Resource and Environmental Policies for the Mining Industry: What Should Governments Do About the Increasing Social and Environmental Risks?

Anni Huhtala and Olli Ropponen

No 137, Working Papers from VATT Institute for Economic Research

Abstract: Growing demand for materials required in the construction of renewable technologies and zeroemission infrastructure may signal significant changes for the minerals and metals market. These in turn might exacerbate the social and environmental risks associated with the mining industry. We explore the impacts of commodity price volatility, the adoption of new technology and environmental risks on the long-term sustainability of a stylized mining firm and examine the implications for government policy intervention. We first analyze whether a mine should remain open or be closed when premature closing is costly due to land rehabilitation and reclamation resulting from an environmental accident. We then go on to investigate alternative resource policy instruments for by which the government may extract resource rents, examples being an ad valorem tax on output, a mining industry-specific corporate tax rate and a royalty on the amount of ore removed. Furthermore, we evaluate the potential of a number of means to correct for environmental externalities and compensate for damages that a mine causes during its lifetime, specifically a Pigou tax on effluents, fines on environmental accidents, mandatory up-front payments to an environmental liability fund and a surety bond to cover closure and reclamation costs.

Keywords: royalty; fines; liability payment; surety bond; Pigou tax; ad valorem tax; excess corporate tax; Environment; energy and climate policy; Business regulation and international economics; Q31; Q38; Q52; Energia; ilmasto ja ympäristö (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-env
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.doria.fi/handle/10024/180198

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fer:wpaper:137

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Working Papers from VATT Institute for Economic Research Contact information at EDIRC.
Bibliographic data for series maintained by Anita Niskanen ().