Negative Externalities and Optimal Extraction of Iron Sand Mining at Tasikmalaya Regency

Abstract

Exhaustible resources get special attention in the economics literature. Rapid demand is responsible for unsustainable extraction of iron sand mining at Tasikmalaya Regengcy. Iron sand mining effects at the stream river mining resulted in channel degradation and erosion increased turbidity, stream bank erosion and sedimentation of riffle areas. All these changes adversely affect fish and other aquatic organisms either directly by damage to organisms or through habitat degradation or indirectly through disruption of food web. This situation has implification to fisherman income because of decreasing fish production at Tasikmalaya Regency. Further, effects on disturbing road function at overloaded truck hauling which increase the travel time and fuel consumption. This study is an attempt to estimate the negative externalities and also estimate Pigouvian tax and path of optimal extraction iron sand mining along Tasikmalaya Regency. The total of negative externality in area of sand mining per 5 years Rp 3.674.811.431,9. It is suggested to impose a Pigouvian tax of Rp 9.579 on each sand tonnage truck load in order to compensate the fisherman and road user for loss incurred due to iron sand mining. This paper also tests Hotelling’s prediction that level of extraction period for a iron sand mining with and without negative externalities was included at cost function. The result are, the optimality with negative externalities period extraction 28 years and optimality without externalities 27 years.