commission

4. Ethical reflection

5. Conclusion

Bibliography

1. Introduction

In 2001, the German coalition of the Green Party (Bündnis 90/ Die Grünen) and the Social Democrat Party (SPD) decided in consensus with all the other parties in the parliament, to end its involvement in atomic power. The consensus between politics and the energy providers entailed the structured withdrawal from nuclear energy. Therefore, a law was passed by the parliament in 2002, called “Gesetz zur geordneten Beendigung der Kernenergienutzung zur gewerblichen Erzeugung von Elektrizität”[1].

However, the government that followed (CDU/CSU and FDP) under Chancellor Angela Merkel first decided to extend the use of atomic power stations to an average of twelve extra years. But after the atomic accident in Fukushima, Japan in 2011, this decision was withdrawn. Instead, the coalition decided on a suspension of the oldest power stations and the phase-out of all stations by 2022[2].

It goes without saying that not all stakeholders have been in favour of this decision. Especially the four largest German energy provider companies RWE, Vattenfall, E.ON and EnBW, who were all severely affected and are therefore trying to find ways to improve their situation.

As ethics is a science that seeks to come closer to the truth by reflecting different options in a structured way[3], the characteristics of a dilemma will be explained after an introduction to the topic. Then, the relationship of the topic to sustainability will be elaborated on. Subsequently, the question about the appropriateness of the decision by the commission will be discussed by comparing funding options for the withdrawal from nuclear energy, arguments in favour and against monetary support by the state. Then, the decision of the commission will be reviewed with regard to different concepts of ethics before being summarized in the conclusion.

2. Depreciation costs as a sustainability-dilemma

In order to find a solution on how to deal with the upcoming costs of the nuclear power phase-out, the government set up the “Kommission zur Überprüfung der Finanzierung des Kernenergieausstiegs (KFK)” (commission to review funding options for the withdrawal from nuclear energy) on the 14th of October 2015 (KFK 2016a: 1). This commission was led by Ole von Beust (CDU), Matthias Platzeck (SPD) and Jürgen Trittin (Grüne) and presented its findings on the 27th of April 2016 (KFK 2016a: 1).

To understand their reasoning regarding the options of financing, it is necessary to know that there are different kinds of costs: the shutdown of the nuclear power stations, their deconstruction, the conditioning of the nuclear material as well as the move to temporary or permanent storage.

These expenses mentioned above are considered to be the depreciation costs that have to be taken care of.

The commission's task was to find out how these expenses can be met. Usually, due to the polluters-pay-principle (KMK 2016:8), it would be the companies' task. In these instances, the responsibility falls mainly to the four large energy providers in Germany: E.ON, Vattenfall, EnBW and RWE.

However, this one-sided distribution of costs is not as simple as it seems to be: If the energy providers were in charge of catering for all the costs, their economic situation would worsen. This entails the risk of them going bankrupt, which would also be the worst case scenario for the government. In this case, it would once again fall to the state to pay for all the costs. But this conflicts with the polluters-pay-principle.

We call this situation a dilemma. It is not only a problem anymore, because that could be solved by an obvious best solution, which does not exist for a dilemma. Both alternatives are not preferable: Neither the companies should pay for everything, nor the government.

The question as to why the topic described above is relevant in sustainability-ethics remains prevalent. First, it must be clarified that sustainability is considered here as a principle and not as a discipline. While e. g. medicine is the reference- discipline in medicine-ethics, sustainability is a reference- principle in sustainability-ethics. In the following, this principle will be explained.

The concept of sustainability derives from Carl von Carlowitz (1645 – 1714), a chief mining administrator in the silver mining town of Freiberg in Saxony. He was concerned about the decreasing amount of forests, as wood was essential for the mining industry as supporting beams. Sustainability can also be understood as maintenance: Following Carlowitz, the stock of wood can be maintained, when harvesting and regrowth occur with the same pace. A constant level of wood being available is part of his concept that he published in the book “Sylvicultura oeconomica[4].

In this case, we differentiate according to Ott between the maintenance of natural resources (strong sustainability) and their man-made equivalents through substitution (weak sustainability)[5]. One can argue whether future generations should have access to the original natural capital, e. g. an intact environment or whether it is sufficient to have an environment that is contaminated with nuclear waste but cleaned again.

The question about future generations is again brought up by another concept of sustainability, which was developed by the Brundtland -comission. The commission, named after the Norwegian prime minister Gro Harlem Brundtland[6], was established in 1983 by the United Nations in order to find solutions to global problems of sustainability. In the context of their report entitled “Our common future”, sustainable development is defined as follows: The generation of today, while satisfying their own needs, must not risk that the future generation will not be able to satisfy their needs anymore[7]. Their definition elaborates the intergenerational question.

