Haiti Earthquake Case Study Environmental Effects Of Mining

EarthTalk | Boulder Weekly

Dear EarthTalk: What are the primary environmental concerns in the aftermath of the big earthquake in Haiti?

— Frank Dover, Portland, OR

As would be the case after any natural disaster, water-borne illness could run rampant and chemicals and oil could leak out of damaged storage facilities as a result of the magnitude 7.0 earthquake that ripped apart Haiti on Jan. 12. Surprisingly, no large industrial spills have been found during initial postquake rescue efforts, but of course the focus has been on saving human lives and restoring civil order.

According to the United Nations Environment Programme (UNEP), the biggest issue is the building waste; some 40 percent to 50 percent of the buildings fell in Port-au-Prince and nearby towns. “Thousands of buildings suddenly become debris and this overwhelms the capacity of waste management,” says UNEP’s Muralee Thummarukudy, who is directing efforts to collect the waste for use in reconstruction projects.

Even before the quake Haiti had major environmental problems. Intensive logging beginning in the 1950s reduced Haiti’s forest cover from 60 percent to less than 2 percent today. This lack of trees causes huge soil erosion problems, threatening both food and clean water sources for throngs of hungry and thirsty people. “If you have forest cover, when heavy rain takes place it doesn’t erode the land,” UNEP’s Asif Zaidi reports. “It doesn’t result in flash floods.” He adds that, due to its lack of forest cover, Haiti suffers much more during hurricanes than does the neighboring Dominican Republic.

Compounding these ecological insults is Haiti’s fast-growing population, now 9.7 million and growing by 2.5 percent per year. This has pushed millions of Haitians into marginal areas like floodplains and on land that could otherwise be used profitably. “Most fertile land areas are often used for slums, while hillsides and steep landscapes are used for agriculture,” reports USAID’s Beth Cypser. The resulting sanitation problems have stepped up cases of dysentery, malaria and drug-resistant tuberculosis among Haiti’s poverty-stricken population. Trash-filled beaches, smelly waterways, swarms of dead fish and tons of floating debris stand testament to Haiti’s water pollution problems — now exacerbated by the earthquake.

“We need to … create mechanisms that reinforce better use of natural resources,” says UNEP’s Zaidi. Prior to the quake, UNEP had committed to a twoyear project to restore Haiti’s forests, coral reefs and other natural systems compromised by the island’s economic problems.

Providing access to propane to encourage a shift from charcoal-burning stoves is an immediate goal. Longer term, UNEP hopes the program will help kick-start reforestation efforts and investments in renewable energy infrastructure there.

Perhaps the silver lining of the earthquake in Haiti is the fact that millions of people around the world now know about the plight of the country’s people and environment, and donations have started to pour in.

Anyone interested in helping relief efforts in Haiti can send a text message triggering a small donation to the American Red Cross (text “HAITI” to 90999 and $10 will be donated and added to your next phone bill). Those concerned about clean water specifically should donate to World Water Relief, a nonprofit focusing on the installation of water filtration systems in Haiti and other distressed areas of the world.

CONTACTS: USAID, www.usaid.gov; UNEP, www.unep.org; American Red Cross, www.redcross.org; World Water Relief, www.worldwaterrelief.org.

SEND YOUR ENVIRONMENTAL QUESTIONS TO: EarthTalk®, P.O. Box 5098, Westport, CT 06881; earthtalk@emagazine.com. Read past columns at: www.emagazine.com/earthtalk/archives.php. EarthTalk® is now a book! Details and order information at: www.emagazine. com/earthtalkbook.

Mining and the Environment

Case Studies from the Americas

edited by Alyson Warhurst

Published by the International Development Research Centre
PO Box 8500, Ottawa, ON, Canada K1G 3H9

© International Development Research Centre 1999

Legal deposit: 1st quarter 1999
National Library of Canada
ISBN 0-88936-828-7

The views expressed are those of the author(s) and do not necessarily represent those of the International Development Research Centre. Mention of a proprietary name does not constitute endorsement of the product and is given only for information. A microfiche edition is available.

The catalogue of IDRC Books may be consulted online at http://www.idrc.ca/index_e.html

This book may be consulted online at http://www.idrc.ca/books/focus.html






MERN: Toward an Analysis of the Public Policy – Corporate
Strategy Interface
Alyson Warhurst


Chapter 1
Environmental Regulation, Innovation, and Sustainable Development
Alyson Warhurst


Chapter 2
US Environmental Regulations and the Mining Industry: Lessons for Chile
Juanita Gana


Chapter 3
Environmental Policies and Practices in Chilean Mining
Gustavo Lagos and Patricio Velasco


Chapter 4
Environmental Management in a Heterogeneous Mining Industry: The Case of Peru
Alfredo Núñez-Barriga, assisted by Isabel Castañeda-Hurtado


Chapter 5
Formal and Garimpo Mining and the Environment in Brazil
Maria Hanai


Chapter 6
Environmental Issues in Brazilian Tin Production
Teresinha Andrade


Chapter 7
Environmental Management in the Bauxite, Alumina, and Aluminum
Industry in Brazil
Liliana Acero


Chapter 8
Competitiveness, Environmental Performance, and Technical Change:
A Case Study of the Bolivian Mining Industry
Ismael Fernando Loayza


Appendix 1 Contributors


Appendix 2 Acronyms and Abbreviations





Mining and environment — the two do not seem to go together. Indeed, they seem almost antithetical. Whether one reads about small-scale gold mining in the Amazon or huge coal mines in North America, whether simple sand and gravel pits or complex metallurgical operations, the legacy of the mining industry appears to be destruction of land and pollution of air and water. Actually, of course, the situation is much more complex. True, mining always involves disruption of the environment, either at the surface with open-pit mines or underground with deep mines, and in most cases the mineral being sought makes up only a small part of the material that must be moved, with the result that vast quantities of waste must be handled. True too, for many years and in most parts of the world (the North no less than the South), mining was carried on with little regard for environmental protection — or for the health and safety of miners or for the culture and well-being of local communities. However, the picture of mining firms operating with little regard for nature or native is no longer accurate. Under some conditions, and in some corporations, and in some countries, protection of the environment, of miners, and of nearby communities has become nearly as much a concern as putting a rock in the box.

International Development Research Centre (IDRC) funding is based on the principle that solutions to problems in developing countries can only be found through research based in those countries. From this perspective, it is not so much the record of past destruction of the natural environment that is of interest, but the dynamics of a new business environment in which corporate decisions and government legislation work in tandem to avoid damages that are avoidable and to mitigate those that are not. Of course, there remain as many cases where the old conditions persist, and it is equally of interest to learn where and why this new business environment has not appeared.

The early conclusions of the Mining and Environment Research Network (MERN) were striking: mining firms that are efficient in their main activity of extracting minerals from the Earth are also best at protecting the environment

while doing so, a conclusion that suggests that, under the right conditions, the economics-environment trade-off is not so sharp as once thought. The further conclusion that environmental results are partially independent of the strength of mining legislation suggests the need for governments to take a more sophisticated approach to mining-environment policy. Corporate attitudes are changing; government policies are changing; civil society is changing: and the business environment that brings them all together is changing. The need for further research is almost self-evident.

IDRC's interest in mining in developing countries predates today's recognition of environmental values and its focus on mining-environment policy. During the 1980s, research projects funded by IDRC focused mainly on science and technology policy for mining or on measures to improve efficiency. With the partial exception of a couple of projects that investigated health conditions in Bolivian mines (in particular, the effects of living and working at high altitudes), environment was very much secondary. An explicit environmental project related to mining does not appear until 1991, and somewhat ironically the first such project was the Bolivian component in the initial phase of MERN, as described in Chapter 8 in this book. Other projects looked at the effects of mercury from gold mining. Closely related projects also began to be funded, including some that focused less on environmental problems per se than on conflicts that stemmed from the power of the mining industry to usurp what had been common-property resources. A good example was the dispute over water that occurred between Southern Peru Copper Company and the community of Ilo, just north of Peru's border with Chile. (That research project was undertaken by a community group called LABOR, which then argued its case successfully before the International Water Tribunal in The Hague.) Another line of research that was initiated about the same time involved the effects of macroeconomic conditions and policies in various Latin America countries on the linkage between environmental degradation and mineral operations.

