Monday, April 30, 2012


No, I'm not talking about breaking up with your significant other.

I'm talking about the 2011 Report from the International Resource Panel's Work Group on Decoupling.

This report details the linkage between the extraction of finite resources - fuel oils, ore and minerals, and other construction materials - and both the economics of certain nations, and the earth's environmental well-being.

There are basically two concepts here, "resource decoupling," and "impact decoupling."  Resource decouping means getting more efficiency from the resources we use, so that we can spread the use of our finite resources out over a longer time frame.  Impact decoupling means using processes that leave a smaller footprint on the ecosystem, so that our building and manufacturing do not harm the ecosystem.  We need a healthy ecosystem for our own survival.

Check this first chart for an illustration of this idea, which is really to help you get what they're saying, but isn't tied to the data.

This concept might have been defined first by the World Business Council for Sustainable Development, who advocated for “competitively priced goods and services that satisfy human needs and bring quality of life while progressively reducing environmental impacts of goods and resource intensity throughout the entire life cycle.”

The problem is... both our own desire to have more stuff, and the profitability for corporations in the extraction business create disincentives for decoupling.  Check this second chart.  It shows the exponential increase in extraction, and of the GDP.  Coincidence?  IRP doesn't think so.

I'll just give you one more interesting factoid before leaving you to read the report, which you can find by clicking this sentence.

As we've gone global, exporting a bunch of jobs from higher wage countries like the United States to lower wage countries like India, China, Turkey, and others, third world economies are starting to grow.  In some ways, this is good.  It means more resources in poor countries, and less hungry people.

In some ways, however, it's bad.  It means that more people in those third world countries are able to afford more of the consumer goods we've long enjoyed.  And that means more resources.   For example, China's use of copper, a metal used in everything from construction to technology to communications to medical equipment and supplies, has increased at a rate of 15 percent a year over the past several years - absorbing far more of both newly refined and recycled copper than either the European Union or the United States.

The report says that, for us to get to a balanced use of raw materials - an efficient use that preserves raw materials for future generations - we would need to bring the per capita metal use down to between 4 and 6 tons per person over the course of his or her life.  To put this in proportion, some developing countries, like India, are using about 5 tons per person right now, while Canada uses 25 tons per.

I know that some will argue with this amount, and frankly, I'm not endorsing their number - just reporting it.  Many moving parts impact how these numbers are built.  Extracting raw materials depends on many variables.  Three of the biggies:  Amount of resource both discovered and retrievable, business climate and technical feasibility.

Resource availability:  Despite all the money tossed at the problem of predicting and then locating resource, nobody is sure exactly how much extractible materials really exist.  And, finding it doesn't guarantee accessibility.  Ore depth can impede extraction, both because in some cases the technology doesn't (yet) exist, and in other cases, the ore quality (grade) is low, and extracting it is either difficult or not financially feasible.

Business climate:  Productivity is driven by demand, which in turn is impacted by the economy.  In a good economy, there will be more demand for product.  In a bad economy, people will demand less - and be willing to pay less.

Technical feasibility:  In some cases, improvements in technology can reduce the price of extraction, and make it feasible to extract and refine more raw material.  But in other situations, the high cost of advanced technology can make the technology relatively useless, particularly in an economy like the one we're currently in.

So, given that disclaimer, the important point is not the exact amount.  What if it's somewhere between Canada's 25 tons and India's 5 tons - let's say 15 tons instead of the dire 4 to 6 tons called for in the report?  If all the third world countries with rising economies increase their usage to 15 tons per capita, we'll be out of extractible resources before we know it.  And I haven't even touched on the increasing damage to the ecosystem of exponentially increasing use.

There's another interesting danger that comes with the hyper-fast increase of resource exploitation, one that principally impacts the countries who are at first benefiting from the mining and sale of these resources.  This danger is called Dutch Disease.  Dutch Disease is a concept coined by the  Economist Magazine in 1977 to explain the relationship between a country's increased revenues from natural resource exploitation and the decline in that country's manufacturing sector.  A natural resources revenue increase will make a nation's currency comparatively stronger than other nations' currencies,  As a result, the nation's other exports become more expensive, and its manufacturing sector less competitive.  Pop goes their economy!

Frankly, I was not aware of these linkages.  We need to support our governments' efforts to decouple, but we also need to realize that the extraction industries see this idea as a negative.  They would feel they have a lot to lose by decoupling - they have put a lot of money and resources into planning for the future of extraction (sunk costs), and they will have pressure (and fiduciary obligations) to create as much profitability as fast as they can.  And there are entire communities relying on the extraction industry for their livelihoods and well-being.  It would be great if we could hold extraction at current levels, and take a longer range perspective.  There are advantages to spinning extraction out across many generations... but this will not be an easy problem to solve.

I know that most people who read this blog are already concerned with the environment, and the few of my friends who believe that environmentalists are over-blowing the problem will poo poo this anyway, if they bother to read it all the way through.  But maybe you don't know that much about the way minerals impact the ecosystem, or the well-being of humanity.  This report is a really good way introduction, in lay language.

It's worth the read.

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