Abstract
The use of financial institutions and legislation are some of the regulatory mechanisms for ensuring an effective Environmental Financial Assurance (EFA) implementation. Third party involvement in regulation could mitigate regulatory implementation inefficiency in developing countries. This research uses Ghana as a case study to examine the effectiveness of these two regulatory mechanisms in Ghana’s EFA policy implementation. The influence of financial institutions in environmental policy could be seen in 3 folds: as lenders, insurers and investors. Transnational companies (TNCs) are sometimes unwilling to accept regulatory reforms in developing countries because it appears they can get away with it. The knowledge that contractual agreements and legal institutions are weak also seems to allow TNCs to take advantage of the situation and hardly comply fully with the environmental regulations in developing countries. Key words: Environmental financial assurance, rule of law, financial institutions, developing countries, transnational companies, mining reclamation bonds.
Highlights
As part of policy efforts to ensure sustainable mineral utilisation, most countries insist on reclamation bonds, which apply the polluter-pays principle as a means of regulation (Miller, 2006)
Environmental Financial Assurance (EFA1) policy includes reclamation bonds, which are a form of assurance such as pledged assets of a company and letters of credit and guarantees that mining operators will undertake reclamation activities or forfeit the amount posted as bonds or pledged assets
Three Non-Governmental Organizations (NGOs’); The Third World Network, Friends of the Earth and Wassa community affected by mining (WACAM) were interviewed for because they are involved with mining and EFA policy
Summary
The use of financial institutions and legislation are some of the regulatory mechanisms for ensuring an effective Environmental Financial Assurance (EFA) implementation. Third party involvement in regulation could mitigate regulatory implementation inefficiency in developing countries. This research uses Ghana as a case study to examine the effectiveness of these two regulatory mechanisms in Ghana’s EFA policy implementation. The influence of financial institutions in environmental policy could be seen in 3 folds: as lenders, insurers and investors. Transnational companies (TNCs) are sometimes unwilling to accept regulatory reforms in developing countries because it appears they can get away with it. The knowledge that contractual agreements and legal institutions are weak seems to allow TNCs to take advantage of the situation and hardly comply fully with the environmental regulations in developing countries
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