Three Essays on Economic Development in the Natural Resources Sector

This thesis examines two ongoing development projects that received financial support from international development organizations, and an alternative mining tax proposed by the academia. Chapter 2 explores the impact of commoditization of coffee on its export price in Ethiopia. The first part of the chapter traces how the Ethiopian’s current coffee trade system and commoditization come to be. Using regression analysis, the second part tests and confirms the hypothesis that commoditization has led to a reduction in coffee export price. Chapter 3 conducts a cost-benefit analysis on a controversial, liquefied natural gas export project in Peru that sought to export one-third of the country’s proven natural gas reserves. While the country can receive royalty and corporate income tax in the short and medium term, these benefits are dwarfed by the future costs of paying for alternative energy after gas depletion. The conclusion is robust for a variety of future energy-price and energy-demand scenarios. Chapter 4 quantifies through simulation the economic distortions of two common mining taxes, the royalty and ad-valorem tax, vis-à-vis the resource rent tax. The latter is put forward as a better mining tax instrument on account of its non-distortionary nature. The rent tax, however, necessitates additional administrative burdens and induces tax-avoidance behavior, both leading to a net loss of tax revenue. By quantifying the distortions of royalty and the ad-valorem tax, one can establish the maximum loss that can be incurred by the rent tax. Simulation results indicate that the distortion of the ad-valorem tax is quite modest. If implemented, the rent tax is likely to result in a greater loss. While the subject matters may appear diverse, they are united by one theme. These initiatives were endorsed and supported by authorities and development agencies in the aim of furthering economic development and efficiency, but they are unlikely to fulfill the goal. Lessons for international development can be learnt from successful stories as well as from unsuccessful ones.

REDUCING DIESEL DEPENDENCE IN NUNAVUT: INTEGRATING RENEWABLE ENERGY TECHNOLOGIES THROUGH POLICY ACTIONS

In the last fifty years, Nunavut has developed a deep dependence on diesel for virtually all of its energy needs, including electricity. This dependence has created a number of economic, environmental and health related challenges in the territory, with an estimated 20% of the territory’s annual budget being spent on energy, thereby limiting the Government of Nunavut’s ability to address other essential infrastructure and societal needs, such as education, nutrition and health care and housing. One solution to address this diesel dependency is the use of renewable energy technologies (RETs), such as wind, solar and hydropower. As such, this thesis explores energy alternatives in Nunavut, and through RETScreen renewable energy simulations, found that solar power and wind power are technically viable options for Nunavut communities and a potentially successful means to offset diesel-generated electricity in Nunavut. However, through this analysis it was also discovered that accurate data or renewable resources are often unavailable for most Nunavut communities. Moreover, through qualitative open-ended interviews, the perspectives of Nunavut residents with regards to developing RETs in Nunavut were explored, and it was found that respondents generally supported the use of renewable energy in their communities, while acknowledging that there still remains a knowledge gap among residents regarding renewable energy, stemming from a lack of communication between the communities, government and the utility company. In addition, the perceived challenges, opportunities and gaps that exist with regards to renewable energy policy and program development were discussed with government policy-makers through further interviews, and it was discovered that often government departments work largely independently of each other rather than collaboratively, creating gaps and oversights in renewable energy policy in Nunavut. Combined, the results of this thesis were used to develop a number of recommended policy actions that could be undertaken by the territorial and federal government to support a shift towards renewable energy in order to develop a sustainable and self-sufficient energy plan in Nunavut. They include: gathering accurate renewable resource data in Nunavut; increasing community consultations on the subject of renewable energy; building strong partnerships with universities, colleges and industry; developing a knowledge sharing network; and finally increasing accessibility to renewable energy programs and policies in Nunavut.