Natural Resource use Conflict: Gold Mining in Tropical Rainforest in Ghana
Gold is frequently mined in rainforests that can provide either gold or forest benefits, but not both. This conflict in resource use occurs in Ghana, a developing country in the tropics where the capital needed for mining is obtained from foreign direct investment (FDI). We use a dynamic model to show that an ad valorem severance tax on gross revenue can be used to internalize environmental opportunity costs. The optimal tax must equal the ratio of marginal benefits from forest use to marginal benefits from gold extraction. Over time, this tax must change at a rate equal to the difference between the discount rate and the rate of change in the price of gold. Empirical results suggest that the 3 percent tax rate currently used in Ghana is too low to fully represent the external cost of extraction (i.e., lost forest benefits).
|Date of creation:||28 Oct 2005|
|Date of revision:|
|Publication status:||Published as Akpalu, Wisdom and Peter J. Parks, 'Natural Resource use Conflict: Gold Mining in Tropical Rainforest in Ghana' in Environment and Development Economics, 2007, pages 55-72.|
|Contact details of provider:|| Postal: Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden|
Phone: 031-773 10 00
Web page: http://www.handels.gu.se/econ/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Simpson, R David & Sedjo, Roger A & Reid, John W, 1996. "Valuing Biodiversity for Use in Pharmaceutical Research," Journal of Political Economy, University of Chicago Press, vol. 104(1), pages 163-85, February.
- Addy, Samuel N, 1998. "Ghana: revival of the mineral sector," Resources Policy, Elsevier, vol. 24(4), pages 229-239, December.
- James Benhin & Edward Barbier, 2004. "Structural Adjustment Programme, Deforestation and Biodiversity Loss in Ghana," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 27(3), pages 337-366, March.
- Jeffrey A. Krautkraemer, 1988. "The Cut-Off Grade and the Theory of Extraction," Canadian Journal of Economics, Canadian Economics Association, vol. 21(1), pages 146-60, February.
- Ehui, Simeon K. & Hertel, Thomas W. & Preckel, Paul V., 1990. "Forest resource depletion, soil dynamics, and agricultural productivity in the tropics," Journal of Environmental Economics and Management, Elsevier, vol. 18(2), pages 136-154, March.
- Doherty, Neil A & Posey, Lisa Lipowski, 1997. "Availability Crises in Insurance Markets: Optimal Contracts with Asymmetric Information and Capacity Constraints," Journal of Risk and Uncertainty, Springer, vol. 15(1), pages 55-80, October.
- Tsikata, Fui S., 1997. "The vicissitudes of mineral policy in Ghana," Resources Policy, Elsevier, vol. 23(1-2), pages 9-14, June.
- Löfgren, Åsa, 2003. "Habit Formation in the Environmental Quality: Dynamic Optimal Environmental Taxation," Working Papers in Economics 92, University of Gothenburg, Department of Economics.
- Fraser, Rob W., 1999. "An analysis of the Western Australian gold royalty," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 43(1), March.
- Camille Bann, 1997. "An Economic Analysis of Tropical Forest Land Use Options, Ratanakiri Province, Cambodia," EEPSEA Research Report rr1997112, Economy and Environment Program for Southeast Asia (EEPSEA), revised Nov 1997.
When requesting a correction, please mention this item's handle: RePEc:hhs:gunwpe:0182. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marie Andersson)
If references are entirely missing, you can add them using this form.