The Economic Impact of the Chernobyl Disaster

UKR Chernobyl

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On April 26, 1986, the worst accident in the history of the nuclear industry occurred in Chernobyl, Ukraine. It released more radiation than the bomb on Hiroshima. That's because radioactive fumes leaked for two weeks. It took seven months to build a concrete shelter over the reactor.

The Chernobyl disaster immediately affected RussiaUkraine, and Belarus. A massive release of radioactive material spread over much of Europe. Dangerous caesium-137, which has a long half-life, is still a problem. There are measurable levels in soils and some foods in many parts of Europe. Five million people still live in areas with elevated radiation levels.

An Overview of What Happened at Chernobyl

At 1:23 a.m., Unit 4 exploded and ruptured the reactor vessel. Human error caused the explosion. The crew wanted to find out if the turbines alone could keep the cooling safety system running. They could not turn the reactor off, so they powered it down to 25 percent of normal. To conduct the test at this low level, they switched off the safety system. 

Things did not go as planned. The reactor power fell to less than 1 percent of normal. When they started powering it back up to the desired level, a power surge occurred. That started a dangerous chain reaction. Without the safety system, it quickly ruptured the reactor. 

The explosion blew off the 1000-ton sealing cap. Temperatures rose above 2000°C, melting the fuel rods. Then the graphite covering the fuel rods caught on fire. It burned for nine days, steadily releasing radiation.

Economic Impact

Over the next 20 years, Chernobyl's cost grew to hundreds of billions of dollars. Why? Here are the 12 primary reasons:

  1. The damage directly caused by the accident.
  2. The cost of sealing off the reactor. It is crumbling, exposing the environment to contamination again. The European Bank for Reconstruction and Development and a group of foreign donors are building a replacement. It will be completed in 2017 and cost 2.35 billion euros. 
  3. The creation of an exclusion zone of 30 kilometers around the power plant.
  4. The resettlement of 330,000 people.
  5. Health care for those exposed to radiation. The leak immediately doused 1,000 people with high levels of radiation. Four thousand children later came down with thyroid cancer from drinking contaminated milk. Also, more than 600,000 emergency workers were exposed. Many died or suffered severe health issues.
  1. Seven million people are still receiving benefits payments in Russia, Ukraine, and Belarus. That costs Ukraine at least 5 percent of its annual budget and Belarus at least 6 percent of its budget.
  2. Research to find out how to produce uncontaminated food.
  3. The monitoring of environmental radiation levels.
  4. Toxic waste clean-up and disposal of radioactive waste.
  5. The opportunity cost of removing farmland and forests from use.
  6. Loss of power from the Chernobyl plant itself. Unit 4 was shut down. Reactors 1, 2, and 3 were restarted in October 1986. They produced power until December 2000. 
  1. The cancellation of Belarus’s nuclear power program. Belarus estimates total losses of $235 billion

The accident couldn't have happened at a worse time. The Berlin Wall came crashing down in 1990, ending the Soviet Union. Both Ukraine and Belarus had been former U.S.S.R. satellite countries. Now, they were facing independence. Ukraine had been the "breadbasket" of the Soviet world. The accident destroyed this role. There were few small businesses to take its place.

The accident made new business development more difficult. Few companies wanted to invest in an area threatened by radiation. Who wants to buy a product marked "Made in Chernobyl?"

Comparison With Other Nuclear Disasters

The cost of a nuclear accident in a populated, industrial area could be much higher. That's because the Chernobyl disaster took place in a rural farming region. More than 5,700 square miles, about the size of Connecticut, are contaminated.

At a range between $125 billion to $250 billion, Hurricane Katrina cost less. It knocked gross domestic product growth to 1.3 percent in the 4th quarter of 2005. It affected 19 percent of U.S. oil production and spiked gas prices to $5 a gallon.

The 2011 Fukushima nuclear accident created as much economic damage as Chernobyl. It forced Japan to close 11 of its 50 nuclear reactors. It reduced the country's electricity generation by 40 percent. It did not release as much radiation.

Chernobyl released much more radiation than the Three Mile Island nuclear accident. But the Three Mile Island may have had a more significant economic impact. That's because it shut down the development of new nuclear plants in the United States. The accident occurred in 1974. There were no new plant applications until 2007. As a result, U.S. nuclear engineering companies lost their competitive edge to other countries.