Why we need a political strategy to stop resource costs stifling recovery
I wrote recently about how resource extraction is like the Red Queen race in Lewis Carroll’s Through the Looking-Glass, where rising environmental pressures mean we have to work much harder and pay more just to maintain production. What I didn’t touch on was what this is doing to our politics: persistently high prices appear to have come out of nowhere, leaving politicians reeling.
The debate over energy, for example, has focused on the ten per cent of bills that politicians control, rather than the 50 per cent which is causing much of the price rise: fossil fuels. It would be a mistake to think this is a short term problem. We need a politics that engages seriously with our resource squeeze or we’ll be stuck with reactive responses that don’t tackle the biggest drivers of price pressures: resources.
First world problems
Political disarray in the face of resource pressures can be seen across the rich world: Romania, the site of a cyanide spill at a gold mine in 2000 called the ‘worst environmental disaster since Chernobyl’ is now convulsed with street protests over reopening a cyanide-process gold mine. These were sparked by a proposed law which would have removed public participation and ignored environmental risks to give the project a go-ahead. There was an embarrassing on, off, and on again commitment to a referendum on the project while politicians scrambled to respond to the public. Why is the mine being reopened now? The risks of extraction haven’t changed, but the price of gold has.
The resource squeeze is tempting Canada to move back down the global value chain from industrial production into resource extraction, reversing standard wealthy world economic advice. The political response to new resources has been anything but strategic: rather than a mature discussion about whether tar sand exploitation is right for Canada. In Australia, the commodity price boom was described as being “like being hit up the arse with a rainbow” by a prominent mining executive. The huge financial windfalls from the unexpected boom could have been used to plan for resource stewardship in the context of declining ore quality, lower water availability and climate change impacts. Instead, the windfalls are now widely seen as having been wasted, and Australian politics is dominated by how to relax environmental safeguards to try to cut mining costs which arise from environmentally-related resource scarcity.
UK resource politics are just under the surface
The UK isn’t immune to resource pressures, but a generation of politicians has been assuming we are. As a result, politics and the media is grasping at what is visible – wind turbines, which account for less than three per cent of bills – rather than the underlying driver of long term price rises: the rising cost of fossil fuel extraction.
We’re also falling back on old solutions. Indeed, the only discussion of fossil fuels has been dominated by hype about extraction: a new shale gas resource boom. This is seductive. In this economy, what politician wouldn’t want an Australian-style economic kick up the pants? Our imagined embarrassment of shale gas riches is so compelling that it has dominated the news cycle for nearly two years.
The neutral evidence about the UK’s shale gas is that it is likely to be expensive to extract and won’t be available anytime soon. Shale gas has a much higher water, land, and material footprint than conventional gas, making it more expensive and controversial to extract.
What is true for shale gas is true for a host of resources, from metals to food. Resource pressures are structural in their impact. The UK has an advanced globalised economy and greater domestic extraction will make little impact on our resilience to resource shocks.
What would make a difference is a structural solution: a strategy to keep the resources we use, and the energy used to make them, flowing through the economy for longer. We need a plan to help business create new resource recovery infrastructure and a comprehensive programme to help consumers save energy. There is no political debate about such an approach yet, but there will have to be as the global economy recovers and resource prices escalate.