CC BY
0DOI: 10.29141/2658-5081-2023-24-1-5 EDN: QSVOKB JEL classification: Q58, R11
Olga S. Eremeeva Ural State Mining University, Ekaterinburg, Russia
Lyudmila A. Mochalova Ural State Mining University, Ekaterinburg, Russia
Organisational economic mechanism of circular subsoil use
Abstract. One problem about developing circular economy in the mineral resources sector is the absence of a methodological approach to forming an organisational economic mechanism for circular subsoil use in Russia and its regions which specialise in the extraction of minerals. The paper aims to create such an approach. The concept of circular economy and theoretical propositions of natural resources economics and environmental management constitute the methodological basis of the research. The methods include analysis, synthesis, and inductive reasoning. The paper justifies the application of the terms "organisational economic mechanism", "circular subsoil use", and "organisational economic mechanism of circular subsoil use" and provides them with definitions. Then, the article identifies organisational, legal and economic factors affecting the organisational economic mechanism, as well as formulates principles of balancing it and ensuring its efficiency. Proceeding from these factors and principles the authors justify their selection of tools: 1) organisational and managerial ones targeted at forming, regulating, and coordinating the activities of circular processes' participants; 2) economic ones that create material incentives for developing circular economy in the subsoil use. According to the research results, there are two groups of indicators showing the effectiveness of using these tools: general economic (macro-and meso-) and commercial (microeconomic) indicators. The developed methodology allows ensuring the effectiveness and efficiency of the state management of secondary resources and waste generated by mineral extraction.
Keywords: circular economy; organisational economic mechanism; subsoil use; environmental management; effectiveness.
For citation: Eremeeva O. S., Mochalova L. A. (2023). Organisational economic mechanism of circular subsoil use. Journal of New Economy, vol. 24, no. 1, pp. 104-125. DOI: 10.29141/2658-5081-2023-24-1-5. EDN: QSVOKB.
Article info: received October 28, 2022; received in revised form November 25, 2022; accepted November 28, 2022
Introduction
The era of rapid scientific and technological development has brought an increase in national economic well-being and quality of life as well as opened up new opportunities for the development of society due to occurring production, technological, and socioeconomic changes. On the other hand, the anthropogenic impact on the environment gives rise to a number of environmental problems. To ensure a balance in achieving scientific, technological, socioeconomic and environmental goals in Russia and its regions, it is necessary to implement the well-known concept of sustainable development and the concept of a circular economy based on it.
Experts and scientists usually define a circular economy, also referred to as a closed-loop economy, as an economy that could support recovery and closes loops in industrial production [Dorokhina, Kharchenko, 2017; D'Amato et al., 2017; Guryeva, 2019; Suarez-Eiroaa et al., 2019; Dovgal et al., 2020]. It is distinguished by a decrease in the volume of consumption and processing of primary raw materials, which is achieved through the use of secondary resources, which leads to resource saving, a reduction in the amount of waste, and, as a result, the areas allocated for their disposal [Pakhomova, Richter, Vetrova, 2017; Kinnunen, Kaksonen, 2019; Rossi et al., 2020; Mochalova, Sokolova, 2021].
Among various environmental and economic effects, a circular economy deals with the problem of waste management. Therefore, an important area for its application is subsoil use, which is associated with the formation of more than 90 % of all waste in Russia and its regions. Accordingly, the concepts and strategies for sustainable spatial development of regions specialising in the mineral extraction, include tasks and directions focused on the management of subsoil use waste and the use of secondary mineral resources. Such territories include, in particular, Sverdlovsk, Tyumen and Chelyabinsk oblasts, which are part of the Ural-Siberian macroregion.
Large-scale technical and technological transformations are necessary for the mineral resources sector's transition to a circular economy. Their successful implementation is possible only if there is an organisational economic mechanism that stimulates application of circular business models in subsoil use. There exists a considerable body of literature devoted to the issues of forming an organisational economic mechanism. However, a holistic view on its methodology in circular subsoil use have not been presented as yet.
The purpose of the study, which determines its scientific novelty, is to develop a methodological approach to forming an organisational economic mechanism of circular subsoil use in Russia and its regions, where the industry is based on the mineral extraction.
The objectives of the study are to identify factors that affect the organisational economic mechanism of circular subsoil use; to determine principles of its formation; to select and study the tools of this mechanism, as well as their effectiveness indicators.
According to the study's hypothesis, the formation of circular subsoil use, characterised by the rational use of natural resources and waste minimisation in the conditions of the enterprises' activities belonging the mineral resources sector, is possible if effective tools of the organisational economic mechanism are used.
