Low resource prices are no reason to go slow on better productivity
A version of this post first appeared on BusinessGreen.
Resource prices have been in the news again of late, although this time for the refreshing reason that they’ve been tumbling instead of skyrocketing. Falls in food and transport prices have led to the lowest inflation rate since records began and underpinned the first steady rise in real wages in five years. This is good news and has prompted predictions of a virtuous circle of rising confidence, rising consumption and a rising economy, although perhaps not so virtuous from an environmental perspective. So does this mean we can stop worrying about resources and get back to the business as usual of take-make-dispose-repeat?
Three good reasons for resource efficiency
Well, no. And for three good reasons. The first is environmental: academics involved in the UKINDEMAND programme have shown we can’t continue using materials as we currently do and meet our legally binding CO2 targets. Their analysis shows that meeting 80 per cent emissions reductions by 2050 requires redesigning both how products are made and how much material they incorporate, as well as much higher levels of reuse. And CO2 is not the only problem. The impacts of rising resource production and consumption are fuelling concerns that we are fundamentally undermining our ability to meet future resource needs. Bees and pesticides are an obvious example here. The situation is further complicated by our changing climate; the Pentagon warned last year that climate change will influence resource competition, undermining social stability in the process.
The second reason is that price volatility is at least as much of a problem as price rises. making sharp price falls not a straightforward good thing. The businesses involved in the Circular Economy Task Force told us that they can develop an effective strategy for a world of steadily rising prices, but yo-yoing prices play havoc with their planning, leading to shorter term decision making and delayed investment. Given this, the Task Force’s first report, Resource Resilient UK, showed how service based business models and using remanufactured parts, products and recycled materials can help to reduce businesses’ exposure to price volatility by reducing their reliance on primary materials. Reducing primary resource inputs whilst delivering the same product or service also results in increased competitiveness thanks to increased productivity.
The third reason is that greater resource productivity can also help to address long term social challenges. Analysis done by Green Alliance with WRAP shows that higher remanufacturing and recycling rates could reduce some of the structural problems facing the UK’s labour market. In particular, it could deliver over 50,000 net jobs in areas of high unemployment and replace some of the middle skilled, middle income jobs that have been lost as manufacturing’s share of the economy has declined.
Review UK resource risk and price things right
More fundamentally, the trends on which McKinsey and Chatham House based their predictions of long term price rises and high volatility – an increasingly large and prosperous global population, growing interdependence between resources and environmental instability – haven’t changed.
To protect the UK economy from these challenges, the government needs a new framework to develop a strategy and policy for resources. In the latest report from the Circular Economy Task Force, UK resource governance for the 21st century, published yesterday, we propose a National Resource Council to bring together all the relevant departments to develop effective resource policy. An early act of this Council should be to commission an independent review of resource risk to the UK to help the government set strategy and identify the priorities for action.
So, whilst falling resource prices and rising real wages are a welcome relief after five years of falling living standards, they’re certainly not a reason to go slow on resource security and productivity. Instead historically low prices might be just the time to stop subsidising over consumption and start pricing in externalities to support the shift to a low carbon, resource efficient, high employment economy.