1. PERU Experience with Economic Instruments (EI) in Mining Sector By Ing. Andrea Vásquez

2. Contents Environmental Effects of Mining – Peru Policy Instruments of EM in Mining Taxonomy of Policy Instruments Peruvian Mining Legislation Peruvian Instruments of EM in Mining Experiences with EI in other Economies Conclusions References

3. Environmental Effects of Mining Peru Positive –Technological effects Significant change and investment in modern technology ( e.g. tailings and air pollution). –Regulatory effects Voluntary application of environmental standards. Environmental improvement along with privatization processes. Figure: Antamina

4. Negative –Scale effects Questions of local sustainability and local development unresolved Territorial effects and water rights Lack of monitoring and control Environmental Effects of Mining in Peru Figure: Yanacocha

5. MapofPrincipal Mineral Production Units in Peru Source: MINEM

6. Policy Instruments (PI) of Environmental Management (EM) in Mining Command and Control Policies Technology Transfer, Information, and Education Policies Economic and Financial Policies Financial Assurances (Hybrid of Economic Instrument)

7. Taxonomy of Policy Instruments for Environmental Management Source: Economic Comission for Latin America and the Caribbean - ECLAC (own representation)

8. Mine Law 1981 UT General Mining Law 1992 UT General Mining Law Environment 1993 Envirn. Regulation Mining Activities 1998 MCL Liquid Effluent 1996 MCL Air Emissions 1996 UT General Mining Law Fines Scale Modified 2000 Mine Closure Law 2003 (Regulation 2005) Abandoned Polluted Areas Law 2004 (Regulation 2005) Investment Promotion Law Mining Sector 1991 Framework Law Growth of Private Investment - Environment 1991 OSINERG Law 1996 OSINERGMIN Law 2007Peruvian Mining Legislation (Own representation)

9. Mine Law 1981 UT General Mining Law 1992 UT General Mining Law Environment 1993 Envirn. Regulation Mining Activities 1998 MCL Liquid Effluent 1996 MCL Air Emissions 1996 UT General Mining Law Fines Scale Modified 2000 Mine Closure Law 2003 (Regulation 2005) Abandoned Polluted Areas Law 2004 (Regulation 2005) Investment Promotion Law Mining Sector 1991 Framework Law Growth of Private Investment - Environment 1991 OSINERG Law 1996 OSINERGMIN Law 2007 Peruvian Intruments of Environmental Management in Mining Sector (own representation)

10. Map of Non- Operative Mining Units

11. Peruvian Instruments of EM in Mining UT General Mining Law - Fine Scale –Non-compliance charges of regulations and standards limits Mine Closure Law –Bonds performance –Fiscal incentives Abandoned Polluted Areas Law –Subsidies and Financing of Env. projects

12. Map of Abandoned Polluted Areas

13. Experience with Economic Instruments (EI) in other Economies

14. Experience with Latin American countries Environmental Policies were implemented with evidence of significant pollution reductions Environmental Policies were implemented but no data shows evidence of efficiency Environmental Policies were implemented without success on pollution reduction (own representation)

15. Experience with OECD countries OECD: ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT (own represtentation) Environmental Policies were implemented with evidence of significant pollution reductions Environmental Policies were implemented but no data shows evidence of efficiency Environmental Policies were implemented without success on pollution reduction

16. Experience with EECCA countries EECCA: EASTERN EUROPE, CAUCASUS AND CENTRAL ASIA (own representation) Environmental Policies were implemented with evidence of significant pollution reductions Environmental Policies were implemented but no data shows evidence of efficiency Environmental Policies were implemented without success on pollution reduction

17. Experience with ASIA countries Environmental Policies were implemented with evidence of significant pollution reductions Environmental Policies were implemented but no data shows evidence of efficiency Environmental Policies were implemented without success on pollution reduction (own representation)

18. Conclusions & Recommendations Peru has very little experience with the use of economic instruments as a tool for environmental management. The audit is only through systems of command and control. The instruments are used to promote positive externalities and not to reduce the negatives. The government may charge fees for emissions or effluents based on volume and pollutant loads. This would place the companies "cleaner" in a competitive advantage with respect to companies that pollute more. The government of Peru can put pressure on the industry to prove that they are complying with environmental limits through independent monitoring and auditing the plants.

19. Thank you for your attention

20. References Environmental Effects of FDI in the Mining Sector http://www.oecd.org/LongAbstract/0,3425,en_2649_34313_1833847_1_1_1_1,00.html; 21.01.08 http://www.oecd.org/LongAbstract/0,3425,en_2649_34313_1833847_1_1_1_1,00.html Energy and Mining Ministry of Peru DS-059-2005 Statements for Abandoned Polluted Areas DS 033-2005-EM Statements for Mining Closures DS 016-93-EM Unifying Text of General Mining Law Environmental Policy in Mining, Warhurst, A., Noronha, L. (2000) CEPAL – Aplicación de instrumentos económicos en la gestión ambiental en America Latina y el Caribe: desafios y factores condicionantes. http://www.eclac.cl/dmaah/noticias/proyectos/1/7451/LCL1488.pdf; 20.01.08 http://www.eclac.cl/dmaah/noticias/proyectos/1/7451/LCL1488.pdf www.economicinstruments.com Economic Instruments for Pollution Control and Natural Resources Management in OECD Countries http://www.oecd.org/LongAbstract/0,3425,en_2649_34295_2405107_1_1_1_37427,00.html; 20.01.08 http://www.oecd.org/LongAbstract/0,3425,en_2649_34295_2405107_1_1_1_37427,00.html The use of Economic Instruments in EECCA Countries http://www.oecd.org/dataoecd/37/18/26732337.pdf; 20.01.08 http://www.oecd.org/dataoecd/37/18/26732337.pdf Applying Economic Instruments in Developing Counries http://www.crdi.ca/uploads/user- S/10536145810ACF2AE.pdf; 20.01.08http://www.crdi.ca/uploads/user- S/10536145810ACF2AE.pdf Cepal EI Peru http://www.eclac.cl/dmaah/noticias/proyectos/1/7451/peru.pdfhttp://www.eclac.cl/dmaah/noticias/proyectos/1/7451/peru.pdf