Posted: April 20th, 2022

ECOS3997 Assignment brief:

The University of Sydney Page 1
ECOS3997
Assignment brief:
final report
Photo by Sara Evrington: from an ABC News site: https://www.abc.net.au/news/2016: 2024 – Do my homework – Help write my assignment online-05-16/redbank-copper-mine-off-the-hook-as-nt-epa-drops-charges/7419566
The University of Sydney Page 2
Unit assessment
Final report: Policy brief 3000 words (excluding tables & references)
60% Fri 6 May 11.59 pm
Online submission
Media presentation: 1500 words 40% Fri 27 May 11.59 pm
Online submission
The University of Sydney Page 3
Final report
Due Date: Fri 6 May 11.59 pm
Word length: 3,000 words (excluding tables & references)
Any students experiencing difficulty with generating results 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.
The University of Sydney Page 4
Assignment: Final 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:
The University of Sydney Page 5
Assignment: Final 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 ( 1%, 2% and 5%).
The University of Sydney Page 6
Assignment: Final 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.
The University of Sydney Page 7
Assignment: Final 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 Inc. claims if imposed the tax is unnecessary,
and local groups are calling for a DLT.
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.
The University of Sydney Page 8
Assignment: Final Report
2. Continued
The government also needs to respond about the policy mechanism – in particular,
should a tax be used instead of the bond. Also, it needs a recommendation about a
tax rate per ha and two tax rates have been suggested : $250/ha and $500/ha. 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.
The University of Sydney Page 9
Assignment: Final Report
2. Continued
In Lab 4 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).
Use numerical estimates from Lab 4, and other information from lectures and
readings, to make some recommendations to The NSW Department of Planning
Industry and Environment.
The University of Sydney Page 10
A consultant’s report
• You are writing as an applied economic consultant:
• this means the models you present are ones that you would have
constructed yourself
• Do not make reference to learning material in ECOS3997
• You are writing to government bureaucrats who will understand some
jargon (especially terms about mining) but will not understand terms
live social welfare or externalities. These bureaucrats understand why
they have requested the report, so you do not need to write a rehash of
the problem statement.
The University of Sydney Page 11
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.
The University of Sydney Page 12
1. Introduction and background (approx. 1000wds).
Suggested content:
Problem statement
Background info-stats (reference your claims)
Brief literature review on policy to encourage mining companies to
rehabilitate mining sites (references)
Objectives
The University of Sydney Page 13
More detail
– Ace my homework – Write a brief to a state mining minister on policy to promote mine rehabilitation and
allocation of pooled funds for rehabilitation
– Introduction and background section should include:
– 1. Some statistical information about the problem of pollution from mining
– 2. Be framed in terms of core economic principles (e.g externalities, damage costs,
social welfare – these should be explained clearly and in context).
– 3. Brief presentation of the policies that might be used to provide incentives for mining
companies to clean up pollution (include pros and cons, cite the literature).
– 4. A brief but clear aim of the report.
– Do not describe what the government is currently doing-you can refer to it if you want.
Do not use too much technical language.
The University of Sydney Page 14
Brief presentation/literature review of policy (taxes
V bonds)
Policy makers 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 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.
The University of Sydney Page 15
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
෍
=1

,0 + ෍
=1

෍
=1

( , − , −1) ≤
plus verbal description – couple of paragraphs
2.1 Mine Policy Model
Maxmise = σ =0
−1
−
, − (
) −
–

( )
subject to: +1 = −
for t = 0,1,…T-1
+1 = + ℎ −
for t = 0,1,…T-1
plus verbal description – couple of paragraphs
The University of Sydney Page 16
– 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.
NOTE: ethical obligations of scientists/researchers(Randall
(2011))
The University of Sydney Page 17
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 figures and tables should have titles
All illustrations/graphs are classified as figures.
Cite figures and tables in consecutive order in the report.
Do not cut and paste Excel output
The University of Sydney Page 18
Results Mining Rehabilitation fund
Ace my homework – Write my paper – Online assignment help tutors – Discuss characteristics of mines (your data)
Present results- interpret, recommend
Sensitivity analysis over discount rate – table?
The University of Sydney Page 19
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.
The University of Sydney Page 20
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.
Don’t present background information in this section.
The University of Sydney Page 21
References and referencing
Use the Ace homework tutors – APA 6th referencing style.
Guide available at:
https://libguides.library.usyd.edu.au/c.php?g=508212&p=3476096
The University of Sydney Page 22
Final 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.
The University of Sydney Page 23
Rubric: Final Report
Assessment Against Criteria Weighting
(/100)
Clear and coherent exposition of
background and policy to focus
issues/management problem. HD D C P F 20
Analysis and presentation of empirical
results HD D C P F 40
Writing: appropriate style, free of
spelling and grammatical errors. HD D C P F 30
Quality and relevance of references and
consistent referencing excellent satisfactory unsatisfactory 5
Clear and appropriate formatting of
brief no errors
a few minor
errors
major errors or omitted
altogether 5
HD=85+; D=75-84; CR= 65-74; P=50-64; F=0-49
The University of Sydney Page 24
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.
The University of Sydney Page 25
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 + ).
The University of Sydney Page 26
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
෍
=1

