Decommissioning without Financial Fallout: Reforming Public Nuclear Funds

Abstract

Public-segregated nuclear decommissioning funds are the dominant model for managing decommissioning obligations in the European Union. Despite its widespread adoption, this model faces significant public financial management challenges, including moral hazard, conflict of interest, time inconsistency, and the potential for taxpayer liability. These funds often prioritize safety by investing heavily in local government bonds, but this strategy yields suboptimal returns, increasing financial burdens on operators and exposing the funds to concentration risks. Moreover, governments have incentives to influence fund collection strategies to meet short-term fiscal objectives. In cases of funding shortfalls, governments are likely to assume financial responsibility for decommissioning. This paper proposes reforms to address these issues, including enhancing fund governance through operator representation, revising the statistical classification of funds, strengthening fund independence, and adopting conservative cost estimates. Employing a multidisciplinary approach, the paper integrates insights from energy policy, economics, and public finance to provide a thorough analysis of this important yet understudied issue.