If the analytical focus of mining research funded by IDRC changed from technical efficiency to environmental protection, the geographic focus did not. With the exception of a collection of projects that focused on artisanal mining (mainly for gems) in Africa and Asia, the projects have almost all involved Latin America. This emphasis is not surprising: IDRC's program in South America focuses on the Andean countries, and this region is, perhaps more than any other in the world, dependent on mining for economic health. This focus is likely to continue. As this book appears, IDRC is conducting an inventory of research and researchers on mining and environment in the continent. From this, it is hoped that a long-term strategy for a coordinated program of research, probably focusing on ecosystem health, will emerge. (Ecosystem health is a new approach that links the effects on human health that stem from adverse anthropogenic changes to the natural environment.) The objective would be to determine what changes in government or corporate policies and what forms of community involvement in decision making would do most to protect local and regional ecosystems and, therefore, human health.

For the time being, however, what is needed is analytically sound documentation of the extent and the effects of recent changes in the business environment, as reflected in corporate behaviour and government policy. This is done very effectively, and for a wide range of corporations and conditions, in this first book from MERN.

David B. Brooks
Chief Scientist
International Development Research Centre
Ottawa, Canada

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The editor would like to extend particular thanks to Lisa Eisen, whose tireless and diligent editorial work was vital in preparing these chapters for publication. Special thanks are also due to Yvette Haine and Gavin Bridge for their help with the original manuscript. This book reflects the insight and hard work of many researchers and affiliates of the Mining and Environment Research Network (MERN) whose comments during MERN's annual research meetings contributed to the research contained within these pages. Finally, sincere thanks go to the staff of the International Development Research Centre, particularly to David Brooks, Bill Carman, Brent Herbert Copley, Amitav Rath, and Ann Whyte, for their hard work, from project development to completion.

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This book describes a process of building research capacity in the area of mining and the environment. This process began in the mid-1980s in Latin America, when a number of policy researchers — working together within International Development Research Centre (IDRC)-supported projects on issues of competitiveness, production efficiency, and technological change — began observing a noticeable association between production inefficiencies and environmental damage.

This was at a time when countries such as Bolivia, Brazil, Chile, and Peru either had a poorly developed or nonexistent environmental regulatory regime or lacked the institutional capacity to implement environmental policy. An early observation, examined in detail in this book, was that environmental regulation seemed to fail as the prime determinant of good environmental practice. Environmental performance of firms seemed to differ as much within one regulatory regime as between different regulatory regimes. These observations suggested the need for empirical research at the firm and plant levels, both to describe the environmental practices observed and to check these against the types of operations, vintages of technology, and competitive situations of the minerals sectors of the Americas. Our rationale was to learn how to improve public policies and corporate strategies for the environment.

This research was unfolding in two interrelated contexts. First, many mineral-producing countries were entering a period of economic liberalization, with privatization of previously state-owned mining companies and investment regimes opening up to attract international mining firms. Second, an environmental imperative was fast emerging, with increasingly stringent environmental regulations; growing voice-of-society concerns; environmental conditions often being attached to credit and insurance for new or expanding mining operations; and environmental pressures appearing throughout the supply chain, as industry was increasingly demanding that its suppliers meet new environmental standards. It is also important to recognize that this research was conducted in the early 1990s, when the importance of such diagnostic work was first recognized and we urgently needed descriptive analysis to be able to draw policy lessons.

A collaborative framework was devised to undertake this research, and proposals for its funding were submitted to a number of key agencies with portfolios in environment and development. Seed funding from the Organisation for Economic Co-operation and Development (OECD) Development Centre and the Overseas Development Administration made it possible, in 1991, to establish the Mining and Environment Research Network (MERN), a collaborative project involving researchers from the following institutions: the University of São Paulo and the Centre for Mineral Technology (Centro de Tecnología Mineral) in Brazil; the Institute for Research on Public Health (Instituto de Salud Popular) and the Catholic University of Peru (Pontificia Universidad de la Católica del Perú) in Lima, Peru; the Centre for Studies in Mining and Development (Centro de Estudios Mineria y Desarrollo) in La Paz, Bolivia; and the Centre for Studies of Copper and Mining (Centra de Estudios del Cobre y de la Mineria) in Santiago, Chile. The collaborative research project developed and won the prestigious John D. and Catherine T. MacArthur Foundation Collaborative Studies competition in 1991. Together with complementary funding for the Bolivia project from IDRC, this launched the first phase of MERN, which is the subject of this book. MERN fast expanded to include a range of different types of interdisciplinary centres of excellence in mineral-producing developing and industrialized countries. The current list of members is summarized by institution and country in Table 1.

From the outset, MERN aimed to provide research analysis to inform environmental public policy and to help mining companies achieve environmental compliance and improve competitiveness in the context of growing environmental regulation and technological innovation (see Box 1). The international collaborative research program first set out to examine the relationship between environmental regulation, technical change, and competitiveness in the nonferrous-minerals industry. In particular, it investigated how the process of technological innovation and organizational change could be harnessed to prevent environmental degradation while enhancing productivity and sustainability.

The rationale for the international focus of the research effort, in the developing and industrialized countries, was the need to learn from the experience of more competitive and environmentally proactive firms while focusing on the challenges of achieving environmental best practice in each participating country. The reason for adopting a network approach, as opposed to working independently, was to build up an international pool of interdisciplinary research competence. In other words, research capacity-building was a goal of the network from the outset.

Table 1. MERN: a collaborative research network.



United Kingdom

International Centre for the Environment at the University of Bath
University of Sussex
University of Surrey
University of Dundee
Camborne School of Mines
Royal School of Mines


Gerencia Ambiental
University of Buenos Aires


University of South Australia
University of Murdoch


Centro de Estudios Mineria y Desarrollo


University of São Paulo
Centro de Tecnología Mineral


Geological Institute of Bulgarian Academy of Sciences


Centre for Resource Studies at Queen's University at Kingston


Centro Estudios del Cobre y de la Mineria
Catholic University of Chile


Eco-Environmental Research Center
Academia Sínica


Universidad Pontificia Bolivariana
Instituto de Estudios Regionales


Mineral Resources for Exploration and Development
Addis Ababa University


École des mines


Projekt Consult
Oeko Institute for Applied Ecology
Universität Gesamthochscule


Minerals Commission
Institute of Management and Public Administration
Environmental Protection Agency


Minerals Commission


Tata Energy Research Institute
National Institute of Small Mines
Central Mining Research Institute


Universita degli Studi di Cagliari


Hokkaido University


National University of Malaysia


Eduardo Mondlane University


University of Amsterdam


University of Oslo


University of the Punjab

Papua New Guinea

Department of Environment and Conservation


Instituto de Salud Popular
Pontificia Universidad de la Católica del Perú


University of Mining and Metallurgy

Republic of Guinea

Ministry of Mines and Geology

South Africa

Mitsubishi Electric Personal Computer Division
University of Cape Town


Raw Materials Group
University of Lund


Ministry of Energy and Minerals


Thailand Development Research Institute
Prince of Songkla University

United States

Colorado School of Mines
Massachusetts Institute of Technology
US Bureau of Mines
East-West Center, Hawaii


Mining Sector Co-ordinating Unit
South Africa Development Community


University of Zimbabwe
Institute of Mining Research
John Hollaway Associates

Note: MERN, Mining and Environment Research Network.

A number of environmental concerns made us decide to work collaboratively toward our research objectives. Our early research profiles were all in the area of minerals policy and technological change in the mining sector and in the countries where we worked; many of us had done field work in the Andean region. We were all increasingly observing environmental damage associated with minerals extraction or processing activities: Figure 1 shows the relationships between the mining process, its waste products, and the hazards they present. This relates to environmental impacts affecting the three environmental media of land, water, and air, as well as the effects on local communities. Although in each country and at each mine site, environmental damage differed, some common explanatory factors seemed to emerge. Some of these, we immediately recognized, flew in the face of conventional wisdom. Conventional wisdom maintains the pollution-haven thesis that suggests international firms locate their production activities where they can most easily externalize the environmental-damage costs of their

Box 1

The Mining and Environment Research Network

MERN is an international collaborative research program involving centres of excellence in the major minerals-producing countries of the world. The program was established in 1991, with the aim of helping mining companies to achieve environmental compliance and improve competitiveness in the context of growing environmental regulation and technological innovation.

