PERU Experience with Economic Instruments (EI) in Mining Sector By Ing. Andrea Vásquez.

PERUExperience with

Economic Instruments (EI) in Mining Sector

By Ing. Andrea Vásquez

Contents

• Environmental Effects of Mining – Peru• Policy Instruments of EM in Mining• Taxonomy of Policy Instruments• Peruvian Mining Legislation• Peruvian Instruments of EM in Mining• Experiences with EI in other Economies• Conclusions • References

Environmental Effects of Mining Peru

• Positive– Technological effects

• Significant change and investment in modern technology ( e.g. tailings and air pollution).

– Regulatory effects• Voluntary application of

environmental standards.

• Environmental improvement along with privatization processes.

Figure: Antamina

• Negative– Scale effects

• Questions of local sustainability and local development unresolved

• Territorial effects and water rights

• Lack of monitoring and control

Environmental Effects of Mining in Peru

Figure: Yanacocha

Map Map ofof

PrincipalPrincipalMineral Mineral

Production Production Units in Units in

PeruPeruSource: MINEM

Policy Instruments (PI) of Environmental Management (EM) in Mining

• Command and Control Policies• Technology Transfer, Information, and

Education Policies• Economic and Financial Policies• Financial Assurances (Hybrid of Economic

Instrument)

Taxonomy of Policy Instruments for Environmental Management

Source: Economic Comission for Latin America and the Caribbean - ECLAC (own representation)

Mine Law1981

UT General Mining Law1992

Investment Promotion LawMining Sector

1991

Framework Law Growth of PrivateInvestment - Environment

1991

OSINERG Law1996

OSINERGMIN Law2007

UT General Mining LawEnvironment

1993

Envirn. RegulationMining Activities

1998

MCLAir Emissions

1996

MCL Liquid Effluent

1996

UT General Mining LawFines Scale

Modified 2000

Mine Closure Law2003 (Regulation 2005)

Abandoned Polluted Areas Law2004 (Regulation 2005)

Peruvian Peruvian Mining Mining

Legislation Legislation

(Own representation)

Mine Law1981

UT General Mining Law1992

Investment Promotion LawMining Sector

1991

Framework Law Growth of PrivateInvestment - Environment

1991

OSINERG Law1996

OSINERGMIN Law2007

UT General Mining LawEnvironment

1993

Envirn. RegulationMining Activities

1998

MCLAir Emissions

1996

MCL Liquid Effluent

1996

UT General Mining LawFines Scale

Modified 2000

Mine Closure Law2003 (Regulation 2005)

Abandoned Polluted Areas Law2004 (Regulation 2005)

Peruvian Peruvian Intruments of Intruments of

Environmental Environmental Management in Management in Mining SectorMining Sector

(own representation)

Map of Non-Map of Non-Operative Operative

Mining UnitsMining Units

Peruvian Instruments of EM in Mining

• UT General Mining Law - Fine Scale– Non-compliance charges of regulations and

standards limits

• Mine Closure Law– Bonds performance– Fiscal incentives

• Abandoned Polluted Areas Law– Subsidies and Financing of Env. projects

Map of Map of Abandoned Abandoned

Polluted Polluted AreasAreas

Experience with Economic Instruments (EI) in other

Economies

Experience with Latin American Experience with Latin American countriescountries

  Environmental Policies were implemented with evidence of significant pollution reductions

  Environmental Policies were implemented but no data shows evidence of efficiency

  Environmental Policies were implemented without success on pollution reduction

(own representation)

Experience with OECD countriesExperience with OECD countries

OECD: ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT (own represtentation)

  Environmental Policies were implemented with evidence of significant pollution reductions

  Environmental Policies were implemented but no data shows evidence of efficiency

  Environmental Policies were implemented without success on pollution reduction

Experience with EECCA countriesExperience with EECCA countries

EECCA: EASTERN EUROPE, CAUCASUS AND CENTRAL ASIA (own representation)

  Environmental Policies were implemented with evidence of significant pollution reductions

  Environmental Policies were implemented but no data shows evidence of efficiency

  Environmental Policies were implemented without success on pollution reduction

Experience with ASIA countriesExperience with ASIA countries

  Environmental Policies were implemented with evidence of significant pollution reductions

  Environmental Policies were implemented but no data shows evidence of efficiency

  Environmental Policies were implemented without success on pollution reduction

(own representation)

Conclusions & Recommendations

• Peru has very little experience with the use of economic instruments as a tool for environmental management.

• The audit is only through systems of command and control.• The instruments are used to promote positive externalities

and not to reduce the negatives.• The government may charge fees for emissions or effluents

based on volume and pollutant loads. This would place the companies "cleaner" in a competitive advantage with respect to companies that pollute more.

• The government of Peru can put pressure on the industry to prove that they are complying with environmental limits through independent monitoring and auditing the plants.

Thank you for your attention

References• Environmental Effects of FDI in the Mining Sector

http://www.oecd.org/LongAbstract/0,3425,en_2649_34313_1833847_1_1_1_1,00.html; 21.01.08• Energy and Mining Ministry of Peru• DS-059-2005 Statements for Abandoned Polluted Areas• DS 033-2005-EM Statements for Mining Closures• DS 016-93-EM Unifying Text of General Mining Law• Environmental Policy in Mining, Warhurst, A. , Noronha, L. (2000)• CEPAL – Aplicación de instrumentos económicos en la gestión ambiental en America Latina y el

Caribe: desafios y factores condicionantes. http://www.eclac.cl/dmaah/noticias/proyectos/1/7451/LCL1488.pdf; 20.01.08

• www.economicinstruments.com • Economic Instruments for Pollution Control and Natural Resources Management in OECD

Countries http://www.oecd.org/LongAbstract/0,3425,en_2649_34295_2405107_1_1_1_37427,00.html; 20.01.08

• The use of Economic Instruments in EECCA Countries http://www.oecd.org/dataoecd/37/18/26732337.pdf; 20.01.08

• Applying Economic Instruments in Developing Counries http://www.crdi.ca/uploads/user-S/10536145810ACF2AE.pdf; 20.01.08

• Cepal EI Peru http://www.eclac.cl/dmaah/noticias/proyectos/1/7451/peru.pdf