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The Pandora’s Box of “Social Licence”

Montreal, March 1st, 2017 – The notion of social licence has become an essential feature of all debates surrounding economic development projects. Yet this new concept with no clear definition, mentioned nowhere in the law, can lead to significant pitfalls, according to an Economic Note published today by the MEI.

“It’s obvious that projects, especially large-scale ones, must take into account their impacts on the environment and on local communities,” explains Youri Chassin, Research Director and author of the publication. “However, the process must not degenerate into a kind of mob rule, with no democratic mandate, and with never-ending consultations favouring the most radical groups that are the least likely to compromise.”

Indeed, certain controversial projects, like pipelines and uranium mines, illustrate the potential pitfalls of social licence and remind us that the demands of certain players frequently go beyond a rational framing of this concept. Both supporters of a project and its opponents must accept that not all decisions will always be in their favour.

There are already closely supervised and heavily regulated procedures for the approval of major projects to evaluate whether or not they are in the public interest. Adding other fuzzy constraints on top of this can lead to arbitrary decisions being substituted for laws and regulations. One need only think of the multiple reversals of the current Quebec government on hydrocarbon development.

“If a project receives all of the required approvals, obtains all of the necessary permits, fulfills all of the stipulated conditions, and is still refused on the pretext of a lack of social licence, this becomes a real nightmare for investors,” argues Mr. Chassin. “Uncertainty and arbitrariness chase away investment and prosperity.”

Social licence even runs the risk of opening the door to legalized extortion. If each province or each municipality along a pipeline asks for its “fair share,” projects will soon become impossible to carry to completion.

“Governments would be better off ensuring the proper functioning and the credibility of existing institutions rather than adding another subjective and arbitrary layer, thus opening the door to all kinds of pitfalls,” concludes Michel Kelly-Gagnon, President and CEO of the MEI. “In a democratic society, disputes must be resolved according to the rules of the game, which means our laws, regulations, and institutions. Respect for the rule of law is essential.”

The Economic Note entitled “The Three Pitfalls of Social Licence” was prepared by Youri Chassin, Economist and Research Director at the MEI, with the collaboration of Germain Belzile, Senior Associate Researcher at the MEI. This publication is available on our website.

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The Montreal Economic Institute is an independent, non-partisan, not-for-profit research and educational organization. Through its studies and its conferences, the MEI stimulates debate on public policies in Quebec and across Canada by proposing wealth-creating reforms based on market mechanisms.

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Interview requests: Pascale Déry, Senior Advisor, Communications, Current Affairs, MEI / Tel.: 514-273-0969 ext. 2233 / Cell.: 514-502-6757 / Email: pdery@iedm.org

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