Tag Archives: resource exploitation

Natural Capital and Human Well-Being

What is the contribution of nature to the economy?… The breathable air, drinkable water and tolerable temperatures that allow humans to do everything they do, and the complex ecosystems that maintain them, tend to be taken for granted. Professor Dasgupta’s review on the Economics of Biodiversity does not seek to play on the heartstrings with tales of starving polar bears. Rather, it makes the hard-headed case that services provided by nature are an indispensable input to economic activity. Some of these services are relatively easy to discern: fish stocks, say, in the open ocean. Others are far less visible: such as the complex ecosystems within soil that recycle nutrients, purify water and absorb atmospheric carbon. These are unfamiliar topics for economists, so the review seeks to provide a “grammar” through which they can be analysed.

The report features its own illustrative production function, which includes nature. The environment appears once as a source of flows of extractable resources (like fish or timber). But it also shows up more broadly as a stock of “natural” capital. The inclusion of natural capital enables an analysis of the sustainability of current rates of economic growth. As people produce GDP, they extract resources from nature and dump waste back into it. If this extraction and dumping exceeds nature’s capacity to repair itself, the stock of natural capital shrinks and with it the flow of valuable environmental services. Between 1992 and 2014, according to a report published by the UN, the value of produced capital (such as machines and buildings) roughly doubled and that of human capital (workers and their skills) rose by 13%, while the estimated value of natural capital declined by nearly 40%. The demands humans currently place on nature, in terms of resource extraction and the dumping of harmful waste, are roughly equivalent to the sustainable output of 1.6 Earths (of which, alas, there is only the one)…Indeed, Professor Dasgupta argues that economists should acknowledge that there are in fact limits to growth. As the efficiency with which we make use of Earth’s finite bounty is bounded (by the laws of physics), there is necessarily some maximum sustainable level of GDP…

Professor Dasgupta hints at this problem by appealing to the “sacredness” of nature, in addition to his mathematical models and analytical arguments.

Excerpts from How should economists think about biodiversity?, Economist, Feb. 6, 2021

At Gunpoint in Congo: Is Coltan Worse than Oil?

Tantalum, a metal used in smartphone and laptop batteries, is extracted from coltan ore. In 2019 40% of the world’s coltan was produced in the Democratic Republic of Congo, according to official data. More was sneaked into Rwanda and exported from there. Locals dig for the ore by hand in Congo’s eastern provinces, where more than 100 armed groups hide in the bush. Some mines are run by warlords who work with rogue members of the Congolese army to smuggle the coltan out.

When demand for electronics soared in the early 2000s, coltan went from being an obscure, semi-valuable ore to one of the world’s most sought-after minerals. Rebels fought over mines and hunted for new deposits. Soldiers forced locals to dig for it at gunpoint. Foreign money poured into Congo. Armed groups multiplied, eager for a share.

Then, in 2010, a clause in America’s Dodd-Frank Act forced American firms to audit their supply chains. The aim was to ensure they were not using minerals such as coltan, gold and tin that were funding Congo’s protracted war. For six months mines in eastern Congo were closed, as the authorities grappled with the new rules. Even when they reopened, big companies, such as Intel and Apple, shied away from Congo’s coltan, fearing a bad press.

The “Obama law”, as the Congolese nickname Dodd-Frank, did reduce cash flows to armed groups. But it also put thousands of innocent people out of work. A scheme to trace supply chains known as ITSCI run by the International Tin Association based in London and an American charity, Pact, helped bring tentative buyers back to Congo.  ITSCI staff turn up at mining sites to see if armed men are hanging about, pocketing profits. They check that no children are working in the pits. If a mine is considered safe and conflict-free, government agents at the sites put tags onto the sacks of minerals. However, some unscrupulous agents sell tags on the black market, to stick on coltan from other mines. “The agents are our brothers,” Martin says. It is hard to police such a violent, hilly region with so few roads. Mines are reached by foot or motorbike along winding, muddy paths.

For a long time those who preferred to export their coltan legally had to work with itsci, which held the only key to the international market. Miners groaned that itsci charged too much: roughly 5% of the value of tagged coltan. When another scheme called “Better Sourcing” emerged, Congo’s biggest coltan exporter, Société Minière de Bisunzu, signed up to it instead.

Excerpts from Smugglers’ paradise: Congo, Economist, Jan. 23, 2021

The Plight of Electric Cars: Cobalt Batteries and Mining

About 60% of the world’s cobalt is found in Congo, scattered across the copperbelt that stretches east into Zambia. The people of Kawama, Gongo grumble that too much land has been sold to mining firms. “We used to dig freely,” says Gerard Kaumba, a miner. “But now the government has sold all the hills.” There are still some sites where miners can turn up and dig, but they have to sell to whoever owns the concession. A sweltering day’s work might earn you $7. Many people have found they can make more at night, pilfering cobalt from industrial mines.