Literature review
Existing studies provide different definitions to the organisational economic mechanism. Agaeva characterises it as "a set of organisational economic forms and methods, tools and leverages which influence an object..." [Agaeva, 2013, p. 141]. Kukharuk adds to the definition by noting that this set is a system capable of self-management [Kukharuk, 2013]. Rayzberg, Lozovskiy, Starodubtseva [1996] suggest taking into account the legal aspect in this mechanism, and Udaltsova emphasises its industrial nature [Udaltsova, 2012]. The most complete definition is given by Dergaliuk. In line with it, organisational economic mechanism is "a specific set of elements of an organisational and economic nature (objects, subjects, goals, interactions, methods, tools, etc.) interrelated and interacting with each other through mobile internal and external communications at the macro-, meso- and micro-levels of economy, its inter-industry sectors, industries, primary links and many others" [Dergaliuk, 2017]. The analysis of the definitions allows us to conclude that they all imply the application of a systematic approach to organisational and economic tools.
Natural resources economics already knowns the concept "economic mechanism of natural resources management". Bobylev characterised it as "special mechanisms and tools directly related to environmental protection and natural resources exploitation" [Bobylev, 2014, p. 309]. Karybaeva believes that the economic mechanism for regulating natural resources management and environmental protection is a system of "activities that determine the sustainable rational use of natural resources based on economic stimulation of environmental activities, including the following components: accounting and socioeconomic assessment of natural resources; evaluation of environmental pollution; compensation for environmental damage" [Karybaeva, 2011, p. 16]. Lukyanchikov and Potravnyy present the economic mechanism of natural resources management through its components: "payable natural resources management; system of economic incentives for environmental protection; payment for environmental pollution; creation of a market for mineral resources; improvement
of pricing taking into account the environmental factor; environmental funds; environmental programmes; sale of pollution rights; "deposit - return" system; environmental insurance, etc." [Lukyanchikov, Potravnyy, 2007, p. 589]. Lutkovska and Kaletnik investigate "the organisational economic mechanism for managing natural, technogenic and environmental safety", which is "part of the general system of the economy with its own characteristics" and aims to "coordinate the economic and environmental interests of social production: vertical (state, regional, local), and horizontal (territorial, departmental, at the level of relations between enterprises), etc., as well as to establish the effective security procedure" [Lutkovska, Kaletnik, 2020, p. 606].
From our viewpoint, in natural resources economics, it is more correct to use the term "organisational economic mechanism of natural resources management", because it incorporates not only economic, but also organisational and managerial tools that are closely interrelated. During the circular economy development, one has better speak about the organisational economic mechanism of circular natural resources management. Let us explain the meaning of the adjective "circular", which names an attribute of an object based on the characteristic of the very subject of research -circularity.
Different authors, while defining the term "circularity" quite similarly, reveal its essence in various ways. For example, Guryeva [2019] connects circularity with a number of scientific ideas being adapted to the concept of a circular economy, such as an environmentally sustainable model for industry, an industrial ecosystem by Frosch and Gallopoulos (1989); the concept of zero waste by Snow and Dickinson (1990); sustainable use of natural resources by Pearce (1992); waste-free production, social responsibility by Braungardt and McDonough (2002), etc. In the work of Pakhomova, Richter, Vetrova, the concept under consideration is characterised by "minimising the consumption of primary raw materials and the volume of processed materials, which is accompanied by a decrease in waste sent for disposal, while reducing the area occupied by landfill sites and unorganised dump sites" [Pakhomova, Richter, Vetrova, 2017, p. 245]. In his study of the conceptual framework, Valko relates circularity to balanced sustainability and dynamism [Valko, 2019]. As our analysis demonstrated, to portray circularity both domestic and foreign scientists [Prieto-Sandoval, Jaca, Ormazabal, 2018; Suarez-Eiroaa et al., 2019; Costa Fernandes et al., 2020; Kristensen, Mosgaard, 2020; Yadav et al., 2020] use such concepts as zero waste, low waste, resource saving, complexity, sustainability, efficiency, optimisation, value creation, etc.
Based on the above, let us give a definition to the new term. The organisational economic mechanism of circular natural resources management is a set of organisational,
managerial and economic tools that stimulate such use of natural resources, which saves resources, is of an integrated nature, and generates minimal waste.
However, in relation to the mineral resources sector of the country and its industrial regions, we suggest applying the term "organisational economic mechanism of circular subsoil use" because there are some peculiarities of mineral resources use. The scheme of the term formation is shown in Figure 1.
