Environmental Management

5. The opportunity to go further: complementary tools and lessons learnt 

In favour of efficiency, Environmental Assessments (EAs) require a degree of flexibility in order to allow for successful implementation in different country contexts. Another stipulation is the addition of complementary tools, which would ensure compelling results.

This section looks at a number of approaches and mechanisms, some tested others not, which could further facilitate a balance between EI development and environmental preservation.

A. The International Finance Corporation (IFC)

The IFC features guidelines on international best practice for all stakeholders directly or indirectly involved in projects and operations funded by the financial institution. These guidelines form the backbone of an effective Environmental and Social Management System (ESMS), a methodological approach to continuously managing environmental and social risks. The IFC guidelines are comprised of eight core performance standards:

  • Performance Standard 1: Assessment and Management of Environmental and Social Risks and Impacts
  • Performance Standard 2: Labour and Working Conditions
  • Performance Standard 3: Resource Efficiency and Pollution Prevention
  • Performance Standard 4: Community Health, Safety, and Security
  • Performance Standard 5: Land Acquisition and Involuntary Resettlement
  • Performance Standard 6: Biodiversity Conservation and Sustainable Management of Living Natural Resources
  • Performance Standard 7: Indigenous People
  • Performance Standard 8: Cultural Heritage

In addition to IFC-funded projects, in practice, these standards are applied and used as a basis for a country’s policy reforms. For instance, in early 2014 the Government of Papua New Guinea (PNG) reformed their land acquisition and resultant involuntary resettlement (displacement) policy for the mining sector based on IFC’s performance standard five.

B. Environmental Audit 

Environmental audits can be used as a complementary tool to EIAs. Past experiences have demonstrated that audits are a highly flexible regulatory tool that can be applied alongside EIAs to achieve compliance. In South Africa, for example, all mining operators are required to complete environmental audits at regular intervals and submit them to the respective environmental authorities. This tool was featured as a core recommendation for the Government of Afghanistan in the 2010 World Bank-funded Strategic Environmental and Social Assesment (SESA) Afghanistan.

Due to prevailing anti-mining sentiment across the Philippines, with support from the EITI, the new government administration recently requested an environmental-compliance audit of all mining companies.

These examples demonstrate the global interest in using environmental audits as a tool to strengthening compliance and ensuring that potential environmental impacts are carefully studied and analysed. 

C. Carbon Tax

A fiscal incentive such as carbon tax is a tool that would require global effort.

A number of countries such as such as Ireland, Australia, Chile, Finland, Great Britain and New Zealand have already adopted some form of a carbon tax. Unfortunately, there is not enough evidence to date that would demonstrate the effectiveness of an outright tax. A number of economic experts claim that the carbon tax in Australia was the leading reason for the country’s increased unemployment, leaving many people sceptical about a carbon tax’s implications.

D. Cost-Benefit Analysis (CBA)CBA

A number of scholars, environmentalists, activist and global organisations such as the World Commissions on Environmental Development have highlighted the need for marrying ecology with economics, i.e. monetising environmental costs and adding them to accountants’ balance sheets.

As explained in the previous chapter, EAs present the net effect of a given programme or policy change, integrating all potential risks and impacts – environmental, social and economic. However, in order to achieve this and acquire an estimated net present value, one needs to use a cost-benefit ratio, derived from a cost-benefit analysis. CBA has a number of limitations such as the fact that it assumes a perfectly competitive market. It has been criticised for its attempts to measure items (e.g. a tree) of value that are largely unmeasurable, i.e. inevitably leaving a lot of room for error.


E. Carbon Capture and Storage (CCS)/ Carbon Abatement technologies (CAT)

To address the release of CO2 emissions during the combustion of fossil fuels, the scientific community and EI private sector have invested heavily in Carbon Abatement Technologies (CATs). CAT enable the reduction of CO2 emissions during fossil fuel combustion. Nowadays, there is a renewed interest in further investing in such technologies given their emissions abatement potential. In spite of its relative novelty, CATs integrate a range of cost-effective tools to reducing the impacts from EI development:

  • Higher efficiency conversion processes (e.g. related to power generation and oil refining), which subject to performance and level of sophistication could reduce up to 30% of emissions;
  • The switch from carbon intensive fuels (coal) to lower carbon alternatives (natural gas);
  • Carbon capture and storage technologies (CCS) are technologies designed to capture a certain amount of the carbon, either pre-combustion or post, and store it in geological formations.

In the mining sector, annual reviews reporting on donors’ approach to technical assistance to developing and transitional countries claim that on average performance is high with regards to building institutional capacity and establishing legislative frameworks (licensing, cadastre and geological surveys). However, weak human capacity restrains any policy framework from being properly implemented. According to a World Bank analysis from 2010, there is a particular ‘catch 22’ when it comes to mining sector reform, which is that if a mining reform is successful in terms of its investment promotion capabilities, public institutions end up losing human capacity as it becomes impossible for governments to compete with much higher paying private sector companies coming in. Good examples of countries that have managed to overcome this issue are Mali and Papua New Guinea, where the government reform was made to allocate part of the revenues gained by mining companies to the responsible sector institutions. This resulted in increased both institutional capacity and human resources in the national mining sector.