Abstract
This chapter examines the issue of developing deep-sea mining (DSM) while managing the impact upon deep seabed environmental assets. It reviews pertinent background information relating to DSM and the environment; develops a suite of potential policy instruments, including both direct and incentive-based regulation; develops additional incentive-based policy instruments, largely drawn from terrestrial conservation, for potential consideration; briefly touches upon technology and innovation to address mitigation of adverse environmental impacts from DSM; and then provides a concluding discussion.
The views expressed in this paper are those of the authors and do not necessarily reflect the position of the International Seabed Authority or any of its member States.
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Notes
- 1.
- 2.
For an overview of the DSM environmental issues, see Madureira et al. (2018).
- 3.
The mitigation hierarchy is comprised of four steps: avoidance of environmental damage, minimizing environmental damage after avoidance, restoration/rehabilitation of environmental damage, and addressing the residual after the first three steps have been undertaken, with no net loss of biodiversity and ecosystem services and potentially even a net gain in biodiversity and ecosystem services. See, for example, ten Kate and Crowe (2014). Below we raise a discussion of whether or not no net loss is applicable to an ecosystem that operates on almost geological time scales or at least very long time periods and consistency, whether the no net loss objective applies at all and whether an alternative objective is more appropriate (Griffiths et al. 2018; Kotchen 2009). Besides altering the level of biodiversity loss that is acceptable, the applicability of no net loss also impacts the size of the residual after the first three steps of the mitigation hierarchy have been undertaken and the applicability and role of biodiversity offsets.
- 4.
Cost-effective or least-cost conservation of the mitigation hierarchy’s four steps can lead to greater overall conservation given limited funds for conservation (Squires and Garcia 2014).
- 5.
The impact of the nonrenewability of deep-sea mineral resources is somewhat mitigated by the large size of the Area and expected increase in new reserves as exploration and technological progress proceed. Nonetheless, these resources should be viewed as effectively nonrenewable resources.
- 6.
Sustainable development is development that “meets the needs of the present without compromising the ability of future generations to meet their own needs,” taking into account the capacity of the natural environment to sustain, indefinitely, the quantity and quality of ecosystem services, biological diversity, and ecological integrity. Sustainable development with nonrenewable mineral resources requires transforming the nonrenewable natural capital into sustainable financial, human, and physical capital that can lead to sustainable consumption and well-being for future generations (World Commission on Environment and Development 1987). Sustainability, stemming from depleting resource revenues, is not as central for the ISA as it is for many individual mining-dependent countries with short reserve horizons, given the size of the Area and expected increase in new reserves.
- 7.
This trade-off is further complicated by the potential for improved information over time about the demand for mineral resources, the environmental impacts of mining, and the availability of new technologies. Having better information can improve decision-making but may come at the cost of foregone net benefits that stretch across up to many generations (an opportunity cost). The trick is to achieve the optimum mix of waiting and not waiting. Waiting too long penalizes current and future consumption, but “hasty” decision-making without adequate scientific information can also turn out to be suboptimal.
- 8.
A redistributive goal could be based on a variety of ethical premises, including Rawlsian redistributive justice or a utilitarian foundation with decreasing marginal utility of income. See, for example, Rawls (2009) and Sen and Williams (1982). Note that these principles can be applied in redistributing income either inter-temporally or across generations.
- 9.
- 10.
A similar result applies to intra-temporal allocations, where equal utility weights, but differences in income levels and the associated marginal utility of income can provide a rationale for putting more weight on consumption by low income groups, thereby justifying redistribution of income from high- to low-income households or states (Squire and van der Tak (1975).
- 11.
Although this chapter does not cover the payment regime or the economics of the mining process itself, see Roth (2018).
- 12.
This chapter focuses upon policy approaches that the ISA could implement, but another approach seeks to harness market pressures exerted by consumers who are willing to pay for products made in environmentally friendly ways. This approach addresses insufficient information in markets, where the amount and quality of information typically decline from producers through firms in the supply chain to consumers of final products. Different forms of certification and eco-labeling provide examples. Nonetheless, because minerals from the deep sea are typically used as inputs in the production of other goods and services, eco-labeling requires tracing the minerals’ origins throughout the entire supply chain. The effectiveness of eco-labeling depends upon the extent to which final consumers of the products produced by these minerals are aware of and willing to pay a price premium when the products are produced with DSM that are minimally harmful to the environment as much as possible and when the price premium is actually transmitted to producers to incentivize their behavior and decision-making to reduce environmental damage from their activities. See Kotchen (2013) and Segerson (2013).
- 13.
In its Advisory Opinion on the Responsibilities and Obligations of States Sponsoring Persons and Entities with Respect to Activities in the Area (Advisory Opinion), Case No. 17, 1 February 2011, the Seabed Disputes Chamber of the International Tribunal for the Law of the Sea suggested that consideration could be given to a fund to provide compensation for damage to the marine environment that could not otherwise be compensated by contractors or by sponsoring states, either to fill the “liability gap” or where the contractor or sponsoring state are impecunious.
- 14.
The allocation of costs and the allocation of risks are potentially two different issues. As an example, an environmental fee could impose fully expected costs on contractors but little risk, because the fee’s amount that would have to be paid would be very predictable. In contract, strict liability imposes full actual costs, but also significant risk, because the amount for which the contractor would ultimately be held responsible is unknown beforehand. See Craik (2018) for additional discussion.
- 15.
