Reducing the risk of mining disasters in BC: How financial assurance can help
Mining has important economic benefits for British Columbia, but it also comes with environmental risks. This paper argues that requiring “financial assurance” from mining companies can reduce the risk of disaster. Legislated financial assurance requirements oblige companies to commit funds against their environmental risks. Instruments can include bonds, insurance, or industry funds. Financial assurance ensures that funds are available to pay for clean-up regardless of whether a company goes bankrupt. They give companies a direct economic incentive to reduce their operations’ risk of disaster and they keep costs to companies low by leveraging market forces.
Current policy does not adequately protect communities and taxpayers from costs and exacerbates the risk of another mining disaster. British Columbia should close its current policy gap through legislative and regulatory change. Moreover, the province should implement a “tiered” financial assurance scheme, which combines different financial assurance instruments under a system of successive coverage tiers. The paper also suggests that the province broaden the risk pool in a tiered system’s higher tiers because pooling risk with other sectors that can create a disaster can both better protect the public and reduce costs to companies.