NATURAL RESOURCES AND ECONOMIC GROWTH

OECD GLOBAL FORUM ON ENVIRONMENT

OCTOBER, 24th-25th 2016 Janez Potočnik

Co-Chair UNEP International Resource Panel (IRP)

• Growth of population by a factor 3.7

• Annual extraction of construction materials grew by a factor of 34, ores and minerals by a factor of 27, fossil fuels by a factor of 12, biomass by a factor of 3.6

• Total material extraction grew by a factor of 8

• GHG emissions grew by a factor of 13

• Globalisation

20th CENTURY THE GREAT ACCELERATION

“PLANETARY BOUNDARIES”

Source: Steffen et al. 2015

• Population growth (2050 – 9.7 billion)

• Per capita consumption growth (McKinsey estimates 3 billion consumers moving from low to middle class consumption till 2030)

• Example: China used more cement in the three years 2011-2013 than the USA used in the whole 20th Century

21th CENTURY FACTS WE CAN NOT IGNORE

• Poverty and social inequality (Oxfam Report: 62 people own the same as half of the world and the richest 1% is more wealthy than the rest of the world)

• 60% of ecosystems already degraded or used unsustainably

• Increasing evidence of the climate change threat

21th CENTURY FACTS WE CAN NOT IGNORE

DEVELOPMENT TRAJECTORY …

Source: Global Footprint Network, 2012; UNDP, 2014a

IN THE RECENT SIX MONTH …

THE NEW UNEP IRP MATERIAL FLOW AND RESOURCE PRODUCTIVITY DATA SET

• A coherent account of material use in the global economy and for every nation, complementary to the System of National Accounts

• A large data set covering 40 years (1970–2010) and most countries of the world.

• Presents direct and consumption-based material flow indicators, covering total usage, per capita use and material use per US$.

• Information will help identify opportunities, risks and vulnerabilities related to the global supply of primary materials and show the potential for efficiency gains and reductions in material use in the global economy

SUMMARY OF THE MAIN POINTS (1970-2010)

• Global material use has accelerated

• Material extraction grew unevenly in the global economy

• Trade in materials has grown dramatically and mobilizes primary materials extraction

• Consumption has been stronger driver of material use that population growth

• The richest countries consume on average 10 times more materials as the poorest

• Since 2000 we face an overall decline in material efficiency

• The level of well-being achieved in wealthy industrial countries cannot be generalised globally based on the same system of production and consumption!

AND …

SOLUTIONS

• Developed economies will need to adopt strategies that bring their resource consumption down to globally

sustainable levels (ABSULUTE DECOUPLING)

• Developing nations must strive to improve resource efficiencies and cleaner production processes as their net consumption of natural resources increases for a period until they achieve a societally acceptable quality of life

(RELATIVE DECOUPLING)

IN THE RECENT SIX MONTH …

“With concerted action, there is significant potential for increasing resource efficiency, which will have

numerous benefits for the economy and the environment”

“Improving resource efficiency is

indispensable for meeting climate

change targets cost effectively”

Total anthropogenic GHG emissions (Gt CO2eq per year) by economic sector

LAND MATERIALS GHG WATER

CARBON MANAGEMENT

DECOUPLING

CLIMATE

RESOURCES

“Resource efficiency can contribute to economic growth and job creation”

Modelling results differ in size, but all of them show that increasing resource efficiency can lead to higher economic growth and employment, often even when environmental benefits are not accounted.

“There are substantial areas of opportunity for greater resource efficiency ”

The top 15 categories of resource efficiency potential

“Increased resource efficiency is practically attainable”

Energy consumption and saving potential by equipment type in US mining industry

EU APPROACH

1. Hunting and fishing 2. Can take both post-harvest and post-consumer waste as an

input Source: Ellen MacArthur Foundation; McKinsey Center for Business and Environment; Stiftungsfonds Für Umweltökonomie und Nachhaltigkeit (SUN); Drawing from Braungart & McDonough Cradle to Cradle (C2C)

1 PRINCIPLE

Preserve and enhance natural capital by controlling finite stocks and balancing renewable resource flows

2 PRINCIPLE

Optimise resource yields by circulating products, components and materials in use at the highest utility at all times in both technical and biological cycles

3 PRINCIPLE

Foster system effectiveness by revealing and designing out negative externalities

STRUCTURAL WASTE IN THE MOBILITY SYSTEM

The mobility system of tomorrow

Low CO2 level

Parking spots returned to land

Zero accidents

Fewer lanes needed

X X

Personalized multimodal route. Car preferred for last mile

Universal access and higher affordability

Based on individual preferences (e.g. fast vs. cheap, sharing, etc.)