Natural resources management
Subsoil use Circular subsoil use
Other types of natural resources management
Natural resources economics
Economic
tools
i_
Organisational and managerial tools
Organisational economic mechanism of natural resources management
S
Organisational economic mechanism of circular subsoil use
Fig. 1. Formation of the term "organisational economic mechanism of circular subsoil use"
Considering our interpretation of the organisational economic mechanism of circular natural resources management and the interpretation of subsoil use presented in the Russian geological encyclopedia1, the organisational economic mechanism of circular subsoil use can be defined as a set of organisational, managerial and economic tools that stimulate performing resource-saving, integrated and minimal waste activities related to geological study, prospecting, and exploration and mineral extraction, as well as the use of subsoil for purposes not related to the extraction of minerals.
Methodology for the formation of the organisational economic mechanism
of circular subsoil use
When developing a methodological approach to the formation of the organisational economic mechanism of circular subsoil use in Russia and its regions, we used a logical method of inductive reasoning and took into consideration the factors influencing this mechanism; the principles, which it should be based on; tools that allow it to achieve its goals, and indicators of its effectiveness (Figure 2).
We divide the factors affecting the mechanism under consideration into legal, economic and organisational depending on the sphere of influence.
1 Russian geological encyclopedia: in 3 volumes. Moscow; Saint Petersburg: Publishing House of Russian Geological Research Institute (VSEGEI), 2011. 704 p. 2nd vol. (In Russ.)
Factors influencing the formation of the organisational economic mechanism of circular subsoil use
Legal Economic Organisational
Basic principles for the formation of the organisational and economic mechanism of circular subsoil use
Balanced use of motivating and tightening methods for the circular economy development Reducing the environmental risks of subsoil use Conserving natural mineral resources and using secondary mineral raw materials Ensuring the economic efficiency of circular subsoil use
Tools of the organisational economic mechanism of circular subsoil use
Organisational and managerial Economic
Effectiveness indicators of the organisational economic mechanism of circular subsoil use
General economic Commercial
Technical and environmental Economic Technical and technological Organisational and managerial Financial-economic
Fig. 2. Methodological approach to forming the organisational economic mechanism
of circular subsoil use
Legal factors reflect the need for the development of circular legislation and formalisation of legal regulation in the subsoil use economics. Economic factors are associated with the adoption of methods that increase the level of economic development by involving tailings in the production. Organisational factors imply the readiness of communities, institutions and organisations to promote the introduction and development of circular schemes of production and consumption in subsoil use. These factors can have an impact of different scale - international, national, regional and local.
The principles that the organisational economic mechanism of circular subsoil use should be based upon are described in Table 1.
The first principle provides for promoting the development of a circular economy through the use of not only economic and market leverages inherent in the stimulating mechanism of natural resources management (assumes weak sustainability), but also economic and administrative tools that determine a rigid mechanism of natural resources management (assumes strong sustainability), which are aimed at solving
the problem of waste generated in the process of mineral extracting and processing through the implementation of a strict legal, administrative, tax, credit and penalty policy. An environmental economist Bobylev [2014] believes this combination of stimulating and rigid economic mechanisms of natural resources management to be the most expedient.
Table 1. Principles of forming the organisational economic mechanism
of circular subsoil use
Principle Remarks
1. Balanced use of motivating and tightening methods for the circular economy development By the nature of its impact, the organisational economic mechanism of circular subsoil use should be not only stimulating, but also rigid (suppressing)
2. Reducing environmental risks of subsoil use Circular subsoil use, unlike non-circular, should help reduce the negative impact on all components of the environment
3. Conserving natural mineral resources and using secondary mineral raw materials Subsoil use based on the application of circular economy principles involves the conservation of natural mineral reserves, as well as the development of the industry in terms of using secondary mineral resources
4. Ensuring the economic efficiency of circular subsoil use It will be beneficial for enterprises to promote circular subsoil use if the results obtained do not only cover, but also exceed all the costs
The second principle is based on the fact that the society and state are interested in developing the organisational economic mechanism of circular subsoil use in order to reduce the possibility of adverse environmental impacts and decrease environmental and economic damage. The subsoil use without taking into account the circular development principles creates the following environmental risks:
• natural environmental risk conditioned by adverse environmental impacts and the loss of reserves;
• technical environmental risk, which is determined by the emergence of an industrial environment (there are two types: the risk associated with changes in the environment as a result of accident-free economic activity, and the risk caused by technological disasters);
• social environmental risk, which provokes a defensive reaction of the state and society to the exacerbation of environmental problems and leads to the formation and development of the ecological and social environment (there are two types:
environmental-normative conditioned by the adopting and constant tightening of environmental laws and regulations for business entities, and environmental-political associated with environmental activities of the public in relation to enterprises) [Oleynik, 2000].
The third principle is closely connected with the second one and is associated with the resource saving and mineral resource reserves conservation, as well as the need to use secondary mineral raw materials instead of primary ones. To implement this principle, a positive effect of legal, economic and organisational factors is essential.