Glencore, a commodities giant with two mines in Congo, reckons that some 2,000 people sneak into its pits every day. Other companies have even more robbers to contend with. In 2019 Congolese soldiers chased thieves out of a mine owned by China Molybdenum where, it was reckoned, 10,000-odd people were then illegally digging. Sneaking into Glencore’s mines is hardest, says a Kawaman, as its guards do not collude with thieves—and often chase them away with dogs.

Congo’s industrial miners are not all angels.  Gécamines, the state-owned company, has enriched crooked politicians for half a century. Global Witness, a watchdog based in London, says Congo’s treasury lost $750m of mining revenues to graft between 2013 and 2015. ENRC, which has mines in Congo, has faced allegations of corruption and an investigation by Britain’s Serious Fraud Office (it denies wrongdoing). So has Glencore, which has worked with Dan Gertler, an Israeli billionaire. Mr Gertler, a close friend of a former Congolese president, Joseph Kabila, is under American sanctions… 

While big firms rake in millions, many of the little guys languish in jail. The prison in Kolwezi, the largest city in the mining region, is crammed with men caught stealing copper and cobalt. More than a hundred inmates occupy one stinking room, sitting in rows on the ground, each wedged between another’s legs. Prissoners are allowed to use the toilet only once a day, so they often urinate in their clothes

Excerpt from Cobalt blues: In Congo the little guys are jailed for stealing minerals. Economist, Oct. 17, 2020

Free-For-All: Gold Mining and the Polluted Rivers of Central African Republic

Four Chinese-run gold mines should be closed in the Central African Republic because of pollution threatening public health, a parliamentary panel said in a report published on July 14, 2019.  “Ecological disaster,” “polluted river,” “public health threatened,” were some of the phrases used in the report.  “Gold mining by the Chinese firms at Bozoum is not profitable for the state and harmful to the population and the environment,” the commission found after its investigation into mining in the northern town.  “The nature of the ecological disaster discovered onsite justifies the immediate, unconditional halt to these activities,” the report found.

Members of the commission spent four days in Bozoum a month ago in response to “multiple complaints from the population.”  There, they found a badly polluted River Ouham, shorn of several aquatic species following the excavation of its riverbed.  They discovered that a rising death rate in fishing villages as well as shrinking access to clean drinking water.

The investigators also voiced fears that the country’s “resources are being squandered with the complicity of certain ministry of mines officials.”  The CAR is rich in natural resources but riven by conflict which has forced around one in four of its 4.5 million population to flee their homes. Under those circumstances, exploitation of the country’s natural resources is difficult to monitor effectively given that the state only has partial control of its own territory.

Central African Republic Report Cites Ecological Disaster in Calling for Closing of 4 Chinese Gold MInes, Agence France Presse,  July 14, 2019

Another Resource Curse: Amber Fossils

In a bustling market in Tengchong, China, vendors hawk globs of amber, some the size of cantaloupes, with astonishingly pristine fossils inside. Mined across the border in Myanmar, the amber has yielded extraordinary finds—the hatchlings of primitive birds, the feathered tail of a dinosaur, frogs, snakes, a host of insects, and more—allowing scientists to build a detailed chronicle of life in a tropical forest 100 million years ago. 

In 2018, scientists reported 321 new species immaculately preserved in Burmese amber, bringing the cumulative total to 1195. One team recently argued that Burmese amber may boast more biodiversity than any other fossil deposit from the entire reign of the dinosaurs. “You think this can’t even be possible,” says Philip Currie, a paleontologist at the University of Alberta in Edmonton, Canada, “but it’s happening.”

But as much as Burmese amber is a scientist’s dream, it’s also an ethical minefield. The fossils come from conflict-ridden Kachin state in Myanmar… In Kachin, rival political factions compete for the profit yielded by amber and other natural resources. The amber comes from mines near Tanai township in Kachin, where for decades Myanmar’s army and the local Kachin Independence Army, an ethnic insurgency, have battled over control of lucrative resources such as jade, timber, and, most recently, amber. “These commodities are fueling the conflict,” says Paul Donowitz, the Washington, D.C.–based campaign leader for Myanmar at Global Witness, a nongovernmental organization. “They are providing revenue for arms and conflict actors, and the government is launching attacks and killing people and committing human rights abuses to cut off those resources.”

 Visitors to the mines describe a lush terrain transformed into barren hillsides. Tents cover claustrophobic holes up to 100 meters deep but only wide enough for skinny workers, who say they are responsible for their own medical care after accidents. The miners dig down and, when they hit layers of amber, tunnel horizontally with hand tools to dig it out. They sort finds at night, to avoid publicizing valuable discoveries. Amber with fossil inclusions is the most precious, proof after weeks of uncertainty that a mine will be profitable. Reached by phone through an interpreter, miners say both warring sides demand bribes for the rights to an area and equipment—and then tax 10% of the profit.

The amber is then smuggled into China and sold to the highest bidder. Yet if scientists don’t engage in the amber trade, specimens are lost to science.

