What Alice in Wonderland can teach us about resource scarcity

This post originally appeared on The Guardian.

Lewis Carroll’s Through the Looking Glass contains a famous passage describing Alice’s attempts to run alongside the Red Queen in a topsy-turvy nonsense world, where cause and effect are reversed:

“Well, in our country,” said Alice, still panting a little, “you’d generally get to somewhere else – if you run very fast for a long time, as we’ve been doing.”

“A slow sort of country!” said the Queen. “Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!”

The red queen’s race seems an increasingly apt metaphor for environmental scarcity. Despite new discoveries, physical factors are making extraction costs higher and increasingly having an impact on local environments.

Finding raw materials is getting harder
Major new discoveries show that we aren’t running out of raw materials in the traditional sense. This makes scarcity sound like scaremongering: recent assessments show an alleged supply of 40 years’ worth of UK gas and 300 years of global demand for phosphorus, an essential nutrient for agriculture.

On the face of it, these new discoveries are gamechangers. As late as 2010, dire warnings were being sounded about the risk to the UK from gas import dependency in the face of dwindling UK supplies. Similarly, research about peak phosphorus appeared to show that industrialised agriculture, which is heavily dependent on rock phosphate, was in serious trouble.

But the big numbers attached to new, often unconventional supplies belie a more fundamental problem: digging raw materials up is getting a lot harder. Shale gas has stalled in the UK, France, Poland, and Romania because of public concern and the high cost of drilling. As demand for other resources grows and ore grades decline, we have to use more water, energy and land to recover each tonne of raw material. This feeds conflict and raises supply risks. The result is a new sort of environmental scarcity, where it doesn’t matter how much is underground. What matters is how much you can dig up.

Costs of extraction are rising
There are some other numbers that are challenging the optimistic “years of supply” figures: rising marginal costs. New research on copper reserves shows that 100 years of supply are now available, up from the 30 previously believed to exist. But this is just half the story. The capital cost of new copper mines in Chile, the largest producer of the metal, is now $10,000/tonne. This is double the cost of mines developed between 1995 and 2010. Miners must now pump seawater up 2,500 metres into the bone-dry, copper-bearing mountains, and then pay to desalinate it. Lower ore grades don’t help – ores have fallen from 10% copper in 1850 to just 0.6% today. It takes more water and energy to get copper out of lower grade ore. This pushes up the price.

There’s a similar story for oil: horizontal fracking uses 4.2 times more steel than conventional wells. The depth of offshore wells has more than doubled since the late 1990s. Technology has driven costs down but, in the words of Bernstein Associates, “eventually the rocks win”.

The reality is that we’re spending more and finding less. Record oil industry investment has gone hand in hand with a decade long, 14% year-on-year rise in the marginal price for new oil production. It is now $92 per barrel, up from an estimated $50 per barrel as recently as 2008. We’re running faster just to keep up. And because oil is an input for mining, agriculture, industry and transport, its price drives inflation across the economy.

We need to stop racing to catch up
A red queen race doesn’t have a finish line, it’s a profoundly pessimistic metaphor. Its lesson for resources is that there’s plenty of stuff to dig out of the ground; it just might not be worth doing so.

But the real world isn’t quite so depressing. As resource prices rise, we can see alternatives to a race to the bottom. Green Alliance‘s work on the circular economy since 2012, reported in Resource resilient UK, suggests that the much publicised economic benefits of better resource productivity are matched by reduced exposure to the price and reputational risks caused by expensive and damaging extraction.

Raising resource productivity will require a refocusing of industrial effort, capital allocation and innovation. Given time, this may happen on its own, but system change is hard, and there is plenty of inertia which keeps the economy linear.

Resource challenges are global, but the UK can act now to underpin Britain’s industrial strategy with an understanding of the resource constraints that businesses will face in the future. Our competitors, like France, have already started. We too need a plan to help businesses achieve a resource resilient UK.

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