The fourth principle means that the economic benefits from the circular subsoil use should significantly exceed the costs of subsoil users. These benefits are reduced costs and higher revenues for businesses. Saving money (reducing costs) is achieved by decreasing the amount of natural resources used and environmental payments and penalties for environmental damage. A circular subsoil user spends less money on the neutralisation, storage and disposal of waste. By improving working conditions for workers, compensation payments are reduced. In addition, it becomes possible for a circular subsoil user to reduce the environmental insurance payment rate. Revenue growth is driven by an increase in market share from the sale of 'green' products that are more demanded than competitors' products, as well as the sale of additional core products as a result of using the recycled materials and by-products that open up new markets.
The name and essence of the organisational economic mechanism of circular subsoil use show that it is based on the implementation of organisational, managerial and economic tools. Organisational and managerial tools, which primarily include circular business models, hierarchical schemes and logistical techniques for managing the cycle of production and consumption [Mochalova, Sokolova, 2021], are focused on the formation, regulation and coordination of the participants' activities in circular processes. Economic tools are specific forms of regulation and management methods based on legal norms and they create a material interest in the circular economy development in subsoil use.
The effectiveness of applying these tools is proposed to be assessed by using the following indicators: general economic (macro- and meso-) ones, determined at the level of the mineral resources sector of Russia and its regions, and commercial (mi-croeconomic), calculated for a specific subsoil user. In their turn, the indicators of the first type are divided into technical and environmental indicators and economic ones, and the second type - into technical and technological indicators, organisational and managerial indicators, and financial and economic ones.
Tools' applicability of the organisational economic mechanism of circular subsoil use in Russian conditions: Research results
In practice, the organisational economic mechanism of circular subsoil use is implemented in Russia and its regions by using its tools, which, as noted above, are divided into organisational and managerial and economic ones (Table 2).
We studied each tool of the organisational economic mechanism of circular subsoil use in order to identify their applicability in the conditions of Russia and its resource regions.
Table 2. Tools of the organisational economic mechanism of circular subsoil use
Tools
Organisational and managerial Economic
• intra-corporate circular business models; • hierarchy schemes for managing the cycle of production and consumption; • logistic methods for managing the cycle of production and consumption; • state institutions promoting the circular economy development; • circular industrial clusters; • market infrastructure necessary for receiving and circulating secondary mineral raw materials • pricing in the market of primary and secondary mineral raw materials; • taxation of extracted mineral raw materials from natural and technogenic deposits; • concessional taxation and loans for circular subsoil use; • state funding of circular subsoil use; • penalties and compensations for non-circular subsoil use; • benefits in relation to payment for negative impact on the environment
Organisational and managerial tools were analysed using both domestic [Vaz-henin, Orlov, Khakimov, 2020; Makarova, 2020; Mirkerimova, 2020; Ulanov, Bakhmin, Korobova, 2020; Mochalova, Sokolova, 2021] and foreign [Kemp, Never, 2017; Cai et al., 2020; Fan, Fang, 2020; Tang et al., 2020; Nyangchak, 2022] experience.
Intra-corporate circular business models. These models were proposed by the Ellen MacArthur Foundation1. Due to the high level of waste generation in subsoil use, the "recovery of resources" circular business model should be the most demanded by Russian enterprises. Quantitative recovery of mineral resources provides for the mining waste utilisation, which is carried out through the use of waste rocks for the depleted quarries reclamation, the use of tailings as a secondary raw material for the construction materials production, the process water purification and its reuse in
1 Ellen MacArthur Foundation. (2015). Towards a circular economy: Business rationale for an accelerated transition. https://www.ellenmacarthurfoundation.org/assets/downloads/TCE_Ellen-MacArthur-Foundation-9- Dec-2015.pdf.
the circulating water supply system, and the capture of inorganic substances (sludge) and their application in construction materials manufacturing [Mochalova, Sokolova, 2021].
Hierarchy schemes for managing the cycle of production and consumption. At the initial stage of applying these schemes, enterprises of the mineral resources sector should start with the implementation of the 3R concept - Reduce, Reuse and Recycle (waste prevention - reuse - recycling into secondary resources). As the range of tasks expands, the 3R may change into 6R with one exception: in the management of the cyclical production and consumption associated with subsoil use waste, it will not be possible to apply remanufacture. Thus, management will be limited to 5R. Developing the hierarchies of methods for managing the cyclical production and consumption up to the 9R concept is possible by adding ways to organise smart consumption if the mining activity is associated with metals production (mining and metals production) or if production is implemented in a conglomerate carrying out non-core economic activity for the mining sector [Mochalova, Sokolova, 2021].