Our current research examines the relationship between environmental regulation, technical change, and competitiveness in the nonferrous-minerals industry. We investigate how the processes of technological innovation and organizational change can be harnessed to prevent environmental degradation while enhancing productivity and sustainability. The liberalization of investment regimes worldwide, combined with growing environmental regulation and more frequent requirements for an environmental-impact analysis as a precondition for loans, means that objective and well-documented policy analyses are urgently needed to support decision-making in industry, donor agencies, government, and nongovernmental organizations. This program of collaborative research aims to facilitate the global diffusion of such policy analyses and contribute to building international research competence in this area.

Taking this into account and building on our diagnostic research, the next phase of MERN research covers three interrelated themes:

Comparative analysis of environmental performance and its relationship with production efficiency — MERN research has demonstrated that good environmental management in the firm is more closely related to production efficiency and capacity to innovate than to regulatory regime. Environmental degradation tends to be greatest in high-cost operations working with obsolete technology, limited capital, and inadequate human-resource management. Because these problems are characteristic of much of the minerals production of developing countries, they are a special, but not exclusive, focus of MERN research. A major area of empirical research is an international benchmarking exercise to investigate environmental performance.

Analysis of international environmental regulations and the definition of improved policy options — Building on an international comparative analysis of the effectiveness of current environmental regulations, researchers are investigating a range of policy approaches to achieve sustained and competitive improvements in environmental management and to achieve pollution prevention, as opposed to pollution treatment. The research will make an original contribution by evaluating the potential of technology transfer and training (particularly if governed by joint-venture agreements and are linked to credit conditionality) to accelerate the development and diffusion of improved environmental-management practices. Researchers are also analyzing the environmental implications of new trade policies and agreements, such as the General Agreement on Tariffs and Trade and the North American Free Trade Agreement.

Toward best practice: corporate trends in environmental management — A preliminary conclusion of MERN research is that technical change, stimulated by the drive for improved competitiveness and the environmental imperative, is reducing both production and environmental costs, to the advantage of those companies that have the resources and capacity to innovate. Our current phase of research is intended to evaluate and compare trends in environmental best practice for nonferrous-minerals production in different socioeconomic and policy contexts, drawing out the lessons for both corporate strategy and government policy. This includes empirical research on planning for closure within the minerals industry.

Past and current sponsors of MERN research and dissemination activities include the John D. and Catherine T. MacArthur Foundation; IDRC, Canada; the Overseas Development Administration, United Kingdom; the Economic and Social Research Council, United Kingdom; the OECD, Paris; the US Bureau of Mines; the United Nations Environment Programme, Paris; the Science, Technology, Energy, Environment and Natural Resources Division of the United Nations; Industry, Science and Technology Canada and Environment Canada; the Chinese State Science and Technology Commission; the Columbian Institute for the Development of Science and Industry (Instituto Columbiano para el Desarrollo de la Ciencia y Tecnología), Colombia; the British Council; and a growing number of MERN Industry Club sponsors.

The output of MERN includes ongoing publication of research articles and reports, conference papers, books (including edited volumes of case studies), a biannual bulletin and briefing papers for sponsors, national workshops, and an annual international conference. As the MERN members develop research capability and define new areas of work and as demands on MERN's central resources increase, new funding is being sought. The benefits for MERN's sponsors include full access to MERN's central services and research findings (which include the results of detailed empirical studies in most of the major minerals-producing countries) and to a network of contacts, including interdisciplinary teams in well-placed centres of excellence.

For further details on membership, sponsorship, or research, please contact

Professor Alyson Warhurst
Director of the Mining and Environment Research Network
International Centre for the Environment
School of Management
University of Bath
Bath, UK BA2 7AY
Tel: +44 (0)1225 826156
Fax: +44 (0)1255 826157

production, that is, in developing countries where environmental regulations are either limited or poorly enforced. However, an early, common observation explored in these studies was that environmental damage was not evenly distributed within the minerals sector of each developing country studied but that seemed to vary according to a number of other factors, such as type of mineral; vintage of technology; stage of investment; stage of operation; level of integration; effectiveness of environmental regulation and its enforcement; and socioeconomic context (including poverty in local communities and work-force education and training). Most of all, environmental performance varied according to the firm's inherent technological dynamism.

These studies are therefore unique in refusing to accept a priori conventional wisdom and seeking to investigate actual environmental performance and its determinants at the mine site and across a range of site-specific factors.

The intellectual benefits of working together in a network and collaborating across a range of research and dissemination activities were greater than they would have been as the sum of the efforts of each institution working alone. Our

Figure 1. The mining process and the environment. Source: Warhurst (1991a).

networking activities included the coordination of our efforts through an electronic database and information system. As we grew from an initial 6 institutions to 56, luckily so did information technology grow in sophistication. We now do most of our networking activities via electronic communication. The network produces a bulletin twice annually, and this contains progress reports from each group, policy updates, industry news, professional articles, and a conference calendar. We recently completed Bulletin No. 10; collectively, the bulletins record MERN's growth over the years.

Once a year, MERN meets for a research workshop on a theme-by-theme basis. Workshop themes have included mining and sustainable development; pollution prevention, risk, and responsibility; planning for closure; and best practice in the management of mining's ecological impacts. Each workshop includes special sessions for research feedback and dissemination. Each of the chapters of this book went through such a peer-review process.

Finally, competence-building was absolutely paramount in this research process — these research studies were also undertaken as an education and training exercise. Two of the researchers who contributed chapters to this book, Maria Hanai and Fernando Loayza, were awarded PhDs for their work. All the researchers, including the editor, Alyson Warhurst, built on the network-research experience to develop their research programs. Each has now achieved either promotion within an existing role or a new position of decision-making responsibility relating to minerals development in their countries.


It remains to briefly review each chapter and describe the perspectives of the authors on these emerging themes in mining and the environment.

In Chapter 1, Alyson Warhurst develops a framework for the analysis of the case studies of environmental practices. Building on her training in the Earth sciences and in policy research, she describes the characteristics of dynamic firms that innovate to prevent pollution rather than reducing it after it has occurred. She analyzes these cases from the perspective of companies' strategies to externalize and internalize the environmental-damage costs of their production. Dynamic firms are those that not only internalize the environmental-damage costs of their production in response to the environmental imperative but also innovate to reduce their direct production and future abatement costs and so diminish the environmental-economic trade-off that conventional economic theory regards as the constraint on environmental progress. She then uses these findings to analyze changes in environmental-regulation approaches. A paradigm shift is occurring from command-and-control environmental regulations to ensure the polluter pays to environmental regulations governed by the principle that pollution prevention pays. However, Warhurst concludes that current policy mechanisms fail to promote technological and organizational change within firms to ensure pollution is prevented from the outset. She recommends broadening the range of regulatory mechanisms and making the technology-policy mechanisms and economic instruments needed to support them combine both regulation and promotion of industrial development. This new approach she terms environmental innovation.

In Chapter 2, Juanita Gana draws on her training in Chile as an engineer and her postgraduate training in the United States in minerals economics to examine the US experience of developing regulatory approaches in the minerals sector. She investigates waste disposal and the control of SO2 emissions and concludes that even US environmental policy is still very much in the trial-and-error phase and that solutions to environmental threats are constrained by our lack of scientific knowledge about the ecosystem and the impacts of human activities like mining. Gana ends by drawing some lessons for Chile US from experience. She concludes that, particularly in a developing country, cost-effective policies are crucial and that site-specificity should be examined to ensure that regulations are relevant to the site-specific pollution hazards. She argues for the ecoregional administrative approach to economic policy and therefore to environmental regulation in Chile and for a case-by-case approach to negotiating site-specific environmental controls. Gana highlights Chile's potential to learn from the mistakes and failures of other regulatory regimes and to begin its efforts with more appropriate environmental-policy objectives.

In Chapter 3, Gustavo Lagos, an engineering specialist in the mining industry, and Patricio Velasco develop these ideas through an analysis of environmental policies and practices in Chilean mining. They trace the environmental impacts of mining in Chile back to colonial times but recognize that environmental problems became more acute during the 1980s because of the growth of mining. A progressive impoverishment of ore grades was leading to increasing volumes of metallic impurities in tailings from processing plants and in smelter-feed material. Public awareness in Chile and international concern about environmental impacts also grew during the 1980s. Lagos's earlier research identified SO2 and particulate emissions from the country's six smelters as the key sources of pollution, followed closely by leakages from tailing dams and leaching operations, resulting in river and sea contamination.