,0 + ,0, ,0 + ෍
=1

෍
=1

( , − , −1) + 1 − , −1 ( ,
, , )
subject to
෍
=1

,0 +෍
=1

෍
=1

( , − , −1) ≤
The optimal clean up schedule seeks to minimise the discounted sum of rehabilitation costs
and damage costs.
The University of Sydney Page 27
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.
The University of Sydney Page 28
Numerical application
• 5 abandoned mine sites, 11 year horizon, t = 0, 1, 2…, T=10.
• Damage function with no rehabilitation: , = , ,
2
• Nature of the damage function?
• Data sources/assumptions?
• Initial conditions and parameters are
,
, ,
,
The University of Sydney Page 29
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
The University of Sydney Page 30
Solver dialogue box
Sets Xit values to be
0 or 1 only
Present value sum of
remediation costs can’t
exceed total funds
available
Constraints that ensure
once a site is cleaned up,
it stays so
The University of Sydney Page 31
Solution: location and timing of rehabilitation
Solution fully utilises
available funds
Substantial damage
costs remain from
unrehabilitated sites
Recommended
clean up
schedule:- clean
up only sites 3
and 5 immediately
The University of Sydney Page 32
Discounted clean up cost schedule
,

, − , −1
The University of Sydney Page 33
Discounted damage cost schedule
,0

((1 − , −1) ((1 + )
,0)
The University of Sydney Page 34
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) =
POLICY MODEL – dynamic optimisation model
The University of Sydney Page 35
Maximise a social welfare function
– = σ =0
−1
−
, − ( ) −
–

( )
– 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
The University of Sydney Page 36
References
– Conrad (2010 – Essay Writing Service: Write My Essay by Top-Notch Writer or 1999) Resource Economics, Ch 6. Section 6.4, 2nd edition, Cambridge University Press
– Dept. of Mines & Petroleum-WA Government (2016: 2024 – Do my homework – Help write my assignment online) 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: 2024 – Do my homework – Help write my assignment online) 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

—
ECOS3997 STREAM 2
Lab 5: Mining model with policy options
In this exercise, you will build on the simple dynamic model established in Lab 3 to investigate
the problem of non-renewable resource extraction and environmental stock pollution
externalities.
Background: The government is seeking advice on a small mineral ore mining operation. The
mine operator is Wongalee Inc. and the mine will be in the Hunter Valley region of NSW. The
mine is mid-way through the approval process for operation. Using an on-line government
provided calculator tool, the company has calculated an environmental bond value of $5m that
is due 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 to prevent
environmental damage. 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 where the proposed mine is to be located is in fact
not possible to value. 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.
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.
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 of this particular
mine to put some figures on things and also wants an educated opinion from an economist on
the general relative appropriateness of environmental bonds versus environmental taxes
levied on damaged land.
Tasks : In this tutorial we will assess potential damages and explore outcomes from a per unit
tax on damaged land to the proposed bond for Wongalee Inc. This will provide some numerical
estimates that will facilitate the making of recommendations to The NSW Department of
Planning Industry and Environment.
Outcomes for the mining company (NPV of profit) and society (discounted SWF) will be
compared under no regulation, a bond and a proposed damaged land tax (DLT) at a variety
of rates. Wongalee Inc. claims the bond mechanism is adequate to ensure environmental
protection, and local groups are calling for damaged land tax.
The spreadsheet model used for this tutorial is available on Canvas: MinePolicyModel.XLS.
The results you generate from this lab should be used for your Written Report assignment.
Open the file. There are 4 worksheets set up for the tutorial and the assignment. In the “No
regulation” worksheet will be the results for mining outcomes in the absence of regulation.
The other worksheets “SWF” and “DLT” are for outcomes that maximise discounted social
welfare and discounted firm profit at for a damaged land tax. Recall the model presented in
the lecture for Week 6:
Maximise a social welfare function:
= ∑

[ − (
,
) − ( ) − (
)]