Logistic methods for managing the cycle of production and consumption. The organisational and managerial tool that contributes to the most effective implementation and development of circular business models and hierarchy schemes for managing the cycle of production and consumption at the enterprises of the mineral resources sector is the use of logistic methods for waste management as specific material flows. For example, the "circular supply" business model implies a reduction in the volume of resources used (Reduce), which can be achieved through such a waste management logistical technique as optimising the consumption rates of material, fuel and energy resources. The "recovery of resources" business model, in particular, is implemented through waste recycling (Reuse), which involves the transportation of subsoil use waste to its own divisions or to partner enterprises in order to produce sand and gravel mixtures, thermal insulation materials, etc.
State institutions that promote the circular economy development. The formation of a circular economy in the mineral resources sector largely depends on the presence of an institutional environment that ensures the possibility and efficiency of processing waste from subsoil use. The state institutions should be built to conduct fundamental research of a circular economy, encourage enterprises to introduce closed loops, monitor compliance with circular legislation and create conditions for introducing innovations. Thus, their main task is establishing formal rules, for example, developing legal regulation for a circular economy (including the law on a circular economy); conducting state environmental monitoring; implementing regional state environmental supervision over the subsoil use waste management; organising the system of environmental education and systems of personnel training and retraining
to introduce circular subsoil use practices; maintaining state records of enterprises that have the potential to turn subsoil use waste into secondary raw materials; sys-tematising subsoil use waste, etc. The function of state institutions is also to conduct individual consultations related to the organisation of closed loops, and to promote the production and consumption of environmentally friendly products [Makarova, 2020].
Moreover, the tasks of these institutions should include not only the development of new approaches, methods and legal regulation related to the subsoil use waste management, but also the adjustment of already existing 'formal rules' established by law. Taking into account the conditions in Russia, we are speaking, in particular, about excluding the so-called double regulation that arises between environmental (related to environmental issues, including the production and consumption waste management) and natural resources (related to subsoil use) types of legislation, as well as clearly delimitating their activities [Vazhenin, Orlov, Khakimov, 2020; Mirk-erimova, 2020; Ulanov, Bakhmin, Korobova, 2020]. Hard work on improving legal regulation is also necessary to eliminate contradictions in Russian legislation regarding the subsoil use waste management and secondary mineral resources use. The need to eliminate them prioritises the actions of state institutions designed to develop a circular economy in the mineral resources sector. State regulation in this area should be entrusted to the Ministry of Natural Resources and Ecology of the Russian Federation, as well as to subordinate services and agencies. In the Ural Federal District, the ministries of natural resources and ecology of the regions, the Department for Subsoil Use in the Ural Federal District and the Department of the Federal Service for Supervision of Natural Resources Management in the Ural Federal District should be responsible for the implementation of circular legislation in subsoil use.
Circular industrial clusters. These clusters belong to a special kind of intercorporate circular business models, and are the association of industrial enterprises that turn each other's waste into finished products. The mechanism of their functioning is based on the exchange of resources and the use of by-products. As a result, closed-loop systems are formed that create minimal waste and consume less natural resources and energy.
Creating circular industrial clusters in Russia's mineral resources sector and its resource regions is necessary for the cascade use of mined and processed minerals, obtaining the main and by-products from primary and secondary mineral raw materials, as well as ensuring waste-free production in the subsoil use. One circular industrial cluster can unite enterprises that generate and process subsoil use waste of a certain type, as well as include one large mining and processing or mining and
metal-producing enterprise and several medium and small enterprises that utilise waste from its production.
The circular industrial cluster development is possible with the support of the Ministry of Industry and Trade of the Russian Federation and it should be based on the following documents: Federal law no. 488-FL of December 31, 2014 "On industrial policy in the Russian Federation", Decree of the Government of the Russian Federation no. 779 of July 31, 2015 (amended on August 2, 2018) "On industrial clusters and specialised organisations of industrial clusters", Order of the Ministry of Industry and Trade of the Russian Federation no. 304 of February 9 (amended on January 29, 2019) "On approval of the Procedure for maintaining the register of industrial clusters and specialised organisations that meet the requirements for industrial clusters and specialised organisations, including ensuring the timely introduction of changes to the information contained in the register". Another scheme for forming industrial clusters is based on the two legal regulations: Guidelines for implementing cluster policy in the subjects of the Russian Federation (prepared in 2008 by the Ministry of Economic Development of Russia) and the Procedure for forming a list of pilot programmes for the development of innovative territorial clusters (adopted following the meeting of the Presidium of the State Council of the Russian Federation on November 11, 2011). To implement this scheme in Sverdlovsk oblast, the Sverdlovsk Regional Fund for Entrepreneurship Support (SRFES) established the Center for Cluster Development.
