Ranjan reported in 2018 that mining of mineral resources can entail significant deforestation in developing countries. The large financial rewards associated with mining can create corrupt linkages between weak government regulators and mining industry, resulting in illegal extraction of minerals in potentially environmentally sensitive areas. The author explored cases of political-industry corrupted relationships to investigate the problem of illegal mining of iron ore and its impact on deforestation in Goa, India.
For the weak regulator, the decision to allow illegal extraction and relaxation from environmental remediation requirement is made with the objective of accumulating illegal wealth, while simultaneously mitigating the risks of political ouster and conviction. Results suggest that several factors, such as the relative risks of political survival and conviction, the degree of impatience displayed by the regulator as well as the contribution of the mining sector to the economy, play a role in influencing the extent of illegal mining activity. When the regulator faces a low risk of political ouster, an increase in conviction risk may not provide enough deterrence to illegal mining, resulting in high levels of deforestation.
The process of mining mineral resources in developing countries can cause significant deforestation. This problem is further exacerbated by the presence of a corrupted relationship between the regulators and the mining firms. The regulators, who are entrusted with the task of ensuring sustainable mining, authorize illegal extraction of minerals and enforce lax environmental remediation requirements in return for financial rewards received from mining firms. Using the case of iron ore mining in Goa, India, the author developed a model of political-mining illegal nexus to derive insights over the various incentives that influence the unlawful exploitation of mineral resources and cause deforestation.
Results derived through empirical examples indicate that a number of factors determine the rate of illegal extraction of mineral resources. Chief among such factors are the degree of vulnerability exhibited by the regulator towards appropriating illegal wealth and the relative risks of political ouster and conviction. When the regulator exhibits a high level of vulnerability, they are likely to grant more illegal licences over a short period of time, [to a variety mining companies for the primary purpose of quickly developing wealth], which can thereby lead to a rapid destruction of the forests.
The nature and magnitude of the risks faced by the regulator also affect the scope of illegal activities. When the regulator faces the risks of political ouster and conviction, the level of illegal activity is generally higher compared to a no-risk scenario due to a discounting effect. When the regulator does not face illegal extraction related political ouster risks or conviction possibilities, they do not enforce any environmental remediation requirements. Instead, as was found from our analysis, in certain cases the regulator may even allow higher extraction coupled with no remediation requirement to maximize their profits. Whereas, when faced with the above risks, environmental remediation requirement is used in combination with illegal extraction allowance as a way to balance the two risks resulting from acquiring illegal wealth and causing deforestation.
When the risk of political ouster is low and that of conviction while in power also low, illegal extraction of resources is done with the objective of prolonging the expected time of survival while reaping maximum rewards. However, if the risk of conviction while in power is higher and that when out of power is lower, it leads to a perverse outcome where the incentive shifts from prolonging political survival to making rapid profits and exiting. A higher risk of political ouster has a moderating effect on the extent of illegal extraction only when the risks of conviction while in power as well as that out of power are both high enough. Otherwise, it results in a resource discounting effect where minerals are extracted in highly unsustainable fashion.
From a policy perspective, the author's results suggest that the perverse incentives related to excessive illegal extraction increase with an imbalance in the various risks faced by the regulator. If the risk of conviction is made high and independent of whether the regulator is in political power or not, it will help reduce the illegal extraction of minerals and also lead to lower levels of deforestation [Note: a break in logic here]. As the chances of conviction are usually low during the period the regulator holds political power, they can reduce their expected costs from conviction in the post-power scenario through lowering the risk of losing power [Note: another break in logic here]. This could be accomplished through either preventing excessive deforestation (as the author's results purportedly indicate) or through other means such increasing their vote banks using their illegal wealth.
Therefore, delinking of the conviction risk with political survival risk is key to preventing corrupted relationships between politicians and mining firms. Through strengthening the judicial institutions and the auxiliary mechanisms associated with indicting and convicting those engaged in illegal mining, it could become possible to increase conviction chances while keeping them independent of any political influence. [Isn't this how the legal system in developing and developed countries is supposed to work? Or do all developing countries pass through a corrupt period as they pass from developing to developed countries?]
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