=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
0 = a, initial resource endowment
0 = b, initial damaged land endowment
Control variables: Rate of extraction (tonnes of ore) during t: Qt. and rehabilitation of damaged
land (hectares) during t: Et
10 year finite time period t = 0,1,2…..T
Assume firm is a price taker p =$34 ($/t)
5% discount rate; h=0.0005; d=4,000; c=6,000
Extraction cost function: (
,
) = 1,435.953 + 0.5
2
(0.0000001 + 5.461
−1
)
Social damage function: d
Rehabilitation cost function: c
Tasks to be undertaken:
1) Open the spreadsheet MinePolicyModel.XLS. Familiarise yourself with the parameters in
the workbook labelled “No regulation”.
2) Enter the formulae to calculate mineral ore stocks (Xt) damaged land (Yt), total revenue,
total costs, discounted firm profit, society’s costs of damaged land, per period tax
payments, and discounted social welfare.
3) On the “no regulation” tab, call the Solver in Excel and optimise the net present value for
the firm without the tax. Report the solution.
Solution: NPV = $61.5878
SWF=-$42.357
1000 ha of damaged land remain after resources are exhausted. This leave a cost in
perpetuity of $80m.
4) On the “maxSWF” tab call the Solver again and optimise discounted social welfare. Report
the solution.
Solution: NPV = $51.453
SWF=$51.453
These values are equal as it is socially optimal to clean up all damaged land in every time
period, hence there are no contemporaneous damaged land costs to society.
No damaged land remains after resources are exhausted. There is no cost in
perpetuity.
5) On the “DLT” tab call the Solver and optimise the net present value for the firm with the
tax. To find a recommended tax, repeat over the different values of taxes in cell L12.
Report the solutions.
Students need to decide on a tax rate themselves by trial and error and appeal to theory.
As a start (and as an example) the solution for a tax rate of $250/ha on damaged land the
solution would be:
Solution: NPV = $55.027
SWF=-$40.11
1000 ha of damaged land remain after resources are exhausted. This leave a cost in
perpetuity of $80m. Clearly the tax is still too low.
6) Save the results in each spreadsheet to use as information in your report the NSW
Department of Planning Industry and Environment.
—-
ECOS3997 Lab 5
Mining Fund Allocation Model
The spreadsheet model used for this tutorial is available on Canvas:
MineRehabilitationFund.XLS. This is the spreadsheet you will use to generate your results
for the Written Report assignment. Open the file. On the Model workbook/tab is the Excel
model which has been set up for the tutorial and the assignment. In the Parameters
workbook/tab are the parameters you will use for the assignment (your individual parameters
appear in the same tow as your SID).
The tutorial parameters are different to any of the parameters that have been issued for the
assignment.
The model used is the one presented in the lecture for Week 5:
Minimise total damage and rehabilitation costs:
∑[ ,0 + ( ,0, ,0)] + ∑

{∑[( , − , −1)
]

=1
+ (1 − , −1) ( ,
, , )}

=1

=1
subject to:
∑[ ,0
] + ∑

{∑[( , − , −1)
]

=1
}

=1

=1
≤
Where:
,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.
,
: binary choice variable ( , = 1 if site has been cleaned up, 0 otherwise)
, = (1 − , ) ( ,
, , ) for t=1, 2,…T
Funds not spend in t are available to earn interest (they increase by factor (1 + ).
There are 5 abandoned mine sites: Muswellbrook (1), Vales Point(2), Munmorah (3), Liddell
(4) and Wallerawang (5)
Assume advice is needed for a 10 year horizon, t=0, 1, 2…, T=9.
The particular damage function with no rehabilitation: , = , ,
2

The parameters for this tutorial are:
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 80 20 10 30
αi 0.01 0.2 0.02 0.02 0.04
Ki 50 500 200 100 300
βi 1 0.01 0.4 0.5 0.2
The present value of total available funds, K=$380 (in $m) and the discount rate assumed is
0.05.
1. Open the Model tab. The excel formulae have been entered for you. Acquaint yourself
with how they represent the parameters and functions of the model.
2. Compare/describe the 5 sites in terms of their initial parameter values.
3. Graph the damage functions. Comment.
4. Based on damage costs, which site might you want to clean up first? Why?
5. Use Solver to determine the optimal clean up schedule. (note you do not have to set
up the dialogue box in Solver, this has been done for you). The Solver will take a
couple of minutes to find a solution.
6. Report the solution: Optimal total clean up cost, the present value of cleaning up and
the present value of any remaining damage costs.
7. Repeat 5, and 6 for a range of discount rates 0.02 and 0.1. Is the solution sensitive to
changes in the discount rate?
8. Consider the case where there is debate about the parameter values for βi at Vales
Point (site 2). In response to the debate, conduct a preliminary sensitivity analysis by
increasing the parameter in steps of 0.01 and resolving the model. Would it take much
of a revision to parameter value in order to completely change the recommended
clean up schedule?

Order | Check Discount