An economic analysis of the rehabilitation bonds system

There is currently great concern amongst construction materials processors about recent increases in the costs of meeting regulatory requirements for their industry. In particular, individual firms are experiencing substantial increases in the rehabilitation bonds required to be posted under the Extractive Industries Development Act (1995). For a sample of bonds for small firms over 1990 to 2001, the aggregate real value has nearly doubled! For the numerous small firms these substantial increases can significantly reduce the ability of the firm to make the continuing investments required for operating in the industry. Firms that do not invest will be unable to compete and less able to meet community expectations on safety and other environmental concerns. These changes, and the industry, call for explanations as to why these increases occurred. And they pose the question: Is there a better way for the industry to meet community expectations?