Market infrastructure necessary for receiving and circulating secondary mineral raw materials. Creating and maintaining a stable demand for secondary mineral raw materials, ensuring free movement of goods and services in the market derived from it, largely depends on the state. Its main role is to create economic, regulatory and organisational conditions to effectively involve secondary mineral resources in economic circulation, maintain free competition of business entities, regulate economic relations between all market participants, protect their economic rights and interests.
The key measures promoting the development of market for secondary mineral resources include ensuring the quality of secondary materials, using economic incentives for the conversion of subsoil use waste into secondary raw materials, creating the demand for secondary resources and products, e.g. by introducing restrictions and incentives that encourage the use of secondary raw materials instead of primary ones, conducting constant monitoring of the secondary mineral resources market, training personnel for work in the secondary market1.
1 The concept of secondary resources market development. https://www.waste.ru/modules/section/item. php?itemid=117. (In Russ.)
Economic tools of circular subsoil use are considered in both foreign [Chen et al., 2021; Chevallier et al., 2021; Dikau, Volz, 2021; Fatica, Panzica, Rancan, 2021; Luo, Leipold, 2021; Wang, Yu, 2021], and domestic [Larichkin et al., 2010; Mamaev, 2016; Gorodnyanskiy, 2017; Bloshenko, 2019; Larichkin, Knysh, 2019; Sokolova, Kon-dratyev, 2019; Mochalova, Ignatieva, Yurak, 2020; Yumaev, 2020] scholarly literature. According to the works, these economic tools, on the one hand, rely on organisational and managerial tools, on the other hand, they provide monetary incentives for their application.
Pricing in the market of primary and secondary mineral raw materials. It is believed that in the market a product price is set depending on the following key factors: production cost and products sales; supply and demand ratio; industry average profitability; quality; demand elasticity for price and income, etc. However, pricing in the mineral resources sector is substantially complicated by the fact that in the process of multi-stage and multi-operational extracting and processing of mineral multi-component raw materials, a large number of heterogeneous, multi-component and different-quality ready-made basic, accompanying and intermediate products are made, obtained at different stages of processing minerals and subject to further processing in the same enterprise or in other enterprises.
The first difficulty is related to the lack of specifics in the conceptual framework. For example, there is not a clear scientific justification for the difference between the main and by-products, which makes it difficult to objectively differentiate the assessment of all manufactured goods, since the cost of by-products, as a rule, is not determined, and the cost of main products is, accordingly, distorted [Larichkin et al., 2010]. Another difficulty is related to the coordination of prices for commercial concentrates obtained from multicomponent technogenic raw materials. It is fair to say that pricing should ensure "the validity of differentiated assessments of every component used in the initial complex raw materials" [Larichkin, Knysh, 2019, p. 182]. However, the problem is more serious when producers determine and agree on the prices of commercial concentrates, most often having a complex multicomponent composition, with actual or potential consumers. Problems also arise when valuing and agreeing prices for various kinds of semi-finished products and intermediate products: sludge, slag, beneficiation tailings, accumulated waste heaps. Finally, another difficulty in setting an acceptable price for secondary mineral raw materials is the unwillingness of society to pay for products and materials made from subsoil waste [Larichkin et al., 2010].
For the mineral resources sector has an extensive product range with a complex multicomponent composition, the basic prices depending on consumer properties
and technical and economic parameters of products should be differentiated and therefore, the standard-parametric pricing method should be used.
Taxation of mineral raw materials extracted from natural and technogenic deposits. Current mineral extraction tax acts as a regulator of relations between the state and subsoil users, and it is also the main tax paid to the federal budget of the Russian Federation, hence, it significantly affects the country's economic well-being. However, the analysis of the current legislation and scientific works regarding the definition of this tax revealed a number of debatable issues.
First of all, we should mention the expediency of using differentiated rates when establishing the amount of mineral extraction tax (MET) for specific deposits of solid minerals or specific conditions for deposit development. Gorodnyanskiy substantiates the choice of differentiated mining rent of the first form for calculating payments for subsoil use [Gorodnyanskiy, 2017]. Mamaev also supports the differentiated approach, noting that "the flat MET scale, i.e., the absence of a rental approach to taxing oil and gas production, leads to the fact that the development of both highly profitable and substandard reserves is subject to the same amounts of payments" [Mamaev, 2016, p. 162]. This statement is quite applicable to other types of minerals. Such tax system allows subsoil users to extract minerals from richer areas, which provokes premature flooding and blocking significant reserves in the subsoil. Among the imperfections of the tax policy Bloshenko lists the disregard of both the minerals' natural quality and conditions for their development, and also the absence of a differentiated MET rate for individual development stages of the solid minerals deposit [Bloshenko, 2019].