With the polluter pays principle, the party inflicting biodiversity loss pays for it. This party has willingness to pay (WTP), and the affected party or society has willingness to accept (WTA) compensation. Maximum WTP for net gain and minimum WTA for no net loss in biodiversity or ecosystem services bound the size of economically rational compensation in monetary values for any voluntary payments. The beneficiary or user pays principle is just the opposite in that it holds that agents who have benefited from the processes that cause loss in biodiversity and ecosystem services should pay the costs of addressing its harms. Just the opposite of the polluter pays principle, the WTP holds for the “impacted” party and WTA for the “impacting” party.
- 16.
- 17.
Madureira et al. (2018) discuss many potential technology standards, adaptive use of technology standards as knowledge is gained, and potential process standards, notably protected areas and accompanying scientific research to evaluate the impacts of DSM.
- 18.
The socially efficient level of an activity is the level that maximizes the net social benefits of that activity, which equals the benefits derived from the activity minus all social costs (including environmental costs and opportunity costs) that result from the activity. When environmental costs are not fully considered by producers, the activity level that emerges in a competitive market exceeds that level. In addition, the mix of minerals mined, areas mined, and methods of mining can be socially inefficient. All channels to mitigate environmental damage within and across steps of the mitigation hierarchy and across contractors will also be socially suboptimal. Finally, activities across steps of the mitigation hierarchy will not be socially optimal, with excessive mitigation in one step (e.g., avoidance) and insufficient mitigation in another step (e.g., minimization). See Squires and Garcia (In press).
- 19.
In the language of technical economics, these factors are the degree of competition in the market and the relative price elasticities of supply and demand. (Price elasticities give the proportional change in quantity supplied or demanded to a 1% change in price.)
- 20.
For extensive legal discussions, see Craik (2018).
- 21.
Regulations on Prospecting and Exploration for Polymetallic Nodules in the Area (ISBA/6/A/18, 13 July 2000, as amended by ISBA/19/A/9 and ISBA/19/A/12, 25 July 2013, and ISBA/20/A/9 24 July 2014)
- 22.
- 23.
This outcome presumes that the penalties for violation of existing regulations are comparable to the magnitude of the potential liability contractors face if they are negligent and that both face the same likelihood of enforcement.
- 24.
The bonds can take a variety of forms: cash deposit, parent company guarantee, state guarantee, financial institution letter of credit, and associated investment grade of any issuer. The terms of its release and what can be deducted against the deposit can also vary.
- 25.
Adverse selection occurs in some instances when one party in a negotiation has relevant information the other party lacks, i.e., it is a form of asymmetric information that occurs before “the contract,” i.e., the agreement. In this case, the contractor has more and higher-quality information about where the sites for mining and environmental protection are to be located that the other parties lack. By then placing an environmentally protected area in a location that would not have been mined and would have been implicitly protected regardless, there is no additional conservation beyond what would have occurred without the protection (i.e., lack of additionality).
- 26.
In the economics literature, offsets are voluntary contributions to a public good (here biodiversity and ecosystem services) that are motivated, in part, by a desire to compensate for (i.e., offset) the detrimental impacts of other activities such as mining (Vicary 2000; Kotchen 2009). The objective or baseline for offsets is not necessarily no net loss of biodiversity, as posed in the conservation biology literature, but rather the level of offsets that yields an optimal level of voluntary provision of the public good. Such a level balances the benefits of offsetting degradation (i.e., the benefits of the resulting increase in environmental services) and the associated costs.
- 27.
- 28.
In general, typically a single policy instrument is not sufficient for providing efficient incentives to address multiple-faceted problems, unless the problems are closely linked (Bennear and Stavins 2007).
- 29.
In this regard, even though the supplying parties are public, the situation is closer to that of a classic public good in which the supply is the result of the collective supply of individual private providers, which in turn is subject to the classic public good issues of under-provision compared to the socially optimal level, benefits that created by each provider that they do not fully receive (external benefits), and free riding.
- 30.
There are several types of technology that can provide public goods (Hirschleifer 1983; Barrett 2007). Let Q denote the total level of public good supplied, and let qi denote the quantity of public good supplied by party i, where i = 1, 2, … . , M, and there are M total parties. Then for (1) a best-shot technology, Q = max (q1, q2, … , qM); (2) a weakest link technology, there are issues of weak supply incentives and free riding, and supply is determined by the weakest link or smallest provider of the public good, Q = min (q1, q2, … , qM); (3) an aggregate technology Q = f(q1, q2, … , qM), where f(∙) denotes some general function that aggregates the individual supplies qi and supply depends upon the combined efforts of all parties and issues of weak supply incentives and free riding apply and each provider’s supply is an imperfect substitute for every other supplier’s contribution; (4) an additive technology, a form of aggregate technology, Q = q1 + q2 + ∙ ∙ ∙ + qM, so that one provider’s supply is a perfect substitute for another’s supply of the public good and faces the issues of supply incentives and free riding; (5) a weighted average technology, a form of aggregate technology, Q = α1q1 + α2q2 + ∙ ∙ ∙ + αMqM, where the αi denote weights and \( {\sum}_{i-1}^M{\alpha}_i=1 \), and some providers’ supply contributes more to the public good than others; and (6) a weaker link technology, Q = α1q1 + α2q2 + ∙ ∙ ∙ + αMqM, where one of the αi denotes the weaker link so that greater efforts by one party i can offset the weaker effort by another party j, i ≠ j, and there are issues of weak incentives to supply the public good and free riding.
- 31.
For further discussion of cooperation versus coordination in the international environmental area, see Barrett (2016).
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Lodge, M.W., Segerson, K., Squires, D. (2019). Environmental Policy for Deep Seabed Mining. In: Sharma, R. (eds) Environmental Issues of Deep-Sea Mining. Springer, Cham. https://doi.org/10.1007/978-3-030-12696-4_13
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