Applying this concept to our dilemma, this leads to the following: The decision on depreciation costs can have effects on the generations of tomorrow as well, since they will be the ones obliged to pay taxes. Similarly, our choice to utilize nuclear power now means that they have to endure the risk of atomic accidents in the future.

Nevertheless, the intragenerational dimension has to be considered as well. The population in the Global North must not find themselves restricting the Global South by satisfying their needs.

Hence, these problematic developments can be prevented by integrating the ecological factors (as the environment must not be affected by radiation), the social aspects (as employees might lose their job due to the shut-down) and the economic dimension (as the companies might go bankrupt) as Schaltegger describes[8].

The situation between the companies and the government on the subject of depreciation costs can be defined as a sustainability problem. Wiek and Lang define this sustainability problem (or rather dilemma) to be characterized by the four criteria urgent, complex, locally and contested [9]: The economic situation of the companies requires an urgent solution and the conflict is restricted to the location Germany, which will be described in more detail in the following. Moreover, this complex situation with many aspects to consider is fiercely contested, as both parties could lose a lot of money. All of these are described in more detail in the following and emphasize that each criteria is fulfilled.

3. Discussion

3.1 Arguments against financial support by the state

In the following, some elaboration is given about the points why the government is not supposed to pay for the disposal of the nuclear material.

First of all, the companies already externalise costs and thus put a burden on society. The public suffers from the omnipresent risk of nuclear accidents, as well as ecosystems being disturbed by relatively warm river water because of the cooling needs for the station. Moreover, the reactor and its columns of steam have a negative visual impact on the natural landscape. These are non-monetary costs that the population encounters. But the atomic enterprises never had to pay for this. This explains why it is not just that the tax payers' money would subsidize the leftovers of the energy providers, even though the right to decide on what one's tax is spent on does not exist.

In instances such as these, it would again be the ordinary citizen's spending, while they already pay the costs for electricity and other energy. EnBW, E.ON, Vattenfall and RWE are obliged to build provisions, which currently surmount to a total of 38.3 billion Euros[10]. These are supposed to cover the costs for the withdrawal of atomic power. This money, which went into provisions, is ultimately derived from the income through energy sales and comes from the consumer. Therefore, it is not acceptable that, for decades, profits were privatized and high manager salaries were paid inside these companies, but now, during bad times, the losses should be communized while society did not get a share in the good times.

Still, it is necessary to make the allowance that the society could partake in the economic success to some extent in the way that some (and often not so well-situated) communities were shareholders of the company and therefore benefitted from dividend payments. Nevertheless, must be mentioned that no one can definitely predict how high the overall costs are going to be eventually and when they are going to peak. An expert's report written by Warth & Klein Grant Thornton states that the expected costs can vary between 29.9 and 77.4 billion Euros[11]. As a result of this, a decision pro payments by the government would eventually also force future generations to pay for the arrangements of today. Moreover, one could argue that the companies missed economical foresight and therefore caused their crisis on their own: The companies failed to analyse early enough that their business model, based on nuclear or fossil fuels in general, can be considered outdated. Of course by now, they have enlarged their involvement in renewable energies. But they could have taken steps in this direction earlier since the German government started with laws on renewable energies from the year 2000. This trend culminated now in the UNFCCC Paris Agreement, which is aiming for net zero CO2-emissions until 2050[12]. Of course, nuclear energy is neutral with regard to carbon emissions, but this new goal is going to stimulate the growth of alternative energy technologies, which is not favourable for most of the energy provider's portfolios.

However, the political strategy of the German government has also been confusing and failed to lead to an early and clear withdrawal from fossil energy production to renewable energies as described in the introduction. The distancing from nuclear energy in 2002 and the prolongation of the nuclear-term again in 2010, followed by the definite step-back from atomic power after the Fukushima-accident in 2011, was disturbing for both the companies' managers and their investors.

[...]


[1] KFK 2016: 5

[2] ibid.

[3] Oermann 2015: 10 f.

[4] Von Carlowitz 1732: letzte Seite des Vorberichts (S. 12)

[5] Heinrichs, Michelsen 2014: 32

[6] Brundtland et al.: 272

[7] Brundtland et al. 1987: 286

[8] Heinrichs, Michelsen 2014: 330

[9] Heinrichs et al. 2014: 117, originally in: Wiek; Lang (2011).

[10] KMK 2016: 6

[11] Warth & Klein Grant Thornton 2015: 13

[12] UNFCCC 2015: 21

Details

Pages
18
Year
2016
ISBN (eBook)
9783668382091
ISBN (Book)
9783668382107
File size
656 KB
Language
English
Catalog Number
v351646
Institution / College
Leuphana Universität Lüneburg
Grade
2,3
Tags
Nachhaltigkeit Ethik Politik Atom Atomkraft Brennelement Kommission depriciation cost CDU Endlager Energieversorger

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Title: The Division of the Depreciation Costs of Nuclear Power Stations Among Energy Providers and the Government. An Acceptable Solution?