Another issue concerning the taxation of subsoil users' activities is the lack of the conceptual framework. The Tax Code of the Russian Federation does not specify the peculiarities of subsoil use, which negatively affects the determination of tax liabilities of organisations in the mineral resources sector.
Concessional taxation for circular subsoil use. We should specifically stress the need to introduce tax incentives. These can be, for example, a reduction in the taxable base for corporate property tax through the use of property for circular purposes and a reduction in the taxable base for income tax in case of additional costs associated with the maintenance and operation of fixed assets and other property with environmental purposes. In particular, Federal law of July 21, 2014 no. 219 "On amendments to the Federal law "On environmental protection" and certain legislative acts of the Russian Federation" stipulates the provision of tax incentives in the form of an additional coefficient of 2 to charge depreciation on the equipment of the best available technologies (BAT), which include circular business models.
Yumaev and Bloshenko reason the need to improve the tax policy by the following: 1) there is no uniform and systematic approach to the formulation of fiscal policy in the taxation of the mineral resources sector. In Russia, this policy incorporates non-tax payments for subsoil use, a mineral extraction tax, corporate income tax and customs duties; 2) on the contrary, there is often an individual approach expressed in the provision of personal benefits and regimes for individual enterprises and groups of companies, which, in its turn, violates the principles of fair taxation; 3) weak incentives for the involvement of secondary mineral resources in the production due to the lack of tax incentives for the development of technogenic deposits, etc. [Bloshenko, 2019; Yumaev, 2020].
In the Sverdlovsk oblast, the following tax incentives are available for investors, in particular, incentives which facilitate investment in circular projects: 1) tax incentives provided after assigning the status of a participant in a priority investment project, which allows receiving tax concessions for income tax and corporate property tax; 2) changing the terms for paying taxes in the form of an investment tax credit; 3) benefits in relation to companies that are scientific organisations: exemption from corporate property tax; 4) income tax benefits or exemption from property tax under a special investment contract; 5) tax concessions for residents of the special economic zone "Titanium Valley" and territories of advanced socioeconomic development in terms of establishing preferences for income tax, property tax, land and transport taxes; 6) tax concessions for organisations that have the status of a participant of a regional investment project in tourism by providing an opportunity to apply an investment tax deduction for corporate income tax and exemption from corporate property tax.
Concessional lending for circular subsoil use. Concessional lending is considered as one of the tools for stimulating circular subsoil use. It can theoretically be carried out by issuing preferential loans for the purchase of environmentally friendly (circular) means of production to enterprises, as well as through material incentives for commercial banks to issue concessional loans for environmental purposes. The advantage of the latter lies in following the principles of payment and repayment of the funds provided, as well as in stimulating the exclusively targeted use of loans and the minimum terms for environmental protection measures. In this case, the state provides a creditor bank with a tax incentive (reducing the tax rate on profits), which, in its turn, motivates the banks themselves to provide environmental lending. Currently, budgetary funds are not allocated for stimulating environmental activities in Russia [Mochalova, Ignatieva, Yurak, 2020].
Among the available forms of concessional lending in our country, which can be used in the subsoil use waste management and secondary mineral resources use, we
can name providing the investment tax credits and implementing concessional lending programmes for small and medium-sized businesses (SMEs).
The first form of economic incentives is present in the Tax Code of the Russian Federation (Article 67), which states that an investment tax credit can be granted to an organisation that is a taxpayer of the relevant tax when this organisation conducts R&D or technical re-equipment of its own production, including the works aimed at reducing the negative impact on the environment, which implies circular subsoil use. An agreement on an investment tax credit should stipulate the procedure for reducing payments for the relevant tax and an amount of loan and specify the tax for which the organisation was granted an investment tax credit.
The second form of concessional lending is present in the 2015 Programme for stimulating lending to small and medium-sized businesses (with later amendments), which was developed by JSC Federal corporation for the development of small and medium-sized businesses (SME Corporation) together with the Ministry of Economic Development of Russia and the Bank of Russia. This programme states the provision of loans to SMEs on preferential terms, etc., in particular for waste management [Mochalova, Eremeeva, 2021].