Renewable energy

Shared cars is the norm: autonomous cars on demand

Wireless contents provided to the user

A FUTURE END-STATE COULD LOOK VERY DIFFERENT FROM TODAY’S MOBILITY SITUATION

The car of tomorrow

3D printed

Electric and silent propulsion

Connected

Driverless

Long battery duration

Designed for disassembly

Durable, upgradable and easily repairable

Remanu-factured locally

Illustrative vision

SOURCE: SUN, ELLEN MACARTHUR FOUNDATION AND MCKINSEY & COMPANY: TEAM ANALYSIS

CONCRETE ACTIONS • ECO-DESIGN to include reparability, durability, recyclability

• Legislation on FERTILISERS, including organic and waste-based fertilisers

• Minimum requirements for the REUSE OF WASTEWATER

• Actions on GREEN PUBLIC PROCUREMENT

• FUNDING of €650 million for ‘industry 2020 in the circular economy’

• Quality standards for SECONDARY RAW MATERIALS

• STRATEGY ON PLASTICS, including marine litter

• Interface CHEMICALS, PRODUCTS AND WASTE LEGISLATION

GROWTH WITHIN: A CIRCULAR ECONOMY VISION FOR A COMPETITIVE EUROPE

Shift to advanced materials (less resource intensive) Shift to different technologies (electric vehicles, LED) Shift to different product/service (e.g., car to public transport) Shift to renewable energy (wind, solar, etc.) and materials

THE RESOLVE FRAMEWORK

SOURCE: S. HECK AND M. ROGERS, “RESOURCE REVOLUTION: HOW TO CAPTURE THE BIGGEST BUSINESS OPPORTUNITY IN A CENTURY”,2014 ; COMPANY INTERVIEWS; WEB SEARCH; SUN, ELLEN MACARTHUR FOUNDATION AND MCKINSEY & COMPANY TEAM ANALYSES

Examples

SHARE

▪ SHARE ASSETS ▪ REUSE/SECONDHAND ▪ PROLONG LIFE

OPTIMISE

▪ INCREASE PERFORMANCE/EFFICIENCY OF PRODUCT, VALUE CHAIN, CONSUMER

▪ LEVERAGE BIG DATA, INTERNET OF THINGS, ETC TO MAKE PRODUCT OR VALUE CHAIN MORE INTELLIGENT

LOOP

▪ REMANUFACTURE ▪ RECYCLE MATERIALS ▪ REPURPOSE RENEWABLE MATERIALS TO OTHER USES ▪ EXTRACT BIOCHEMICALS FROM ORGANIC WASTE

VIRTUALISE

▪ DIRECT DEMATERIALISATION, E.G., BOOKS, CDS, DVDS, TRAVEL, OFFICE SPACE

▪ INDIRECT DEMATERIALISATION, E.G., ONLINE SHOPPING, AUTONOMOUS VEHICLES

EXPLORE

▪ RECLAIM, RETAIN, AND RESTORE HEALTH OF ECOSYSTEMS

▪ RETURN RECOVERED RESOURCES REGENERATE

▪ ADVANCED MATERIALS ▪ DIFFERENT TECHNOLOGIES ▪ DIFFERENT PRODUCT/SERVICE ▪ RENEWABLE ENERGY

1 Note that this is not a forecast of how costs will develop. It is an assessment of how costs could develop if Europe aggressively went after this agenda, and if all improvements were captured as cost savings.

