ECOS3997 Assignment: written report - Intel Writers

ECOS3997

Assignment:
 written report

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Unit assessment
 Written report 3000 words 60% Week 11 May 15 Online submission

 Media presentation 1500 words 40% Week 13 May 29 Online submission

 A newspaper article (or op-ed, or blog post):

 an extended piece of writing for a non-specialist audience

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Written report
 STREAM 2 Assignment: Written Report
 Due Date: Week 11 Friday May 15 11pm
 Word length: 3,000 words (excluding references)
 Any students experiencing difficulty with generating results for section 1
 (cost minimisation model). Please email me
 shauna.phillips@sydney.edu.au for assistance.

 Posted thread on Ed for questions you may have- will look at this
 frequently- if I don’t respond in time for your please email me.

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Assignment: Written Report
 For this assignment you will write a report for the NSW Department of Planning
 and Industry. Given the recent Senate Inquiry into mining policy and the growing
 social awareness of environmental problems associated with abandoned mines,
 there is a need to review policies and make changes where appropriate. The
 Department is seeking advice on the following 2 questions/issues:

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Assignment: Written Report
1.The Department has a pool of funds for abandoned mine rehabilitation (the current pool of
available funds in the NSW Legacy Mines Program (LMP)). Although there is a large list of sites
that need rehabilitation, the Department has narrowed the choice down that it is seeking advice
on to the following 5 mines: Muswellbrook, Vales Point, Munmorah, Liddell and Wallerawang.
The government programme prioritises the rehabilitation of abandoned mines based on the
following factors: public safety risk, environmental risk, end use of the land, and cost
effectiveness. It is in particular seeking advice on the least cost option from a consultant
economist (you).
Use the results you generated with your assigned parameters in Lab 4 from the spreadsheet
MineRehabilitationFund.XLS to advise the government. Conduct a basic sensitivity analysis of
the results for a range of discount rates ( 2%, 5% and 10%).

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Assignment: Written Report
2. Apart from rehabilitating abandoned mine sites, the Department would like to consider what
the best policy is to encourage mining companies to rehabilitate their sites to avoid have to
make more funds available for the NSW LMP. It also needs particular advice about a small
mineral ore mining operation, Wongalee Inc. in the Hunter Valley region of NSW that is mid-way
through the approval process for operation. Using the online bond calculator tool the company
has calculated an environmental bond value of $5m to be posted in full at the beginning of
operations. The local farming community is concerned about the poor environmental track
record of Wongalee Inc and claim that there is ample historical evidence that the mechanism of
a bond is inadequate. Further, they argue that the bond is undervalued in terms of the real
potential cost of the damage. This sentiment is echoed by local indigenous groups who argue
that in cultural terms the undisturbed land is in fact not possible to value.

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Assignment: Written Report

2. Continued

An alternative to bonds, a damaged land tax is also being discussed. This could be
levied on a per hectare basis with the aim of creating an incentive for total clean up
during mining operations. Wongalee claims if imposed the tax should be at a rate of
$255/ha, and local groups are calling for $500/ha.
The government needs both specific and general advice. In order to respond to
claims about the bond amount, it needs to know how much environmental damage
might be caused by the mining operation and its value.

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Assignment: Written Report

2. Continued

The government also needs to respond about the policy mechanism - in particular,
should a tax be used instead of the bond. The government wants to use the case
study for this particular mine, to put some figures on things, and also wants an
educated opinion from an economist on the relative appropriateness of
environmental bonds versus environmental taxes levied on damaged land.

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Assignment: Written Report

2. Continued

In Lab 5 outcomes for the firm (NPV of profit) and society (discounted social
welfare), amount of damage in the final period (YT), and value of social damage in
perpetuity ( ( ) were compared under no regulation, and a proposed
damaged land tax (DLT) at a variety of rates.
Use numerical estimates from Lab 5, and other information from lectures and
readings, to make some recommendations to The NSW Department of Planning
Industry and Environment.

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Suggested structure (any other logical structure that uses subheadings will also be
appropriate):

 1. Introduction and background.
 2. Method: briefly present the models estimated
 2.1 and 2.2 This section should include a description of the models employed.
 3. Results: mining rehabilitation advice.
 4. Results: advice relating to Wongalee Inc and taxes versus bonds policy.
 5. Conclusions
 6. References – not included in word count.

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1. Introduction and background (approx. 1000wds).

Suggested content:

 Problem statement
 Background info-stats (reference your claims)
 Brief literature review (references)
 Objectives

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Literature review
Researchers will use this existing knowledge to inform what they do or don’t
do….your work draws on prior work.
Take elements of past research and build on or develop or change in some way.

