Insights into designing fiscal regimes for impact benefit agreements

Impact benefit agreements have become a popular tool to manage and mitigate the impacts of resource development activities, and share the monetary and/or non-monetary benefits from development activities with impacted communities. The largely confidential nature of these agreements has made it difficult for communities to learn from past agreements and associated outcomes. This report provides practical recommendations for designing equitable fiscal regimes in IBAs. This report identifies, describes, and qualitatively assesses fiscal instruments and systems for extractive industries using a set of potential community objectives. Then, a method to quantitatively evaluate alternative fiscal regimes is employed for the base metal mining sector, using a modified discounted cash flow model of a representative base metal mine. The results suggest that more aggressive fiscal regimes could be negotiated for IBAs in the base metal mining sector while still ensuring that a given resource project is economically viable. The study also suggests that combining a few fiscal instruments can help to balance between the inherent trade-offs of a given fiscal instrument.