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Property Rights, Transaction Costs, and Indigenous Participation in Major Projects: A Double Dose of Coase
- Indigenous participation in major natural resource and energy projects in Canada is increasing because of the strengthening of their property rights with Canada’s adoption of the United Nations Declaration of the Rights of Indigenous Peoples (UNDRIP) and its requirement of Free, Prior and Informed Consent (FPIC).
- Increased Indigenous participation in major projects expedites their development, increases their returns, and helps ensure their environmental sustainability.
- The development of these major projects is critical for generating economic activity and wealth in communities across Canada, and for raising living standards.
- Indigenous participation in major projects has evolved over time as Indigenous property rights have been strengthened. This increased participation has taken the form of more comprehensive impact-benefit agreements, and more recently, Indigenous equity ownership.
- This evolution will continue as a result of UNDRIP and FPIC, and is consistent with the path-breaking work of Nobel economist Ronald Coase on property rights, transactions costs, and the organization of production.
- Indigenous communities face significant challenges to their increased participation in major projects: obtaining a reasonable return, having access to sufficient finance to acquire equity ownership, and attaining the capacity necessary to participate effectively in the development of these projects.
- The federal and provincial governments have established loan-guarantee programs to increase Indigenous access to finance.
- Governments should also consider other measures to share fiscal revenues from these projects with Indigenous communities and to rely more on Indigenous-led environmental impact assessments. Such measures would support economic reconciliation and promote Indigenous economic development and self-determination.
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