Aim is to provide reader & researcher with understanding of a relevant body of
literature (empirical and theoretical).

In the literature review: summarise, analyse compare & contrast.

Don’t explain every detail- need to isolate what’s important- need to grasp main
aspects of past research as it relates to yours.

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2. Method (suggested approach) approx. 700 words
 2.1 Mine rehabilitation Model
 Minimise σ =1 ,0 + ,0 , ,0 + σ =1 σ =1 ( , − , −1 ) + 1 − , −1 ( , , , )

 subject to

 ෍ ,0 + ෍ ෍ ( , − , −1 ) ≤ 
 =1 =1 =1

 plus verbal description – couple of paragraphs

 2.1 Mine Policy Model
 Maxmise = σ −1 
 =0 − , − ( ) − - ( )

 subject to: +1 = − for t = 0,1,…T-1

 +1 = + ℎ − for t = 0,1,…T-1

 plus verbal description – couple of paragraphs

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Ethical obligations of scientists/researchers(Randall (2011))
– Intellectual rigor: Scholars should be committed to the highest standards of logical and
 empirical rigor.

– Openness: Scholars should be open to new information, ideas.

– Critical attitude: Scholars should be willing to criticize the work of others rigorously, without
 fear or favor, and to submit their own work to such criticism.

– Modesty of claims: Scholars should not claim too much for their ideas and research findings.

– Giving credit: Scholars should give/share credit for ideas and research findings of others
 (collaborators, but also precursors) that have contributed to their work.

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3. & 4. Results (about 1000 words)
 Present results in 2 subsections – one for mine rehabilitation, the other for
 policy.

 Clearly label any tables or figures.

 All illustrations/graphs are classified as figures.

 Cite figures and tables in consecutive order in the report.

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Results Mining Rehabilitation fund

 Discuss characteristics of mines (your data)

 Present results- interpret, recommend

 Sensitivity analysis over discount rate - table?

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Results Mine Policy Model

 Comment on bond vs tax on general principles as well as in specific empirical
 context

 Present results - interpret, recommend

 Potentially tabulate SWF and NPV, outcomes for ( , Y10 etc.

 Any comments on extraction schedules, rehabilitation schedules etc.

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Conclusion (about 300 words)

 Brief concluding statements.
 Make sure your conclusions follow logically from the empirical
 estimates in the report, and any reasoning you have applied based
 on theory and background evidence.

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References and referencing
 Use the APA 6th referencing style.

 Guide available at:

 https://libguides.library.usyd.edu.au/c.php?g=508212&p=3476096

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General overview of a research process-comparison
to what we do here

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Written Report
• You will be assessed on:
 • your ability to articulate your quantitative analysis with reference to economic
 theory and your use of empirical evidence in the applied context of the mining
 industry in NSW.
 • your written communication.
You will not be able to write this the night before submission – good writing is a skill -
takes time and practice.
Leave yourself time to re-edit the document a few times.
A rubric for this assignment has been posted on Canvas.

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Rubric: Written Report
 Weighting
 Assessment Against Criteria
 (/100)
 Clear and coherent exposition of
 background to focus issues/management
 problem is framed in terms of core HD D C P F 20
 economic concepts and principles.

 Analysis of empirical results is framed
 and justified in terms of core economic HD D C P F 40
 concepts and principles.

 Writing: appropriate style, free of spelling
 and grammatical errors. HD D C P F 30

 Quality and relevance of references excellent satisfactory unsatisfactory 2.5
 Correct and consistent referencing
 a few minor major errors or omitted
 no errors 5
 errors altogether
 Clear and appropriate formatting of brief
 a few minor major errors or omitted
 no errors 2.5
 errors altogether
 HD=85+; D=75-84; CR= 65-74; P=50-64; F=0-49

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Empirical models

Available on Canvas:

MiningPolicyModel.XLS

MineRehabilitationModel.XLS

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MRF Model(notation)
 • is pollution stock at site i, i = 1,2….I

 • ,0 : initial volume of contamination from Z at site i in period 0

 • , +1 =(1 + ) , is the growth of volume (0 < < 1)

 • , = / , : average contamination at site i in period t

 • , = ( , , , ): damage during t is a function of volume contaminated and
 average concentration.

