Changing the rules – It’s not just regulatory capture, it’s a whole new game

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NISA plans to ok operations at nuclear power plants built above faults

Despite its conflict of interest, lack of public trust, and pending abolishment, the Nuclear and Industrial Safety Agency has released plans to accept new nuclear safety rules that OK operations even at nuclear power plants even if active earthquake faults are discovered beneath their structures, reversing its current mandate that reactors must not be built above faults.

NISA has announced new plans to classify faults under nuclear reactors into three types: active faults that could trigger quakes, auxiliary faults that are structurally connected to active faults, and faults deemed weaker than the other two.  These last-minute efforts to set new seismic safety criteria have drawn criticism from experts, who suspect it is willfully creating loopholes to ensure the continued operations of nuclear plants.

Mitsuhisa Watanabe, a professor of geomorphology at Toyo University, said it would be hard to distinguish auxiliary faults from rifts with weaker power and both types could cause displacements. “The agency appears to be contemplating how to avoid the decommissioning of reactors just before its disbandment,” he said.

Source: The Japan Times

Regulatory capture exists where conflicts of interest abound

The Nuclear and Industrial Safety Agency has been under seemingly constant scrutiny in the post-Fukushima age, the extra attention has shown that NISA is not effectively fulfilling its obligations related to nuclear safety, and was influencing the public perception of nuclear energy since its birth.  NISA is governed by the Japanese ministry in charge of promoting the nuclear power industry, how could the agency be fully committed to ensuring that nuclear power plants were operating safely?  No one can wholly serve conflicting interests, and will either choose to emphasize some, and mitigate the others.  At some point the desire to increase market saturation or investment becomes an all-important driver of regulations, and the individual end-consumers become far less important to regulatory affairs.

Departing senior members of NISA were guaranteed to be given positions on various utility’s board of directors, in an example commonly known as “the chair of heaven”.  By putting the regulatory agency also in charge of promoting the very industry it regulates, one cannot ignore the conflict of interest which severely limits effective oversight.  NISA, (like the former American agency Atomic Energy Commission) have emphatically proved that regulators which combine purposes do not perform well.  Separating these conflicting duties and functions will increase transparency and limit the extent to which any regulating agency could potentially choose to negatively affect the regulatory process.

Regulatory Capture is the process by which those who are supposed to regulate, are coerced or otherwise affected by those whose actions they are supposed to govern, and over time come to identify with the regulated industry and protect its interests against that of the public.  The likelihood of regulatory capture is a risk that every regulating agency is exposed to by its very nature.

A classic example of capture, illustrated by George Stigler, is when an industry group convinces government actors to adopt policies that erect barriers to entry in their industry.  In today’s modern system, regulators and the public are just as likely to be locked in an adversary relationship, as a cooperative one.  The regulators abilities and preferences are influenced directly by both the governing authority, and the regulated industry.  This situation is exacerbated by a lack of open and accepted lines of communication, and a lack of trust on all sides.  Other examples of this process can be seen most clearly by looking at the special interests or lobbyists composing the regulations, drastic cutbacks in regulatory staff and budgets which also limit inspections and ability, and close relationships between the industry and its regulators.  The Dodd-Frank Act, Deepwater Horizon oil spill, and the Fukushima nuclear disaster are only a few of the most recent events attributed largely to regulatory capture.

In Japan, “The Atomic Village” has been likened to a cult, where the industry and its regulators are focused on a singular purpose of expanding the nuclear industry, and found to be prone to giving way to the will of the vested interests of its members.  This is precisely the definition of corruption: an abuse of entrusted powers for private benefits.  It culminates in the removal of existing regulations and restrictions and hindering or limiting the establishment of new regulations, or at least exerting influence on their design.

Reducing the problems faced to mere Regulatory Capture is an obvious over-simplification.  Regulators tend to be so extremely dependent on the industry for information, expertise, and talent, that they are not capable of exercising effective regulatory authority and are in fact highly dependent upon the regulated industry for policy relevant data.  Additionally, most are prone to judge future expectations primarily on past performance, and are attracted by “too big to fail” strategies, these complexities generate in increasing amount of bias towards industry interests.  After closer examination, the lax attitude and lack of concern for negative outcomes, the narrow and ambiguous conception of risk, shareholder value fundamentalism, leadership and governance failures, organizational disabilities, poor safety culture, and ineffective regulation have all played a role.

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