COST REDUCTION POTENTIAL INHERENT IN BROAD CIRCULAR ECONOMY LEVERS1 Total savings, % X Total annual cash-out costs per household; EU average 2012, Euro,

Improvement potential for the year 2050

SOURCE: SUN, ELLEN MACARTHUR FOUNDATION AND MCKINSEY & COMPANY TEAM ANALYSES REPORT

60-80%

~5,500

25-35%

~9,600

<2%

<2%

15%

15%

10%

2%

25-40%

~6,600

6%

<2%

<2%

<2%

35%

2%

Mobility Food Built environment

Share

Optimise

Loop

Virtualise

Exchange

REgenerate

Today’s cost

Remaining cost2

6%

40%

<5%

5%

25%

25%

2050

2030

2050

2030

Current development scenario Circular economy scenario

EU-27, indexed (2012 = 100)

Household disposable income

GDP

SOURCE: Economic modelling expertise provided by Professor Christoph Böhringer, University of Oldenburg, and Professor Thomas F. Rutherford, University of Wisconsin; Company and expert interviews; Web search; Eurostat household expenditure data; ACEA, The Automobile Industry Pocket Guide, 2015; Todd Alexander Litman, Transportation Cost and Benefit Analysis: Techniques, Estimates and Implications, Victoria Transport Policy Institute, 2009; Udo Jürgen Becker et al., The True Costs of Automobility: External Costs of Cars: Overview on existing estimates in EU-27, TU Dresden, 2012; ICCT, European Vehicle Market Statistics Pocketbook, 2013; ICE database of CO2 embedded in material; Frances Moore and Delavane Diaz, Temperature Impacts on Economic Growth Warrant Stringent Mitigation Policy, Nature Climate Change, 2015; MGI, Overcoming obesity: An initial economic analysis, 2014; FAO, Global food losses and food waste – Extent, Causes and Prevention, 2011; EEA, Towards efficient use of water resources in Europe, 2012; EU Commission, Official journal of the EU, Commission Agriculture and Rural Development, 2012 budget, 2012; FAOSTAT; Kimo van Dijk, Present and future phosphorus use in Europe: food system scenario analyses, Wageningen University, 2014; Josef Schmidhuber, The EU Diet – Evolution, Evaluation and Impacts of the CAP, FAO, 2008; Gregor Zupančič and Viktor Grilc, Anaerobic Treatment and Biogas Production from Organic Waste, 2012; Joint Research Centre (JRC) of the European Commission et al., Precision agriculture: an opportunity for EU farmers – potential support with the CAP 2014-2020, 2014; Laure Itard et al., Building Renovation and Modernisation in Europe: State of the art review, TU Delft, 2008; BPIE, Europe’s buildings under the microscope: A country-by-country review of the energy performance of buildings, 2011; Per-Erik Josephson and Lasse Saukkoriipi, Waste in construction projects: call for a new approach, Chalmers University of Technology, 2007; Mark Hogan, The Real Costs of Building Housing, SPUR, 2014; Cushman & Wakefield Research Publication, Office space across the world, 2013; Ellen MacArthur Foundation, Delivering the circular economy toolkit for policymakers, 2015.

COMPARISON OF POTENTIAL DEVELOPMENT PATHS: IMPACT ON THE ECONOMY

2050

2030

2050

2030

Current development scenario Circular economy scenario

EU-27, indexed (2012 = 100)

CO2 emissions

Primary material consumption

COMPARISON OF POTENTIAL DEVELOPMENT PATHS: IMPACT ON THE ENVIRONMENT

ACHIEVING ‘GROWTH WITHIN’ 10 CE investment opportunities to accelerate Europe’s circular economy transition

INTERNATIONAL DEVELOPMENTS

SDGs offer unique opportunity to move to an integrated, universally relevant and potentially

transformative Global Development Agenda.

SDGs DIRECTLY DEPENDENT ON NATURAL RESOURCES

Sustainable Consumption and Production is the most efficient strategy to avoid trade-offs and create

synergies to resolve the development and environmental challenges articulated in the SDGs.