 • : costs of cleaning up site i, K is the present value of total funds available
 for clean up.
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Diffusion and stock pollutants (assumptions)
 • , : binary choice variable
 • ( , = 1 if site has been cleaned up, 0 otherwise)
 • Assume once site is cleaned it stays cleaned:
 if , = 1 then , = 1 for all > t
 Assume damage occurs while a site is being cleaned, but then all
 future damage goes to zero:

 , = 1 − , , , , for t=1, 2,…T
 • Funds not spend in t are available to earn interest (they increase by
 factor (1 + ).
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Binary dynamic optimisation problem
The optimal schedule of rehabilitation becomes a binary dynamic optimisation problem that
seeks to minimise total costs by choosing the , values. Minimise

 ෍ ,0 + ,0 , ,0 + ෍ ෍ ( , − , −1 ) + 1 − , −1 ( , , , )
 =1 =1 =1

subject to

 ෍ ,0 + ෍ ෍ ( , − , −1 ) ≤ 
 =1 =1 =1

The optimal clean up schedule seeks to minimise the discounted sum of rehabilitation costs
and damage costs.
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Binary dynamic optimisation problem

• In determining the optimal schedule, the first time that , = 1 , the
 government pays dollars in period t (or a present value payment of 
 today t=0)

• If and when a site is cleaned, i.e. , = 1, then , = 1 for all > t and the
 future coefficients on are zero. This ensures only a single payment of
 rehabilitation at any site in this model.

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Numerical application

 • 5 abandoned mine sites, 11 year horizon, t = 0, 1, 2…, T=10.

 2
 • Damage function with no rehabilitation: , = , , 

 • Nature of the damage function?

 • Data sources/assumptions?

 • Initial conditions and parameters are , , , , 

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Data table. K=$500, = . 

Parameters site i=1 site i=2 site i=3 site i=4 site i=5

Zi 5 50 20 10 30

V I, 0 10 500 100 10 50

 i 0.01 0.1 0.02 0.02 0.04

Ki 50 500 200 100 300

 i 1 0.01 0.4 0.5 0.2

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Solver dialogue box
 Sets Xit values to be
 0 or 1 only

Present value sum of Constraints that ensure
remediation costs can’t once a site is cleaned up,
 it stays so
exceed total funds
available

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Solution: location and timing of rehabilitation

 Solution fully utilises
 available funds

Recommended
 Substantial damage
clean up costs remain from
schedule:- clean unrehabilitated sites
up only sites 3
and 5 immediately

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Discounted clean up cost schedule
 , 

 , − , −1 

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Discounted damage cost schedule

 ,0

 ((1 − , −1 ) ((1 + ) ,0 )

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POLICY MODEL - dynamic optimisation model
Control variables: control variables Qt (extraction) and Et (rehabilitation)
Co-state variables: = −1 +ℎ −1 − −1 ; +1 = +1 − 
Price takers p =$34 ($/t).
Extraction cost , = 1 + 2 2 3 + 4 −1
Rehabilitation cost w 
damage cost (social) = 

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Maximise a social welfare function

 – = σ −1 
 =0 − , − ( ) − - ( )

 – subject to: +1 = − for t = 0,1,…T-1
 +1 = + ℎ − for t = 0,1,…T-1

 – Qt ≥ 0 and Et ≥ 0 for all t
 – with 0 = a, initial resource endowment and
 – 0 = b, initial damaged land endowment
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References
– Conrad (2010 or 1999) Resource Economics, Ch 6. Section 6.4, 2nd edition, Cambridge University Press
– Dept. of Mines & Petroleum-WA Government (2016) MRF The first two years. Available:
 https://www.dmp.wa.gov.au/Documents/Environment/MRF_The_First_Two_Years.pdf
– Gilbert & Tobin (2017)Mining Rehabilitation in Western Australia – Where to From Here? Available:
 https://www.gtlaw.com.au/insights/mining-rehabilitation-western-australia-where-here
– NSW Govt (2016) Derelict Mines Program Policy.
 Available:https://www.resourcesandenergy.nsw.gov.au/__data/assets/pdf_file/0003/594084/POL16-6-Derelict-Mines-
 Program-Policy.pdf
– NSW Govt (2020) Legacy Mines Program Available: https://www.resourcesandgeoscience.nsw.gov.au/landholders-and-
 community/minerals-and-coal/legacy-mines-program

– NSW Govt. (2020) Mining Legacies. Available: https://www.mininglegacies.org/mines/nsw/

– NSW Govt. (2020) Legacy Mines Program/ Funding Guidelines. Available:
 https://www.resourcesandgeoscience.nsw.gov.au/__data/assets/pdf_file/0009/594198/POL16-7-Derelict-Mines-Program-
 Funding-Priority-Guidelines.pdf

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