Intensified global competition for resources (GMT 7)

Drivers

Global demand for resources has increased substantially since the start of the 20th century, driven by a number of closely related trends. Across the world, countries have undergone structural economic change, shifting from agrarian societies, primarily reliant on biomass to meet energy and material needs, to urban, industrialised economies (GMT 2). The technological advances that accompanied economic development have provided many more uses for resources, and greatly improved methods for locating and extracting them. Coupled with a quadrupling of the world’s population in the 20th century (GMT 1), innovation has underpinned a 25-fold increase in economic output (GMT 5), bringing radical changes in consumption patterns.

Looking ahead, the global population may increase by more than a third by 2050, reaching 9.6 billion.^[1] World economic output is projected to triple in the period 2010–2050.^[2] And the middle class may increase from 27 % of the world population of 6.8 billion in 2009 to 58 % of more than 8.4 billion in 2030.^[3]

At the same time, however, some of the drivers of past increases in resource use could alleviate demand in the future. For example, continued structural economic change – away from industrialised systems and towards services and the knowledge economy – could offer ways to decouple further economic growth from resource use. Similarly, a continued shift from diffuse rural living to compact urban settlements could translate into less resource-intensive lifestyles (GMT 2).

Trends

Intensifying global demand

Global materials use is estimated to have increased almost ten-fold since 1900, accelerating from annual growth of 1.3 % in 1900–1949, to 2.6 % in 1950–1999, and 3.6 % annually in 2000–2009 (Figure 1).^[4] Developing regions account for an increasing proportion of global resource use. Whereas Europe was responsible for 19 % of total resource extraction in 1980 and the US accounted for 18 %, by 2009 both had fallen to 10 %. Asia’s share increased from 41 % to 57 % over the same period.

Resource use tends to rise as countries develop economically. However, there is evidence that growth slows or ceases at high income levels, as a consequence of reduced investment in infrastructure, structural economic change, efficiency improvements and the relocation of some manufacturing to countries with lower labour costs.^[5]

Figure 1: Global total material use by resource type, 1900–2009^[4]
 

Data source: Krausmann et al., 2009 (data updated in 2011)

International Monetary Fund analysis, for example, indicates that consumption of base metals and steel rises in step with per person gross domestic product (GDP) but reaches a saturation point at USD 15 000–20 000 (2000 PPP), except in countries, such as South Korea, where industrial production and construction continue to play a major role in economic growth.^[6]

Consumption of energy resources follows a similar pattern. Cross-country analysis shows a strong correlation of energy use to economic output (Figure 2). Yet in many developed countries energy use has been stable for some decades, albeit at very different levels. In 2012, the citizens of EU-28 countries consumed roughly the same amount of energy as they did in the late-1970s. In the US, energy use per person has changed little in almost half a century, while GDP per person has more than doubled.

Figure 2: Correlation of energy consumption and GDP per person, 2011^[7]
 

Data source: World Bank World development indicators - [a], [b] and [c]
Note: The graph shows the correlation of national per capita energy consumption and per capita GDP. The size of the bubbles denotes total population per country. All values refer to the year 2011.

While these trends indicate a huge improvement in energy efficiency, it is clear that advanced economies remain very resource intensive. If developing regions adopt similar systems of production and consumption it will have huge implications for global resource demand. For example, if the current global population increased average energy use to EU levels it would imply a 75 % increase in world energy consumption, while an increase to US levels would imply a 270 % rise.

Projections of future resource use indicate that developing regions will drive up global resource demand in coming decades. The Sustainable Europe Research Institute (SERI) expects world resource use to double between 2010 and 2030.^[5] The International Energy Agency projects that global energy consumption will increase by 31 % in the period 2012–2035, based on energy policies in place in early-2014.^[8]

Uncertain access to critical resources

While global demand for resources is set to grow significantly in coming decades, the outlook for supplies is more uncertain. Geographic concentration of reserves in a limited number of countries is a concern since it affords suppliers considerable influence over global prices and supplies, as illustrated by the influence of the Organization of Petroleum Exporting Countries over global oil markets. Uncertainty regarding access to commodities increases if reserves are concentrated in politically unstable regions.

Certain non-renewable resources deserve particular attention because of their economic relevance, including their role in green-energy technologies. In 2014, the European Commission identified twenty critical raw materials, based on the risks of supply shortage and their economic importance to Europe.^[9] Global production of these materials is quite concentrated (Figure 3).

Figure 3: Proportion of global production of EU critical raw materials within a single country, 2010–2012^[9]
 

Data source: European Commision 2014
Note: The figure shows the 20 raw materials identified by the European Commission as being critical because of risks of supply shortages and their impact on the economy.

Identifying alternative resource streams

Uncertainty about resource supplies can create strong incentives for countries to identify other ways to meet their resource needs, either by locating new sources of traditional resources or identifying substitutes. For example, rising fossil fuel prices, coupled with state efforts to promote alternatives, have incentivised huge investment in renewable energy in recent years. Global investment rose from USD 40 billion in 2004 to USD 214 billion in 2013. Renewable power capacity, excluding hydropower, increased more than six-fold in this period.^[10]

As well as facilitating a move towards other energy sources, technological advances have also boosted access to fossil fuels. Estimates of reserves evolve rapidly as new deposits are discovered and innovation allows previously unusable or unreachable reservoirs to be exploited, for example via deep water drilling and the extraction of shale gas and oil. Indeed, proven global reserves of oil and gas have increased substantially since 1980 – faster than consumption of either resource. As a result, the number of years that proven oil reserves would last at current rates of consumption has increased from 30 to more than 50 years.^[11]

Implications

Insecure access to essential resources and price volatility are threats to economic development and living standards. Global commodity prices have spiked repeatedly in recent years, reversing long-term downward trends.^[12] Such uncertainty represents a clear risk to the European economy, which is dependent on imported resources, particularly metals and fossil fuels.^[13]

In addition to economic risks, attempts to secure access to resources can foster insecurity and conflict.^[14] Tensions can arise in connection with competing claims over resource stocks or, less directly, as a result of attempts to restrict trade flows. As the World Trade Organization notes, 'in a world where scarce natural resource endowments must be nurtured and managed with care, uncooperative trade outcomes will fuel international tension and have a deleterious effect on global welfare.^'[15]

Escalating resource use also imposes an increasing burden on the environment, through impacts related to resource extraction, use and disposal. Such impacts will increase if higher prices and growing concerns over scarcity induce countries to exploit sources such as tar sands that were previously deemed uneconomic.

Clearly, growing scarcity and rising prices also create strong incentives for private and public investment in research and innovation aimed at exploiting abundant or non-depletable resources, such as wind and solar energy. Governments can augment these incentives through ecological fiscal reform — increasing the tax burden on resource use and pollution.

Innovation can also alleviate resource demands by increasing efficiency or reducing waste, although such improvements can also make products cheaper, incentivising increased consumption. For these reasons, reducing resource demand often requires a mixture of technological improvements and policy measures addressing consumption.

Moreover, technological innovations can also augment pressures on the environment by increasing access to non-renewable or polluting resources. For example, new sources of fossil fuels could weaken the momentum behind global efforts to boost efficiency and mitigate climate change. In globalised markets, governments may have difficulty correcting market prices and pursuing ambitious greenhouse gas mitigation due to opposition from businesses and consumers. The result would be to delay the shift to cleaner alternatives and greatly increase harmful emissions.