The Impact of the Government’s Mineral Policy-Making Approach on Compensating for Environmental Consequences of Mining in Iran

Although mines provide primary raw materials for production and they are considered a valuable resources, they often come with pollution and environmental damage. Sustainable development policies aim to compensate for the environmental damages caused by mining activities, by directing the related  enterprises towards environmentally friendly investments. It is expected that with an increase in mining activities, capital spending on environmental protection will also increase to compensate for the destruction caused. This study estimates the relationship between the level of mining exploitation and the value of mining environmental investment in different provinces of Iran, using the dynamic panel data model GMM with an Arellano-Bond approach. Regional governance quality can significantly impact  commitment to environmental investments. For this purpose, the provincial environmental governance index was extracted and included in the model. Since the level of development in provinces has an effective relationship with institutional quality, provincial added value was taken into account in the model as a control variable for the level of provincial development. Estimates were obtained using provincial data from 2014 to 2021. The results of this study suggest that increased mining activity does not lead to higher capital spending on the environment. On the other hand, higher governance quality in provinces is positively associated with mining environmental investments. Additionally, mines located in more developed provinces incur higher environmental spending. Finally, the government can force mining operators to compensate for environmental damages using the capacity of corporate social responsibility by improving regulations in the area of mining environmental protection.