Intensified Global Competition for Resources – Global Mega Trends Part 7

The use of natural resources around the world has increased ten-fold since 1900 and is set to double again by 2030. This is a huge increase with a number of key drivers pushing consumption ever higher.

Consumption first started to significantly increase at the onset of industrialisation which saw new technologies and population structures leading to a shift away from rural, biomass reliance to urban economies (GMT 2). Technological advances have provided many more uses for resources (the world of gadgets today), and greatly improved the methods for locating and extracting them.

Increased food production, healthcare and many other factors have led to the population quadrupling in the 20th century (GMT 1). Innovation has also resulted in a 25-fold increase in economic output (GMT 5). This has resulted in increased demand on top of the increased consumption per capita, which will only increase further with global population projected to reach 9.6 billion by 2050 and economic output to triple in the same period.

Some of these could alleviate in the future, for example the transition away from industrialised to service and knowledge economies and a shift from rural to compact urban settlements.

Interestingly, whilst the implication from the above is that continued economic growth will lead to increasing resource consumption, the trend is not as simple. The IMF has shown for example that there is a saturation point at average incomes of USD 15,000-20,000 where consumption of metals per capita does not increase further. Similarly, energy use in many developed nations has been stable for decades, albeit at very different levels. Whilst this indicates a huge improvement in energy efficiency, if developing regions adopted similar systems of production and consumption it will still have huge implications for global resource demand.

If the current global population increased average energy use to US levels it would result in a 270% increase in world energy consumption!

It is not just about demographics, geography is also important. Many of the resources required are concentrated in a limited number of countries. This is a cause for concern as it allows these countries to influence global prices, the best example probably being the OPEC nations and their regular interventions in the oil markets.

The European Commission has identified 20 critical raw materials based on the risks of supply shortage and their economic importance to Europe. The image below shows these materials, many of which have huge economic relevance including a role in renewable energy technologies.

EU Critical Resources.png

Many of these resources are located in China, which has also been acquiring rights to reserves in Africa and elsewhere around the world. Not only does this have direct implications as a result of the relative monopoly they have on supply, but it may also hinder the world’s move towards a circular economy. After all, China may well feel threatened by efforts to recycle these rare materials elsewhere as it will undermine their monopoly over time. China or other countries could react by imposing much higher prices or restrictions on exports. After all China is itself heavily investing in renewables to tackle its domestic air quality issues.

As a result of these uncertainties, countries are now incentivised to identify other ways to meet their resource needs. This may result in locating new sources of traditional resources or identifying substitutes. A classic example is the rising fossil fuel prices, coupled with state efforts to promote alternatives, have incentivised huge investment in renewable energy in recent years. Renewable power capacity has increased six-fold as a result.

So what the implications of these global trends? Well, it should be obvious that this insecure access to vital resources produces a threat to economic development and living standards. Attempts to alleviate these pressures, by securing access to alternatives could lead to regional insecurity and conflict. The South China Sea and surrounding areas are a clear example of a future flare up area.

The environment will of course be negatively impacted by all of these trends. Not only will existing resources be used more intensively with all of the associated impacts, but new reserves will become cost-effective to exploit, for example the far more carbon-intensive tar oil sands in Canada.

Innovation can alleviate resource demand to some extent by increasing efficiency or reducing waste. This can be incentivised by governments using tax reform to change behaviours e.g. by increasing taxes on resource use and pollution. However, such improvements can also make products cheaper, incentivising more consumption overall. Governments are also loathe to introduce taxes due to the short-term electoral cycles and therefore policy thinking in most countries.

In summary, it appears that the current system is locking us into an increasingly resource intensive global economic system. In order to prevent this, and resulting conflicts around unequal access, we will all need to review how we consume things and what economic system we think we can sustain.


One thought on “Intensified Global Competition for Resources – Global Mega Trends Part 7

  1. Pingback: Diversification of Governance in the 21st Century – Global Mega Trends Part 11 | The Pale Green Dot

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