State funding of circular subsoil use. Creating a circular economy in subsoil use is practically impossible without state support for enterprises, which can take the form of subsidies, subventions and grants for environmental protection measures, the introduction of circular business models and the implementation of closed loop supply chains. Subsoil users oriented towards processing waste and using secondary mineral resources can receive a subsidy1, which is aimed at investing in the country's priority areas, such as the introduction of BAT and reduction of the anthropogenic impact on the environment. In addition, the Decree of the Government of the Russian Federation of December 31, 2020 no. 2398 "On approval of the criteria for classifying objects that have a negative impact on the environment as objects of categories I, II, III and IV" approved the criteria based on which it is possible to receive subsidies for companies undertaking investment projects on the introduction of BAT at sites that have a considerable negative impact on the environment. The procedure for issuing this subsidy is stated by the Decree of the Government of the Russian Federation of April 30, 2019 no. 541 "On approval of the rules for subsidies provision from the federal budget to Russian organisations to reimburse the costs of
1 These subsidies are mandated in accordance with the Decree of the Government of the Russian Federation of February 15, 2018 no. 158 "On the programme "Project financing factory" (together with the Rules for the subsidies provision from the federal budget in the form of a property contribution of the Russian Federation to the state development corporation "VEB.RF" for reimbursement of expenses in connection with the provision of loans and borrowings as part of the 'factory' mechanism of the project financing)"
paying coupon yield on bonds issued as part of implementing the investment projects to introduce the best available technologies".
Moreover, one can consider such a form of state support as the conclusion of a special investment contract between an investor and a public legal entity on the basis of Federal law no. 488 of December 31, 2014 no. 488 "On industrial policy in the Russian Federation". The basis for this is any project related to the creation/ modernisation of an industrial enterprise, including the BAT introduction while implementing an environmental protection action plan or an environmental efficiency improvement programme. Another form of state support, according to which the Ministry of Finance of the Russian Federation should provide budgetary funds for the planned period for the fulfillment of obligations under guarantees, is the state guarantees for loans and bonded loans. This form is stated in decree of the Government of the Russian Federation dated May 05, /2017 no. 549 "On state guarantees of the Russian Federation for loans or bonded loans attracted by legal entities for the purpose of... " [Sokolova, Kondratyev, 2019; Mochalova, Eremeeva, 2021].
Penalties and compensations for non-circular subsoil use. This tool should be used in cases where enterprises of the mineral resource sector, in the presence of technical and economic possibilities for applying the circular economy principles in their production, disregard the opportunity to introduce circular business models and business processes and, therefore, cannot comply with environmental regulations and requirements.
Benefits in relation to payment for negative environmental impact. Federal law no. 89 of June 24, 1998 "On production and consumption waste" (Article 24) provides for:
• a cut down in the payment for negative environmental impact for individual entrepreneurs and legal entities if they introduce technologies that reduce the amount of waste;
• the use of accelerated depreciation of fixed production assets associated with the activities in waste management.
In accordance with the Federal law no. 219 of July 21, 2014 "On amendments to the Federal law "On environmental protection" and certain legislative acts of the Russian Federation", this payment can be adjusted by the deduction of costs of implementing measures on reduction of the negative impact on the environment within the calculated amount as well as by the exemption from charging this payment after the BAT introduction.
Conclusion
Within the terminological framework ("circularity", "subsoil use", "organisational economic mechanism of natural resources management") existing in environmental and economic sciences, we were able to form a number of new terms that explain modern trends in the conceptual development of a circular economy in subsoil use: "circular natural resources management", "circular subsoil use", "organisational economic mechanism of circular natural resources management".
In line with our findings, we define the organisational economic mechanism of circular subsoil use as a set of organisational, managerial and economic tools that stimulate performing resource-saving, integrated and minimal waste activities related to geological study, prospecting, and exploration and mineral extraction, as well as the use of subsoil for purposes not related to the extraction of minerals. Our findings confirmed the initial hypothesis about the possibility of using natural resources rationally and minimising waste in the mineral resource sector in case effective tools of the organisational economic mechanism are used.
From the practical standpoint, the methodological approach to forming the organisational economic mechanism of circular subsoil use developed and substantiated in the article allows the state authorities and administration to create and implement an efficient policy to stimulate subsoil users to organise closed-loop production and ensure favourable environmental conditions. The proposed organisational, managerial and economic tools of circular subsoil use, on the one hand, are consistent with traditional approaches to natural resources management in Russia and its regions, and on the other hand, they take into account such modern management technologies as business modeling, clustering, return logistics, which allow productively dealing with problems of closed-loops in subsoil use.
Assessing these tools from the viewpoint of applicability in Russian conditions showed their general compliance with the existing institutional environment. At the same time, we identified some problems connected with legal regulation of this sphere, and therefore, a separate study is required to develop ways to eliminate them.
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Information about the authors
Olga S. Eremeeva, Postgraduate of Economics and Management Dept. Ural State Mining University, Ekaterinburg, Russia. E-mail: 206081@m.ursmu.ru Lyudmila A. Mochalova, Dr. Sc. (Econ.), Associate Prof., Head of Economics and Management Dept. Ural State Mining University, Ekaterinburg, Russia. E-mail: lyud-mila.mochalova@m.ursmu.ru
© Eremeeva O. S., Mochalova L. A., 2023