Because of the lack of previous research in Chile on environmental pollution from mining and its policy, Lagos and Velasco's study mainly describes and identifies practices, trends, and policy issues. A major part of their analysis focuses on the very diverse environmental criteria adopted by different regional agencies and ministries and the diverse approaches adopted by the regulatory authorities to state, national private, and international operations. The authors report that several international mining firms adopted environmental practices in advance of legislated norms and institutional recommendations. But the state-owned companies face massive challenges in dealing with their sins of the past, in terms of accumulated environmental problems, combined with other factors such as the state companies' history, culture, and resource constraints.

The authors also report that consensus is more commonly obtained in other spheres of Chile's political, economic, and social development, such as in industrial development and the role of the private sector, than in environmental policy. Apparently, some people believe that sacrifices in the quality of the environment are needed to achieve fast economic development. Lagos and Velasco expect that environmental-management standards will be achieved before air-emission standards because the former are less dependent on capital investment. However, Congress now supports the new Environmental Framework Legislation, and the authors report that 1990 was a watershed for public companies' setting realistic and effective regulatory goals.

In Chapter 4, Alfredo Núñez-Barriga, a mining engineer with training in development studies, examines the range of environmental problems of the diverse mining industry in Peru and investigates their site-specific and policy-related factors. He concludes that ownership — private, domestic, foreign, or state — is not a key explanatory factor in environmental performance, whereas the time in operation or, as he calls it, the "longevity of production capabilities," is. Centromin Perú S.A., which is more than 100 years old and has experienced periods of foreign and state ownership, illustrates this well.

Núñez-Barriga also argues that the vintage of technology is a key factor: the older the technology the greater the pollution problem is likely to be and the more radical and costly the solutions for those pollution problems are likely to be. Núñez-Barriga also reports that size of the firm fails to explain poor environmental practice, if pollution per unit of production is considered. Núñez-Barriga makes some interesting remarks regarding the relationship between mineralogical complexity and environmental pollution. He argues that there are barriers to the acquisition and transfer of clean technology that relate to the polymetallic nature of many Peruvian mineral ores.

This Peruvian case study illustrates the recent but growing environmental awareness of the country's main production enterprises across a range of minerals and regions. Most important, it highlights that change" has come about through industry and state collaboration, rather than through government imposition of unrealistic regulations, with costly compliance and potential bankruptcy for some firms. Under the new legislative regime, most companies have developed site-specific environmental management and adequation programs. However, Núñez-Barriga reports that the mining industry in Peru tends to rely on established, external consultants to undertake environmental assessments and the planning of environmental-impact-mitigation measures, even where local capacity for this exists.

In Chapter 5, Maria Hanai, a sociologist, compares the economic roles of formal and garimpo gold mining in Brazil. She analyzes their environmental impacts and draws lessons for their mitigation. Hanai highlights the economic importance of the garimpo sector during the 1980s and its decline relative to formal gold mining during the 1990s, with garimpo mining supplying about 75% of gold production in the late 1980s and less than 50% in the early 1990s.

Hanai examines relationships among gold-mining techniques and their environmental implications. Small-scale garimpo mining is particularly polluting, with the hazards of mercury use and frequent large-scale land and watercourse degradation. Notwithstanding, she reports a fundamental link apparent throughout South America between poverty, or socioeconomic context, and environmental practice. This appears in the constraints these miners face acquiring credit to invest in improved technologies and in the lack of opportunities for education that also inhibits their adoption of improved environmental-management practices.

Hanai makes some policy recommendation as a basis for further research. These include technology-policy initiatives for education and innovation incentives for garimpo mining, as well as the adaptation of mining legislation to incorporate garimpo gold production.

In Chapter 6, Teresinha Andrade, a minerals-technology researcher, examines the environmental issues in Brazilian tin production. She also describes an industry divided between garimpos producers and mining companies and analyzes the different environmental problems with each type of production. By relating them to evolving environmental legislation, she identifies areas of potential convergence and conflict in the future relationship of tin mining to the environment. She reports that the industry is under pressure and has few resources for environmental concerns. Because of the low price of tin on the international market following its price collapse in the 1980s and because of competition from cheaper tin from China, the Brazilian tin industry has difficulty implementing the new environment-recovery plans and, for the most part, concentrates on the remediation of land degraded through past tin mining in response to regulatory pressures, rather than proactively responding to societal pressures.

Andrade comments that the most serious pollution problem is nonpoint-source pollution across mining regions, such as the silting up of large tracts of rivers. Scientists are reporting irreversible ecological degradation, the modification of gene banks and profiles of animal and plant life, changes to the soil structure, and new incidences of pests and disease. Andrade notes that current environmental legislation is retrospective and focuses on cleaning up existing pollution with current technology. She recommends emphasizing policy mechanisms to stimulate pollution prevention from the outset by providing incentives for technological and organizational change. On the basis of her interviews, she argues that this would be more attractive to mining companies, and she argues that a more democratic and regional approach to developing environmental policies is needed to find integrated and lasting solutions to the environmental impacts of Brazilian tin mining.

Liliana Acero reports, in Chapter 7, on the bauxite, alumina, and aluminum industry in Brazil. Her objectives are to document various companies' managerial approaches to the environment; to relate these practices to recent laws and regulations regarding environmental controls and planning; to measure and illustrate changes in the ways companies' environmental practices respond to specific new environmental legislation; and to describe some of the environmental effects experienced by local communities. Acero argues that regulating the environmental practices of transnational bauxite, alumina, and aluminum producers, either locally or in their home countries, is a necessary but not sufficient condition for effectively implementing sound environmental policy at the operational level. She finds that some regulations are adhered to more systematically than others and that this relates more to the economic benefits that accrue to the company than to either government or societal pressures, unless the environmental problem is very visible and has triggered a specific public response. Acero attributes some environmentally proficient practices of some transnational firms to their greater technological capacity and financial resources, although some transnational operations are not at the forefront of environmental proficiency in Brazil. She favours the strategy of Companñía Vale do Rio Doce S.A. (the state mineral producer) for reforesting and rehabilitating mined lands, which she argues is superior to the strategies of the international firms. Acero also describes lag phases in local implementation of practices already adopted in the companies' more stringently regulated home countries. She describes loopholes in local laws and regulations, along with failures in their effective implementation, which means that companies need to be proactive to achieve sound environmental track records. Acero concludes that environmental soundness depends not only on effective environmental regulation and efficient technical choices but also on the institutional context; the support, if any, given to environmental policies; and having the educational capacity and political interests needed to operationalize the law. Without the latter, Acero asserts, neither regulation nor technical or managerial solutions are sufficient to achieve truly environmentally sensitive minerals production.

Finally, in Chapter 8, Fernando Loayza analyzes, from a minerals-economics perspective, the links between competitiveness, environmental performance, and technical change in the Bolivian mining industry. He develops a dynamic economic model of the mining firm, which is empirically tested in a multiple-case study of four Bolivian mining companies and seven mining operations. This model combines an economic theory of depletion and a theory of pollution and relates investment behaviour to pollution per unit of output. It starts from the assumptions that companies compete through technical change and that competitive companies can increase their production capacity and technological capability over time.

The significance of Loayza's study is its theoretical and empirical demonstration of how mining firms' dynamic efficiency affects the internalization of environmental-damage costs. Dynamic efficiency — the ability to innovate and gain economies of scale — is not only a significant influence on a firm's ability to compete but also a principal determinant of its environmental performance. Because increased competitiveness encourages investment in technological capability and production capacity, an improvement in competitiveness tends to reduce pollution per unit of output, whereas a decline in competitiveness tends to increase pollution per unit of output. Thus, Loayza's analysis illustrates how pollution results not only from a market failure to adequately price environmental resources but also from a lack of dynamic efficiency within firms. The implication for environmental policy is that regulatory initiatives to reduce pollution should both consider mechanisms to make firms internalize externalities and address the inefficiencies of some firms, along with the dynamic capacities of others. Policy mechanisms should promote both environmental proficiency and economic efficiency.

The methodology of Loayza's study justifies applying its conclusions beyond Bolivia to other mineral-producing countries.


On a final note, the environmental imperative has been gaining momentum in recent years, along with the liberalization policies of Bolivia, Brazil, Chile, and Peru. Therefore, by the time these studies are published, some of the regulatory initiatives they describe may be out of date. Readers are therefore urged to view this book not only for the information it contains but also for its value as an historical document that, through empirical investigation, challenged some of the conventional wisdom that surrounded the dawn of the environmental imperative.

