Annual cap on mining approvals undesirable and impractical

In the Cairns Post today, in an article with the over-the-top title of People desert Cairns in droves, there is reference to the South of the Embley mining project which is being held up by the need to secure environmental approval from the Commonwealth Government. I can’t comment on the merits of the project, and I note it has attracted strong criticism from the Wilderness Society, but it strikes me as another example demonstrating how, contrary to the suggestion of an Australia Institute paper yesterday, Governments are attempting to manage the mining boom in a responsible manner.

As discussed in yesterday’s post, I believe the Australia Institute’s policy recommendation for slowing down the mining boom is undesirable and impractical. In its report (Too much of a good thing?), the Institute describes its proposal as follows:

A simple and direct way to both reduce the negative consequences of a rapid mining construction boom and maximise the returns of that boom to Australian citizens would be to place an annual cap on mining development approvals and to auction the access to those limited approvals.

That is, in order to both minimise the negative externalities associated with attempting to simultaneously build record numbers of new resource projects and ensure that each project is rigorously examined by the relevant government agencies a fixed number of new mining projects could be determined on national interest grounds based on the size of the existing workforce, infrastructure and bureaucratic capacity.

Having determined the cap, in terms of either the total number or size of projects, mining companies could then bid for the right to apply for prioritised approval. The willingness of mining forms to pay for such projects would be directly proportional to the expected profitability of their project. Such an approach would ensure that the national benefits of mining expansion were maximised for a fixed value of the negative externalities associated with the projects.

If the Institute wants to progress this idea in the public debate it needs to provide more detail on how it would work in practice. It needs to explain at least:

  • how Governments can sensibly set an annual cap on approvals in four to five year’s time, which they will need to do given that approvals processes can take this long (see the project overview for the South of the Embley project for example);
  • whether the auction is run by the State or Commonwealth Government, noting that approvals of new mines can involve both levels of Government; and
  • how the State and Commonwealth Governments would share the auction proceeds.

In my view, Governments setting a cap on mining approvals several years in advance, when they have limited understanding of what prevailing economic and labour market conditions will be at the time, is just silly.

If there is concern about the capacity of bureaucracies to process applications then a simpler policy solution would be to increase application fees and use the funds to provide more resources in departments. If there is concern around adverse impacts on other sectors from the expansion of the mining sector, such as through poaching skilled labour,  Governments should review whether our current regulations allow Ministers sufficient discretion to block or to attach conditions (e.g. around workforce training) to approvals for projects that are likely to result in the adverse impacts the Australia Institute has identified.

This entry was posted in Macroeconomy, Mining, North Queensland, VET. Bookmark the permalink.

1 Response to Annual cap on mining approvals undesirable and impractical

  1. Pingback: Mining not the only job generator in two-speed economy | Queensland Economy Watch

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