Challenges in the Regulation of Small-scale Mines: the case of China Philip Andrews-Speed Centre for Energy, Petroleum and Mineral Law and Policy University of Dundee

“Sustainable development” –Environmental damage; inefficient use of resources –Health and safety; failure to alleviate poverty Interaction with large-scale mines/MNCs Size of output (and, in some cases, export) “Alternative livelihoods” Why are SSMs “on the agenda”?

The policy challenge Policy Raw material Poverty reduction* Technology Skills Information Finance Regulations* Institutions* Politics* Education Why? What? How? Alternative livelihoods Sustainable SSM

1.Growth –Benefits and costs –The regulatory deficiencies 2.The closure campaign –Aims, impact and evaluation 3.Developments since Outlook The Case of China Township and village coal mines

China’s coal output

Number of mines: ? 80,000 Employment: ? 2-4 million Capacity: a few thousand tonnes p.a. to >100,000 tonnes p.a. Gross output >600 mmt, 50% of national Ownership: mainly collective, plus private and various SOES Many illegal and ‘irrational’ mines Low technological levels Township and village coal mines- key features in mid 1990s

Township and village coal mines- benefits and costs Benefits National energy needs Local energy needs Employment Local development Ease pressure on transport system Exploit remnant/marginal deposits SHORT TERM Costs Waste of resources (10-20% recovery) Environmental damage: land, water, air Health and safety: fatalities 7 per mmt LONG TERM Distortion of markets SHORT TERM

Legal, institutional and political obstacles Multiple licence requirement Multiple sources of regulations Rule of law is subordinate to bureaucratic discretion Complex and multi-tiered institutional structure Competition between agencies, little cooperation Tension between different levels of government Conflicts of interest at local level Overall failure to direct government resources and attention at the problems as long as energy needs were growing

Background –Static/falling energy demand (Asian crisis) –Massive oversupply of coal in China Aims: –Protect major state-owned coal mines –Improve management of township & village mines Targets: –Reduce total output by 400 mmt (from 1400 mmt peak to 1000 mmt) mainly from township & village mines –Close 50,000-60,000 illegal and irrational mines The closure campaign

China’s coal output

Official account: targets achieved If valid: –Two million lost jobs –£ 1 bn of lost revenues to local governments –No systematic compensation or schemes to promote alternative livelihoods But –enforcement was variable and false reporting rife –Actual reduction probably 200 mmt not 400 mmt –“Alternative livelihoods” dependent on local government and local situation Closure campaign: impact and assessment

China’s coal output

Coal output set to continue rising (total and TVCM) Laws and regulations- change? Institutions - change? Political tensions, conflicts of interest - change? Sustainable SSM? The Outlook