It should also be seen as a record of a process of research and education that in turn highlights the advantages of working together across both disciplines and national boundaries to ensure that future paths are forged to more environmentally sustainable development. We hope that MERN has contribute to ensuring a more sustainable future.


Alyson Warhurst

More than two decades ago, the famous "Report to the Club of Rome: The Limits to Growth" (Meadows et al. 1972) predicted that the principal problem facing the world would be the depletion of nonrenewable resources, notably fossil fuels and metals. It was projected that tin, for example, would run out in 1987. However, that year saw an oversupply problem in tin markets, and several mines closed. Indeed, with technical change, recycling, and the discovery of new oil and mineral reserves, those predictions have proven to be false. The Meadows et al. report stimulated a lively debate. For example, the Science Policy Research Unit (United Kingdom) argued that institutional change and a change in the world research and development (R&D) system, and therefore in the rate and direction of technical change, could avert the predicted crisis (Cole et al. 1973; Freeman and Jahoda 1978).

In the last decade, the environmental debate has focused on the depletion and degradation of renewable resources, such as water and air. Consequently, the term sustainable development has been used to reflect a growing concern about the interaction between economic activity and the quality of the environment. The 1987 Brundtland Report, of the World Commission on Environment and Development, defined sustainable development as "development that meets the needs of the present without compromising the ability of future generations to meet their

own needs" (WCED 1987, p. 43). This implies that economic policy should encompass environmental conservation and that the goal of more equitable economic growth refers to both intergenerational and geographic equity (Jacobs 1991).

Leaders of the G7 (group of seven leading industrialized nations) adopted the principle of sustainable development at the Toronto Summit in 1988 (Jacobs 1990, p. 59), and the 1992 Earth Summit in Rio de Janeiro heralded a more global commitment to its aims. However, the widespread adoption of the principle by policymakers, academics, industrialists, and environmentalists has not yet led to a systematic effort to make it operational through measurable policy targets or policy mechanisms for implementation. Nonetheless, regulation is slowly moving in this direction.

Previous policy, guided by the polluter-pays principle, dealt mainly with the results of environmental mismanagement — pollution — and its treatment after it occurred. The new regulatory principle — pollution prevention pays — aims to promote competitive and environmentally sustainable industrial production. This paper argues that successful implementation of the pollution-prevention principle will require the introduction of new policy mechanisms designed to both stimulate technological innovation in firms and encourage the commercialization and diffusion of those innovations across the boundaries of firms and nations. This means that government efforts to promote and regulate industry, which have traditionally been separate efforts, will need to be combined (Warhurst 1994).

This paper analyzes the challenge to policymakers posed by pollution-prevention approaches to environmental management. It develops the concept of corporate environmental trajectories for evaluating the relationship between regulatory regime and competitiveness and the implications for sustainable development. It then discusses policy mechanisms that may be used to stimulate the development and diffusion of clean technology. (The term clean technology is used here to refer to industrial processes that incorporate current best practice into environmental management. The term is not intended literally; indeed, a more accurate term would be cleaner technology.) Case studies of mining operations around the world, drawn from the research of the Mining and Environment Research Network (MERN), are used to illustrate these arguments. (The term mining is used here to cover all aspects of metals production, including mine development, extraction, smelting, re-mining, and waste management.) The paper shows how policy guided by the pollution-prevention principle represents an advance over previous policies guided by the polluter-pays principle. However, the paper highlights two flaws in pollution-prevention regulatory approaches: first, the firms that pollute the most are mismanaging the environment precisely because of their inability to innovate; second, the most efficient firms are generally better environmental managers because they are innovators and are able to harness both technological and organizational change to reduce the production and environmental costs of their operations. The paper concludes by suggesting a new policy principle: environmental innovation.

This analysis recognizes that mining is a highly heterogeneous activity and that winning metals requires the removal and processing of vast quantities of rock (Winters and Marshall 1991; Tilton 1992). Some pollution can clearly be prevented, and the inevitable by-products of mining can be treated, recovered, or recycled. Radical technological and organizational innovation can change the broader context of metals production and the resulting pollution.

Although improving the environmental management of the mining industry production is the primary focus of this paper, the author recognizes that this is only one objective of sustainable development. Policy also needs to address poverty, education, health and welfare, the agricultural sector, and rural development. Nonetheless, the analysis may have implications for other industries for which institutional change, technology transfer, and training are requirements for sustainable development.

The policy challenge of pollution prevention

To meet the pollution-prevention principle requirement that pollution be reduced at source, firms must either change their technology or reorganize their production process, or both. To accomplish this, firms may need to develop new technological and managerial capabilities, form technological alliances with equipment suppliers, and collaborate with R&D institutions, which may in turn require policy mechanisms not currently part of pollution-prevention thinking.

The reasons for this are rooted in the determinants of environmental-management practices in the firm. Indeed, MERN's research suggests that the environmental performance of a mining enterprise is more closely related to its innovative capacity than to the regulatory regime under which it operates (Lagos 1992; Acero 1993; Lin 1993; Loayza 1993; Warhurst 1994). Capacity to innovate is in turn related to the entrepreneurial characteristics of the firm's management; to the firm's access to capital, technological resources, and skills; and to the broader policy and economic environment in which the firm operates. This suggests that technical change that is stimulated by the environmental imperative reduces both production and environmental costs, to the advantage of those dynamic companies with the competence and resources to innovate. Such companies include mining enterprises in developing countries as well as transnational firms. However, the evidence is strongest for large, new investment projects and greenfield sites. In older, ongoing operations, environmental performance correlates closely with production efficiency, and environmental degradation is greatest in operations working with obsolete technology, limited capital, and poor human-resource management. Developing the technological and managerial capabilities needed to bring about technical change in such organizations would clearly lead to more efficient use of energy and chemical reagents and to higher levels of metals recovery. Thus, improved production efficiency would result in improved overall environmental management, including better workplace health and safety.

International standards and stricter environmental regulations may pose no significant economic problems for new mineral projects, but major costs and challenges may be involved for older, inefficient operations. Controlling pollution problems in many of these cases requires costly add-on solutions: building water-treatment plants, strengthening and rebuilding tailings dams, investing in scrubbers and dust precipitators, etc. Furthermore, in the absence of technological and managerial capabilities, there is no guarantee that pollution-control equipment — environmental hardware — will be incorporated or operated effectively in the production process. Crandall (1983) found that a significant fraction of mandated pollution-control equipment was never even installed. In some instances, regulatory requirements are leading to shutdowns, delays, cancellations, and reduced competitiveness. When mines and facilities shut down, the cleanup costs are frequently transferred to the public sector, which, particularly in developing countries, has neither the resources nor the technical capacity to deal effectively with the resulting problems. In most countries (except perhaps the United States), the lack of retrospective regulation means that the pollutee-suffers-and-pays principle is alive and well and would continue under a pollution-prevention regime, unless, of course, the new policy fosters improved production efficiency and stimulates innovative capacity.

Environmental innovators

Although some mining companies have resisted environmental regulation of their existing operations, a growing number of dynamic, innovative companies are making new investments in environmental management. This is partly because these firms see an evolution toward stricter environmental regulation and because pushing forward the environmental and technological frontiers is to their competitive advantage. Being free of investments sunk in pollutant-producing, obsolete technology or having significant resources for R&D and technology acquisition, these firms develop cleaner process alternatives or select new or improved technologies from mining-equipment suppliers (who are themselves busy innovating). New investment projects increasingly incorporate economic and environmental efficiencies into the production process, not just through new plants or equipment but also through improved management and organizational practices. Some examples of dynamic environmental innovators are discussed below in three categories: smelter emissions, gold extraction, and waste management.

Smelter emissions

INCO LTD — At one time one of the world's highest-cost nickel producers, Inco Ltd was until recently the greatest single point source of environmental pollution in North America. This was due to its aged and inefficient reverberatory-furnace smelter, which emitted excessive quantities of SO2. Inco had done all it could to improve the efficiency of this obsolete technology through incremental technical change when the Ontario Ministry of Environment introduced an intensive SO2-abatement program to control acid rain. These factors prompted Inco to invest more than $3 billion in a massive R&D and technological innovation program (Aitken, personal communication, 19902). Indeed, more than 12% of Inco's capital spending during the 1980s and early 1990s was for environmental concerns (Coppel 1992). Under the Canadian acid-rain-control program, Inco was required to reduce SO2 emissions from its Sudbury smelter complex from 685 000 t/year to 265 000 t/year by 1994, a 60% reduction. To achieve this reduction, Inco planned to spend $69 million to modernize its milling and concentrating operations and $425 million for smelter-SO2 abatement. The modernization process included replacement of its reverberatory furnaces with innovative oxygen-flash smelters and the construction of a new sulfuric acid recovery plant and an additional oxygen plant. By incorporating two of the flash smelters, the company reduced emissions by more than 100000 t in 1992, and by 1994 the firm expected to achieve the government target levels. Inco is now one of the world's lowest-cost nickel producers (Warhurst and Bridge 1997). Furthermore, like other dynamic companies responding to environmental regulations through innovation, Inco seeks to recoup R&D costs by aggressively licencing its technology to firms in other copper- and nickel-processing countries.

