Sustainable development and mining-An exploratory examination of the roles of government and industry

Abstract

A common perception is that the activities of the extractive minerals industry are inconsistent with sustainable development objectives, and that any form of mining is de facto un-sustainable. This paper outlines some of the major issues surrounding sustainability in the context of mineral development, and argues that mining can be sustainable if revenues that are derived from mining are collected and used to promote sustainable objectives at both the local (community) and national (or regional) levels. In order to develop a better understanding of the arguments presented, this study provides a brief empirical investigation of the impact of broad measures of regulation and taxation on the mining sector investment climate, based on data from the Fraser Institute's annual mining surveys, World Bank indices of regulatory activities, and various other sources of information on a variety of country-specific socio-economic characteristics. A positive relationship is found between the quality of the regulatory environment and mining companies' perceptions of a country's investment climate, as measured by the Fraser Institute's policy potential index (PPI). However, there is no evidence in the data of a negative relationship between the level of taxation and mining investment climate, except where tax and legislative frameworks are unstable and unpredictable. This allows us to conjecture that there may be scope for increased taxation to deal with local and national sustainability issues. As long as there is political stability and a good regulatory environment, it may be possible to raise taxes to mitigate local mining externalities through community development, or to fund other programs through hypothecated taxes (i.e., taxes raised to fund specific objectives). © Springer-Verlag Berlin Heidelberg 2009.