SDGs DIRECTLY DEPENDENT ON NATURAL RESOURCES

Source: Literature review; AlphaBeta analysis

SUSTAINABLE BUSINESS COMMISSION: QUANTIFYING THE SDG PRIZE

Environmental

Social

Economic

Governance

Shift to circular models could generate an opportunity of over $3 trillion by 2030

Reducing food waste could be worth over $580 billion by 2030

Gender equality could be worth up to $28 trillion by 2025

Matching Poland’s improvement in education could boost OECD GDP by 1.5% by 2030

Technological upgrading and innovation could deliver an economic prize of $25 trillion by driving productivity growth

Annual incremental infrastructure opportunity of $1.7 trillion

Potential economic prize of up to $6 trillion from addressing corruption, illicit financial flows, and reducing all forms of violence

DRAFT

GROWTH AND JOBS PARADIGM

GROWTH … IN TRANSITION

• LEADING EU POLITICAL GOAL: FROM GROWTH AND JOBS TO JOBS AND GROWTH

• GROWTH RATES IN EU BY DECADES - OECD DATA:

Sixties 5.4%

Seventies 3.8%

Eighties 3.1%

Nineties 2.3%

First decade of this century 1.4%

GROWTH … IN TRANSITION

• Growth is generally considered as a positive phenomena

• Growth expressed as GDP – Beyond GDP agenda

• “Good” growth -“Bad” growth (externalities) – how much of the “growth” in the past actually qualifies for growth?

-15

-10

-5

0

5

10

15

AGRICULTURE MINING STEEL

WITHOUTWITH

EVALUATION OF EXTERNALITIES PROFIT MARGINS WITHOUT NATURAL CAPITAL COSTS INCLUDED

AND WITH NATURAL CAPITAL COSTS INCLUDED

SOURCE: TRUECOST STUDY - 2013

GROWTH … IN TRANSITION

• Growth as a future political priority (developed and developing countries)

• 10% growth – doubling in 7 years

• Viable economy - building resilience or improving efficiency?

IS WEALTH (GDP) MAKING US HAPPIER …

• Win-Gallup Survey

(December 2014, 64000 people, 64 states)

• 70% of people satisfied with their lives

• The happiest people live in Africa (83% very happy or happy)

• The least happy people live in western Europe (11% very unhappy)

• In improvement of quality of life believes 75% Africans and 26% western Europeans

TO CONCLUDE …

SUSTAINABLE, LOW-CARBON, CIRCULAR, GREEN, RESOURCE EFFICIENT, ENERGY EFFICIENT, DECOUPLING, 3Rs, ECOLOGICAL CIVILISATION, BIOECONOMY, ECO-ECONOMY, BLUE …

• What we actually talk about

NECESSARY AND UNAVOIDABLE

NEW ECONOMIC MODEL BASED ON SCP INTEGRATING ALL THREE PILLARS OF

SUSTAINABILITY IS

WE HAVE TO FIX A BROKEN COMPASS

(PAVAN SUKHDEV)

SCIENCE

• If prices do not reflect the true value and costs of resources,

• If rewards to capital are disproportionate to other inputs,

• If managers on annual contracts are induced to make short term investment decisions overly influenced by bonuses based on short term share price,

• If …

MARKETS CANNOT ENSURE EFFICIENCY IN THE ALLOCATION AND USE OF RESOURCES …

• INNOVATION (Incentives) • PRODUCTS (Design) • CONSUMERS (Behaviour) • BUSINESS MODELS (Sharing -

Products to services)

MARKETS AND REGULATION

ALL POLICIES SHOULD BE SYSTEMATICALLY ADJUSTED

Beyond GDP, natural capital accounting, corporate sustainability reporting, tax policy, state aid, public procurement, product design, use of banking potential, R and D and innovation, investments in infrastructure, education, consumers awareness, new business models, support to SMS, …

ACTIVE DIALOGUE WITH ALL STAKEHOLDERS IS NECESSARY

Transition is only possible if we actively involve those loosing in the process of transition

POLICY APPROCH

WE CAN NOT SOLVE OUR PROBLEMS WITH THE SAME THINKING WE USED WHEN WE HAVE CREATED THEM

INSANITY – DOING THE SAME THINGS OVER AND OVER AGAIN AND EXPECTING DIFFERENT RESULTS

ABOUT OUR TIME ...

EVERYTHING HAS TO CHANGE TO REMAIN THE SAME

GIUSEPPE TOMASI DI LAMPEDUSA

ALBERT EINSTEIN

SCP

ENV

ECO SOC

THANK YOU www.unep.org/resourcepanel