KENNECOTTCORPORATION (UTAH) — Kennecott Corporation (RTZ Group) recently launched a new smelter project in Utah. The dual aim of the project is to set a new emissions standard for smelters worldwide and to improve cost efficiencies in the processing of its ore. Advantages include the capture of 99.9% of sulfur off-gases (previous levels were 93%). Sulfur dioxide emissions will be reduced to a new world-best-practice level of about 200 lb/h (1 lb = 0.454 kg),

less than 5% of the 4600 lb/h permitted under Utah's clean-air plan. The investment of 880 million United States dollars (USD) resulted in 3 300 new construction jobs and the transfer of 480 million USD to local companies through project-development contracts. The proposed Garfield smelter will expand the copper-concentrate-processing capability to the level of mine output (about 1 × 106 t of copper concentrate per annum) at about half the previous operating cost. It represents the first application of oxygen-flash technology in the conversion of copper matte to blister. (Details are from Kennecott Corporation [1992] and Emery [personal communication, 1992].) The two-step copper-smelting process starts with smelting furnaces, which separate the copper from iron and other impurities in a molten bath, followed by converting furnaces, which remove sulfur from the molten copper. A new technology, known as flash converting, will be used in the second step.

Kennecott developed this unique technology in cooperation with Outo-kumpu, a Finnish company and a leader in the supply of smelting technology. Essentially, the new technology eliminates open-air transfer of molten metals and substitutes a totally enclosed process. Flash converting has two basic effects: it allows for a larger capture of gases than the current open-air process; and it allows the smelter's primary pollution-control device — the acid plant — to operate more efficiently.

The smelter will include double-contact acid-plant technology that will improve the capture of SO2 gases as acid. The new smelter will have other environmental benefits. An extensive recycling plan will reduce water usage by a factor of four. Pollution prevention, workplace safety and hygiene, and waste minimization will be incorporated in all aspects of the design. In addition, the smelter will generate 85% of its own electrical energy by using steam recovered from the furnace gases and emission-control equipment. This eliminates the need to burn additional fossil fuel for power. The new facility will require only 25% of the electrical power and natural gas now used per tonne of copper produced.

Gold extraction

HOMESTAKE'S MCLAUGHLIN GOLD MINE (CALIFORNIA) — Opened in 1988, Homestake's McLaughlin gold mine is a good example of a mine and processing facility designed, constructed, and operated under the world's strictest environmental regime (see Warhurst 1992c). Environmental efficiency is built into every aspect of the mining process. The McLaughlin site is notable for its innovative process-design criteria, its fail-safe tailings and waste-disposal systems, and its

extensive, ongoing mine-rehabilitation and environmental-monitoring systems. The mining operation, with its myriad of innovative technologies, defines best practice in environmental management.

The most interesting conclusion drawn from site visits and discussions with the firm's environmental officers is that most of these environmental-management initiatives have resulted in no substantial extra cost; indeed, many have improved the efficiency of the mine and made the overall operation more economical. An extensive environmental-impact analysis was undertaken before the mining started. All plant and animal species were identified and relocated in readiness for site rehabilitation once the mining operations end. Air, soil, and water quality were measured in detail and water-flow patterns were determined to provide the baseline for future monitoring programs. Assaying was done not just of the gold ore but also of the different types of gangue material so that waste of different chemical compositions could be mined selectively and dumped in specific combinations to reduce acid mine drainage. Local climatic conditions were evaluated to determine the frequency of water spraying needed to reduce dust; evaporation rates were evaluated to assist in water conservation and to determine the flood-risk potentials of tailings ponds. The tailings ponds were constructed on specially layered, impermeable natural and artificial filters, with high banking to prevent overflow and with secondary impermeable collecting ponds for use in the rare case of flooding.

At many other mining projects, site rehabilitation is seen as a costly task to be undertaken at the end of a mining operation, but at the McLaughlin gold mine rehabilitation began immediately and is an ongoing activity. This not only spreads expenditure more evenly over the life of the mine but also allows more efficient use of truck and earth-moving capacity and of construction personnel. When waste piles reach a certain size, soil (overburden previously stripped from the mine area and stored) is laid down and revegetation begins. Although mining at McLaughlin had been under way for only 3 years at the time of writing, extensive areas of overburden and waste had already been successfully re vegetated, immediately reducing environmental degradation and negative visual impacts. In addition to these in-built environmental controls, Homestake has sophisticated environmental monitoring in place. Seepages, emission irregularities, and wildlife and vegetation effects can be detected and rectified immediately, reducing the long-term risk of expensive shutdowns, costly court cases (for water toxicity, for example), and the need for treatment technologies.

Waste management

In the minerals industry, marginal-ore dumps, tailings, and the removal of overburden result in considerable quantities of waste rock (Gray 1993). Any toxicity associated with that waste is principally a direct result of the loss of expensive chemical reagents or of metal values. Public policy has not yet taken up the challenge of promoting R&D geared toward waste-toxicity reduction or waste-treatment innovations. One interesting area of research is the application of biotechnology to waste treatment (Warhurst 1991a).

The task of improving environmental-management practices within ongoing mining operations may not be adequately supported, however, if waste treatment is considered a third priority, below pollution prevention at source and recycling. (For an explanation of the federal approach to pollution prevention in the United States, see the chapter on pollution prevention in Environmental Quality: The 23rd Annual Report of the Council on Environmental Quality, Together with the President's Message to Congress [CEQ 1993].) This again suggests that pollution-prevention policy needs to focus on the environmental-innovation process, rather than strictly on pollution reduction at source.

The following two examples demonstrate how innovation can reduce pollution. The approach taken — the integration of waste management into the production process — does not always represent an add-on regulatory cost as perceived by conventional wisdom; indeed, there are competitive advantages, as well as environmental benefits, to using such a strategy.

WATER TREATMENT AT HOMESTAKE'S MINE AT LEAD (SOUTH DAKOTA) — Facing regulatory pressure to clean up a cyanide seepage problem, Homestake was able to turn the situation to its own advantage. Its R&D staff developed a proprietary biological technique for treating the effluent, which led to the recovery of local fisheries and water quality in the mine's vicinity at Lead, South Dakota (Whitlock and Crouch 1990). To recoup and profit from its investment in R&D, the company is now actively commercializing the technology, which could be widely applied at other gold-leaching plants.

WATER TREATMENT AT EXXON'S MINE AT LOS BRONCES (CHILE) — Exxon is expanding its mining project at Los Bronces, Chile, into one of the largest open-pit copper mines in the world. The expansion will result in the stripping off of very large quantities of overburden and in the creation of low-grade ore dumps. Before the mine was developed, the Chilean government warned Exxon that it would be imposing financial penalties for the water-treatment costs for the expected acid mine drainage into the Mantaro River, the source of Santiago's drinking water.

This warning became the economic justification for a bacterial-leaching project at the mine. A feasibility study showed how profitable it can be to leach copper from waste at the same time as preventing otherwise naturally occurring pollution (acid mine drainage). More than 1 × 109 t of waste and marginal ore below the 0.6% Cu cut-off grade is expected to be dumped during the project's life span. The waste could have an average grade of 0.25% Cu and would therefore contain a lucrative 2.5 × 106 t of metal, worth about 3.5 billion USD at 1985 prices (Warhurst 1990). The study demonstrated that with a 25% recovery rate, high-quality cathode copper could be produced profitably at 0.39 USD/lb by recycling mine- and dump-drainage waters through the dumps over a 20-year period.

This was shown to have the double advantage of extracting extra copper and avoiding government charges for water treatment. Both investment and operating costs were less than two-thirds of estimated costs for a conventional water-treatment plant, which would not have generated saleable copper. The Los Bronces mine demonstrates the potential economical benefits of building environmental controls into a mine at its development.