Exerpts from Joshua Sokol, Troubled Treasure, Science, May 24, 2019

The Power Plays in Africa

As the overthrow of despot Robert Mugabe entered a stalemate on November 17,  2017, eyes turned to China — Zimbabwe’s largest foreign investor and a key ally — amid speculation over its role in the military coup.Source in Harare believe the Zimbabwean conflict within the ruling party Zanu PF is involving two rival camps has direct links to China and Russia with both countries trying to control and protect their own economic interests.

The army chief General Constantino Chiwenga, visited Beijing l — just days before tanks rolled into the streets of Harare. President Mugabe has been been hostile to the Chinese in recent years accusing them of plundering the countries diamonds worth $15 billion.  On October 2017 First Lady Grace Mugabe was in Russia where she represented her 93-year-old husband at a function where he was honoured with some accolade in Russia at the World Federation of Democratic Youth (WFDY) in Moscow.

“It is a BRICS internal rivalry with both Russia and South Africa on one side trying to protect their economic interests and China on the other side,” a regional think-tank in London said on November 17, 2017… Russia has been investing in several projects in southern African nations, for example, the ALROSA group of diamond mining companies is engaged in several projects in Zimbabwe, while mining and steelmaking company Evraz and Severstal steel and steel-related mining company conduct their business in South Africa.

Russia and South Africa, which together control about 80% of the world’s reserves of platinum group metals, have created a trading bloc similar to OPEC to control the flow of exports according to Bloomberg.

Zimbabwe, Canada, and the U.S. are among other major platinum group metals producers.

Russian and South African officials signed a memorandum of understanding today to cooperate in the industry.South Africa mines about 70 percent of the world’s platinum, while Russia leads in palladium, a platinum group metal used in autocatalysts, with about 40% of output, according to a 2012 report by Johnson Matthey Plc.

According to the Chamber of Mines of Zimbabwe (CMZ) and geologists, Zimbabwe has far bigger platinum reserves than Russia. The country currently has the second known largest platinum reserves after South Africa. Experts say underfunding and limited exploration has over the years stifled growth of the mining sector.

The Zimbabwe chamber is on record saying it seeks to increase production to the targeted 500 000 ounces per annum requires the setting up of base and precious metal smelters and refineries, investment of $2,8 billion in mines, $2 billion in processing plants and between $200 and $500 million to ensure adequate power supply. Already, the country’s major platinum miners – Zimplats, Unki and Mimosa who are currently processing the metal in neighbouring South Africa – have undertaken to construct the refinery….

Miles Blessing Tendi, a lecturer in African history and politics at the University of Oxford, says there is no way to be certain if China knew about Mugabe’s fate but believes China’s respect for sovereignty would make their involvement uncharacteristic.

Excerpt, It gets ugly as Russia and South Africa gang-up against China over Zimbabwe coup, http://www.thezimbabwemail.com/, November 17, 2017

Miners v. Indigenous Peoples: Canada

In 1849 the First Nation of Ojibways, a Canadian indigenous group, fired a cannon into a copper mine that had gone ahead without their approval.These days Canada’s aboriginal groups use public pressure, backed by legal action, to protect their lands against exploitation by outsiders. In February 2016 the government of British Columbia reached agreement with forest companies, environmental groups and 26 First Nations communities to protect from logging an area on the Pacific coast larger than Belgium—newly dubbed the Great Bear Rainforest. The deal, which allows logging and mining in areas aboriginals have agreed to, is the culmination of a long public-relations campaign (choosing the Kermode bear as its mascot was a masterstroke). It would have got nowhere without centuries of treaty-making and decades of case law to back it up….

The federal aboriginal affairs agency is party to 554 proceedings involving such rights (not all of which concern resource firms). That does not include disputes between aboriginal groups and firms. Projects as diverse as seismic testing for mineral deposits in Arctic waters and fracking in the west face challenges. Until 1951 such lawsuits were barred. They are expensive and can drag on for years; the outcome is never assured. The Tsilhqot’in, who filed suit in 1998 against logging on their ancestral lands in British Columbia, finally won in 2014 and now have title to 1,750 square km (1,100 square miles). But the Innu of Ekuanitshit in Quebec last year lost their bid to stop the Muskrat Falls hydropower project, which they say will affect caribou herds.

Some big projects are caught in legal limbo. The Northern Gateway pipeline, which is to bring crude oil from Alberta to Canada’s west coast, has been stalled for more than a decade, largely because of opposition from First Nations groups along its route, some of them parties to the Great Bear agreement. The Pacific Northwest liquefied natural gas project, backed by Petronas, a Malaysian state-owned firm, has offered C$1 billion ($726m) in benefits over 40 years to the Lax Kw’alaams nation of northern British Columbia. That has not allayed fears that the project would destroy salmon fisheries.

When such disputes are unresolved, the price can be high. The Northern Gateway pipeline would add C$300 billion to Canada’s GDP over 30 years.

Miners and aboriginals in Canada: I’ll see you in court, Economist, Feb. 6, 2016 at 33