These few examples suggest that dynamic companies are not closing down, reinvesting elsewhere, or exporting pollution to developing countries with less-restrictive regulatory regimes. Rather, these companies are adapting to environmental regulatory pressures by innovating, improving, and commercializing their environmental technology and environmental-management practices, at home and abroad.

Trends in distributing environmental costs: from "pollutee suffers," to "polluter pays," to "pollution prevention pays"

Environmental regulation is frequently seen as a way to distribute the environmental costs of industrial production. Its aim is to shift the cost burden of environmental mismanagement from the pollutee to the polluter.

According to conventional wisdom, two types of costs are incurred in industrial production (Tilton 1992): the internal costs of labour, capital, and material inputs, which the company pays; and the external costs of environmental damage, such as ecological degradation, water pollution, and air contamination, which the company does not pay. This analysis runs the danger of assuming that a fixed cost is associated with each increment of pollution and that the reduction of this cost burden to society will result in a corresponding incremental increase in the firm's production costs. Tilton (1992) described this view clearly in his account of the

Figure 1. The marginal social costs (MSC) and marginal social benefits (MSB) of pollution.

Source: Tilton (1992).

relationship between the marginal social benefits (MSB) and marginal social costs (MSC) of industrial production, with pollution as an externality (Figure 1). The argument rests on the assumption that the socially optimal use of an environmental resource occurs when the additional benefits (in terms of goods and services it derives by permitting one more unit of pollution) equal the additional costs it incurs. In economic terms, this is the point at which MSB = MSC. If all social costs and benefits of pollution are incurred or internalized by the producing firm, the firm will have an incentive to pollute only up to this optimal point (Po). However, if the firm realizes all the benefits associated with pollution, but not the costs, it has an incentive to expand its production until the additional benefits from causing a further unit of pollution are equal to zero. Note that in this circumstance, pollution has reached Pa, which is far beyond the optimal point, Po.

The cost burden of this falls on society. Indirectly the pollutee pays, although the state may absorb these costs to a degree. Furthermore, as consumers do not pay the full social costs of production, pollution-intensive goods are usually underpriced and, consequently, overproduced and overconsumed. It is then argued that this situation can lead to production inefficiencies because "free" environmental resources may be substituted for labour, equipment, and other inputs (for which the firm must pay). For example, a firm may engage in the excessive and damaging use of water resources, rather than incorporating a treatment and recycling plant for effluent. This in turn reduces the entrepreneurial capacity of the firm and, most importantly, acts as a disincentive to innovate. Such a sequence of events explains in part the decline of Bolivia's state mining company, Corporación Minera de Bolivia (Comibol), and its related mismanagement of the environment (Jordan and Warhurst 1992; Loayza 1993). However, central to this idea is the assumption of a fixed environmental cost, to be either externalized or internalized. This paper challenges this assumption, arguing that technological change can reduce the environmental costs of production.

External environmental costs

For policymakers, estimating the costs of natural-resource degradation associated with mineral exploitation is a complex task. The most significant problem is devising ways to share these costs among the polluter, state, and community. Such costs are high, particularly with old and ongoing operations.

In the past, environmental costs were largely measured in terms of remedial treatment of degraded water, investment in environmental-control technologies, or compensation for damage caused to local farmland by toxic dust. More recently, environmental costs have been estimated in terms of extensive rehabilitation of the former mine and plant site for alternative uses; such rehabilitation could include revegetation or the construction of leisure facilities (Kopp and Smith 1989). However, in developing countries, it has been argued, the mining industry has traditionally been structured to externalize such environmental costs so as to maximize profit — the industry appropriates undervalued resources and shifts the environmental costs to others, rather than improving efficiency and innovating.

When it comes to evaluating these costs, it should be remembered that those most affected by environmental pollution from mining in developing countries are generally those least able to understand and respond to it — remote miners' families or isolated rural communities. Responses are typically short term and nonsustainable. For example, when farmlands were ruined by pollution from the Karachipampa tin-volatilization plant in Bolivia, the peasants were offered small compensation payments covering only the loss of particular harvests, rather than the potential loss of their livelihoods. In contrast, in the United States, the fastest growing area of consultancy is in the assessment of liability for natural-resource damage — propelled by the Comprehensive Environmental Response, Compensation, and Liability Act and Superfund Amendment and Reauthorization Act, or "Superfund" laws, which apportion blame for environmental damage to any one of a mine's past owners and charge them with the cost of government contracts to clean up and rehabilitate the damaged site.

Inevitably, some environmental degradation results from mining. Although such pollution has a negative economic impact, it often presents unrealized economic opportunities — for firms, as well as for society. For example, toxic byproducts that could be economically reprocessed are frequently dumped instead. This is the case especially in developing countries, where inaccurate sampling or inefficient technologies result in such loss. Mining high-grade ore and dumping low-grade ore may be a short-term expediency for boosting foreign-exchange earnings in times of crisis, but it results in greater environmental degradation (higher risk of acid mine drainage from dumps) and the loss of long-term revenue. Water-treatment projects are often instigated at the time of mine closure, which is more costly than preventing acid mine drainage from the outset. Such pollution control could result in the recovery of metal values, through solvent-extraction or electrowinning techniques. Finally, some companies have had to pay the healthcare costs for communities that drink degraded water, which are in many cases greater that the cost of the technical change needed to treat the chemical effluent in the first place. Even if firms are forced to absorb some of the environmental costs of their operations in the long term, this does not necessarily translate into improved efficiency in the short term.

Considerable work is still needed to quantify the nature and extent of environmental degradation caused by metals production. Currently, only isolated case studies exist, and little systematic analysis of the problem has been undertaken. It is difficult to generalize because local geological, geographic, and climatic conditions affect mineral and ore chemistry, soil vulnerability, and drainage patterns and hence the extent of the environmental hazard. Furthermore, the degree of environmental hazard is affected by the social and economic organization of the production unit, including such factors as the firm's size, history, and ownership structure, as well as its propensity to innovate.

The polluter-pays principle and the internalization of environmental costs

A combination of political, economic, and environmental elements has given rise to the polluter-pays principle, which in essence requires polluting companies to internalize the external costs of environmental damage caused by their production of goods and services. Member countries of the Organisation for Economic Cooperation and Development have endorsed this principle for many years, and the 1992 deliberations of the United Nations Conference on Environment and Development (UNCED) heralded commitment to its application on a more global scale.

The norm for environmental regulations incorporating the polluter-pays principle is for governments to set maximum permissible discharge levels or minimum levels of acceptable environmental quality. Such command-and-control mechanisms include Best Available Technology (BAT) standards (including Best Available Technology Not Entailing Excessive Costs standards), clean-water and clean-air acts, Superfund laws for determining cleanup and liability, and a range of site-specific permitting procedures, which tend to be the responsibility of local government within nationally approved regulatory regimes. Implementation and enforcement of command-and-control mechanisms tend to be the responsibility of administrative agencies and judicial systems. However, such polluter-pays regulations may not promote real reductions in environmental degradation or improve environmental management in metals production on a broad scale.

First, the polluter pays only if discovered and prosecuted. This requires technical skills and a sophisticated judicial system, often activated only after the pollution problem has become apparent and caused potentially irreversible damage. Moreover, in developing countries, serious economic and political constraints limit the implementation of environmental regulations and the penalization of polluters (Warhurst 1994). For these reasons, environmental regulations tend to address the symptoms of environmental mismanagement (pollution problems), rather than the causes (economic and technical constraints; lack of access to technology or information about better environmental-management practices). This neglect can be serious because for certain types of pollution, such as acid mine drainage, it is extremely costly and sometimes technically impossible to trace the cause and thus to rectify the problem and prevent its recurrence. Certain environmental controls may only work if incorporated into a project from the outset (such as buffer zones to protect against leaks under multitonnage leach pads and tailings ponds) or if combined with economic incentives.

Second, a plant may meet BAT standards at start-up without being able to achieve the specified effluent and emission levels throughout its life span. Technical problems may arise; cumulative production inefficiencies are not unusual; and the quality of concentrate or smelter feed may change if supply sources are changed. Moreover, the site-specific nature of mining operations has serious implications for monitoring, as technology has to be fine-tuned for each mineral deposit. It would also be erroneous for a regulatory authority to assume that standards are met simply because a preselected item of technology has been installed. Ongoing management and environmental practices at the plant are as important as technical hardware in achieving environmental best practice. Evidence from MERN research suggests that these problems are endemic to metals production in many developing countries (Núñez 1992; Hanai 1993; Loayza 1993; Warhurst 1994), where obsolete technology is widely used without modern environmental controls or safeguards. In the industrialized countries, new concentrators and roasting plants tend to be computerized. Automatic ore assaying and in-stream analysis give an accurate picture of the chemical composition of the ore feed, information that is needed for fine-tuning the pressure, heat, cooling, and environmental-control systems and for accurately predicting and monitoring emissions. However, where these controls are missing and, in particular, where ore feeds are of variable composition (in terms of, for example, sulfur, lead, and arsenic content), the pollutant effects of emissions also vary. Furthermore, pollution increases with the inefficient or excessive use of fossil fuels, particularly by poorly lagged roasters, inefficiently operated flotation units, and energy-intensive smelters. It could, therefore, be argued that command-and-control regulatory instruments are unlikely to result in a reduction of pollution, as they do not alter the capacity of a debt-ridden and obsolete mining enterprise (especially in developing countries) to implement technical change. Such a firm might find it preferable to risk detection, pay a fine, or mask its emission levels than to face bankruptcy from investing in new technology while its capital is scarce.

Third, BAT standards and environmental regulations of the polluter-pays type tend to presume that technology is static — they're based on a technology that was best at one time. Such regulations act as a disincentive for equipment suppliers, mining companies, and metal producers to innovate. Or perhaps they have innovated, but their innovations, which may have required substantial R&D resources, have been superseded by a regulatory authority's decision about what constitutes BAT for their activity. Ashford and Heaton (1979) described instances where the use of environmental innovations that were superior to the specified BAT was discouraged because the regulators were unfamiliar with their design or operation.

Regulations obliging the polluter to pay tend to lead to end-of-pipe, addon, or capital-intensive solutions (such as smelter scrubbers, water-treatment plants, and dust precipitators) for existing technology and work practices, rather than promoting alternative environmental-management systems and technological innovation. Moreover, if regulations are incremental, they may promote technical change that is also incremental, involving the addition of numerous new controls at greater cost and with more overall degradation than if a new, more radical change had been introduced in the first place (see Kemp and Soete 1990; Freeman 1992). Such regulations may also require specific reductions in pollution without regard to cost or local context. The regulations may refer to the chemical composition of an effluent in isolation, disregarding the site-specific precipitation, evaporation, or soil and geological conditions that affect the discharge rate and pattern.

Such regulations also result in a single-medium approach; consequently, firms may respond by shifting pollution from one medium to another (such as from emissions to effluent). An interesting example of this occurred at the Alean Ltd bauxite mine and alumina plant in Jamaica. Foreseeing impending environmental regulations and responding to public concerns in its home country (Canada), Alean gave support to a local university to develop an innovative solution for the disposal of red-mud sludge from the bauxite mining operations. Previously, the sludge had been dumped in a large catchment pond, but toxic seepages into surrounding soils and groundwater were reported. The university developed a process called red-mud stacking, which involves sun-drying to remove much of the moisture from the sludge and stacking of the material in much less obtrusive piles. However, this technology does not address the toxic seepage of the previously dumped slurries. Nor does it offer a solution to pollution per se because it replaces water pollution to a large extent with dust pollution, which is less stringently regulated. Moreover, a change in the production process to facilitate the recovery of caustic soda from the "mined" dry-mud stacks means that more of that chemical is discharged than with the previous method. The dust pollution, plus overflows from those parts of the dry-mud stacks that become waterlogged during tropical rain showers, presents a greater toxic hazard than the previous low-level seepages.

Also, industry may cooperate less with this regulatory approach because the rules are continually changing and the costs of complying are increasing. Finally, such regulations ignore the human-resource contribution to sound environmental management because they emphasize a specific pollution-control technology (environmental hardware), rather than training, managerial approaches, and information diffusion (environmental software).

TOWARDPOLLUTION PREVENTION — Interest has been growing in the use of market-based mechanisms whereby polluters are charged for destructive use based on estimates of the damage caused. An important justification for market-based incentives is that they give companies greater freedom to choose how best to attain a given environmental standard (OECD 1991). Market-based incentives, by remedying market failures or creating new markets, may permit more economically efficient solutions to environmental problems than government regulations substituting for imperfectly functioning markets would. Two categories of incentives exist (O'Connor 1991; Warhurst and MacDonnell 1992). One group, based on prices, includes a variety of pollution taxes, emission charges, product charges, and deposit-refund systems. For example, a mercury tax has been discussed in Brazil; a cyanide tax, in the United States. The other group of incentives, based on quantity, includes tradable pollution rights or marketable pollution permits. A related measure is the posting of bonds up front for the rehabilitation of mines upon closure. This is now standard practice in Canada and Malaysia.

Few governments have designed systematic incentives for industry to innovate and develop new environmental technology. An approach such as this might change the very essence of environmental costs by no longer assuming they are fixed. Indeed, in two further areas, policy approaches may contribute to improved environmental-management practices. First, private, bilateral, and multilateral credit is frequently contingent upon the use of environmental-impact assessments and best-practice environmental-control technologies in new minerals projects. Requiring mandatory pollution-prevention plans as a condition for obtaining mine permits would be a complementary policy mechanism. A growing number of donor agencies — in Canada, Finland, Germany, and Japan, for example — are also emphasizing training in environmental management. Second, some governments are promoting R&D (jointly and within industry and academic institutions) to evaluate toxicity from mining pollution and develop cleanup solutions. For example, the Canadian government has funded R&D programs on abatement of acid mine drainage and SO2 emissions. However, considerable scope remains for expanding these approaches, as argued below.

Pollution prevention and the demise of the environmental trade-off

The pollution-prevention principle differs from the polluter-pays principle because intrinsic to the notion of reducing pollution at source is a nonstatic vision of the environmental costs of production. The polluter-pays principle implies that firms internalize a fixed environmental cost. However, firms' pollution-prevention efforts demonstrate a diminishing intrinsic value of that environmental cost (not its shifting to others), and this leads to the demise of the environmental trade-off.

The US Environmental Protection Agency (EPA) is still defining pollution prevention in terms of internalized fixed environmental costs: "pollution prevention requires a cultural change — one which encourages more anticipation and internalizing of real environmental costs by those who may generate pollution" (Habicht 1992). Clarifying the concept of pollution prevention is important because it will inform the design and implementation of policy to achieve it.

The concept of corporate environmental trajectories (see Figure 2) illustrates the fundamentally different nature of technical change and therefore of the environmental costs of applying pollution prevention to metal-mining operations. Such trajectories describe the evolution of a firm's competitiveness in response to both changing market conditions and regulatory requirements. Governments and, indeed, corporate strategists need such policy tools to predict the environmental practices and competitive behaviour of firms under various market conditions and regulatory regimes and to identify the warning signs of declining competitiveness, impending mine closures, and their environmental effects. For example, combined regulatory and market pressures may prompt mine closure in advance of expected ore depletion. But in many countries a bankrupt firm is no longer responsible for its cleanup problem, so the burden frequently falls on the state, which has neither the resources nor the skills to deal with such a large-scale and complex problem. (See Warhurst and MacDonnell [1992] for a discussion of the case of Carnon Consolidated Ltd in the United Kingdom and numerous articles about the Summitville Mine Superfund site in Colorado.)

Technical change and corporate environmental trajectories

Characteristically, enterprises respond slowly to environmental pressures, and their responses predominantly reflect the regulatory regimes and public climate of their home countries. Their responses also depend on the nature of their operations in terms of

• The minerals;

• The level of integration of mining and processing;

• The stage in the investment and operations cycle; and

• The economic and technological dynamism of the firm (whether it has the financial, technical, and managerial capabilities to be an innovator).

After a period of using static technology, the mining and mineral-processing industry is currently going through a phase of technical change, with dynamic firms developing new smelting and leaching technologies in response to economic as well as environmental constraints. This trend is stimulated by rapidly evolving environmental-regulatory frameworks in the industrialized countries and the prospects of their application, reinforced by credit conditionality, in the developing countries. Changes in technological and environmental behaviour in this context are evident, particularly in the large North American and Australian mining firms, and are increasingly apparent in firms based in developing countries, such as Brazil, Chile, and Ghana. However, it seems that only new operators and dynamic private firms are changing their environmental behaviour; state-owned enterprises and small-scale mining groups in developing countries continue, with some exceptions, to face constraints on their capacity to change environmentally damaging practices.

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