McKinsey’s latest on scarcity

McKinsey have just published an annual update on their resource scarcity work, which is well worth a read if you watch those issues. Key headlines as follows (in their own words):

Commodity prices have come off their previous peaks since 2011, prompting some observers to call an end to the so-called resources super cycle—the sharp price rises since the turn of the century. But talk about the death of the super cycle appears greatly exaggerated, the report finds. Despite recent declines, on average commodity prices are still almost at their levels in 2008 when the global financial crisis hit. This is striking given that the world economy is still not back to full power after the worldwide recession in 2009.

The volatility of resource prices has also been considerably higher since the turn of the century. While there are many factors influencing short-term volatility including droughts, floods, labor strikes, and restrictions on exports, there is also increasing evidence of a more structural supply issue that is likely to continue to drive volatility. Supply appears to be progressively less able to adjust rapidly to demand because new reserves are more challenging and expensive to access.

The prices of different resources have been increasingly closely correlated over the past three decades. While rapid growth in demand for resources from China has been an important driver of these increased links, two additional factors are also important. First, resources represent a substantial proportion of the input costs of other resources. Second, technology advances are enabling more substitution between resources in final demand. As a result, shocks in one part of the resource system today can transmit rapidly to other parts of the system.

With the notable exception of shale gas, long-term supply-side costs continue to increase. While the world does not face any near-term absolute shortages of natural resources, increases in the marginal costs of supply appear to be pervasive and put a floor under the prices of many commodities. In the years ahead, resource markets will be shaped by the race between emerging-market demand and the resulting need to increase supply from places where geology is more challenging, and the twin forces of supply-side innovation and resource productivity.

FYI McKinsey’s Jeremy Oppenheim, who worked on this project, is now on sabbatical to run the secretariat for the new Global Commission on the Economy and Climate (‘Stern 2’ to its friends), which was launched last week. Here’s its work programme.

Iran’s biggest headache

A coda to my post a couple of weeks back on the role of climate change and resource scarcity as conflict threat multipliers in Syria, via Tom Friedman in the NY Times:

“Our main problem that threatens us, that is more dangerous than Israel, America or political fighting, is the issue of living in Iran. Is that the Iranian plateau is becoming uninhabitable. … Groundwater has decreased and a negative water balance is widespread, and no one is thinking about this.

“I am deeply worried about the future generations. … If this situation is not reformed, in 30 years Iran will be a ghost town. Even if there is precipitation in the desert, there will be no yield, because the area for groundwater will be dried and water will remain at ground level and evaporate.

“All the bodies of natural water in Iran are drying up: Lake Urumieh, Bakhtegan, Tashak, Parishan and others … deserts in Iran are spreading, and I am warning you that South Alborz and East Zagros will be uninhabitable and people will have to migrate. But where? Easily I can say that of the 75 million people in Iran, 45 million will have uncertain circumstances. … If we start this very day to address this, it will take 12 to 15 years to balance.”

– Iran’s former agriculture minister Issa Kalantari (now an adviser to Hassan Rouhani), writing in the Iranian Ghanoon newspaper.

“I think we’re fucked” and other reasons not to publish a book

Last night saw the launch at the Science Museum of a new book called Ten Billion, by Stephen Emmott. I’m not sure I can recall another book that’s annoyed me this much.

Emmott is head of computation science at Microsoft Research. He’s smart, and clearly makes full use of his mandate at Microsoft to think about big issues. And his book, as the blurb puts it, is “about the potential consequences of the collective activities of the human population as we continue to grow towards ten billion. Its message is simple: We are in real trouble, are heading for deeper trouble, and are failing to do much about it.”

His analysis, in a nutshell, is that: a massive resource scarcity and climate change crunch is rapidly approaching; we’re kidding ourselves if we think that technology is going to let us off the hook without having to face up to any change in our lifestyles; developed world publics are in no mood to consume less; and since we’re not willing to face up to the questions about fair shares in the context of environmental limits, it’s most unlikely that emerging economies will do so any time soon either.

While he gets some of his data wrong, I agree with the broad thrust of this argument 100%. So why the fury? Because of how he finishes the book. Here’s his conclusion (and I’m quoting verbatim):

“We urgently need to do – and I mean actually do – something radical to avert a global catastrophe. But I don’t think we will.

I think we’re fucked.”

Now, I agree that we’re in for a bumpy ride. I agree that it’s going to take something nonlinear and spectacular to make the transition successfully. And it’s fair enough if Emmott can’t imagine what that might look like; I can’t predict it either.

But the point here is that anyone spinning ‘collapse’ stories like this – and especially anyone who is, like Emmott, an opinion former of considerable influence (as I type, his book is the #1 bestseller on global warming or climate at Amazon) – is creating narrative frames that other people are going to use to make sense of what’s going on, how we get here, and what happens next.

And Emmott’s story is not helpful. It’s toxic.

Stories – myths – are deeply, deeply powerful things. They create our reality as much as they describe it. And the more opinion formers get behind collapse narratives, the more likely these narratives are to become self-fulfilling prophecies, contributing to a mood of despair rather than resolve when shocks open up moments of opportunity.

Thinking that we’re “fucked” is a legitimate intellectual position – but if that is what you genuinely believe, then the responsible course of action is to shut the fuck up about it – and leave the narrative bandwidth to others with something more hopeful to say than you.

What have you got to lose by doing so, if you already think it’s all over? And conversely, what are you adding to public debate if you don’t have the imagination even to admit the possibility of success? Either lead, or get out of the way, as a climate negotiator once put it to the US delegation.

All of which begs the question of what I think a more hopeful narrative would look like, given that I buy Emmott’s analysis of the severity of the situation and the lack of obvious answers. I don’t think there’s a single answer, but I’m personally pretty interested in stuff like this. It’s the transcript of a talk I gave earlier this week, and is a first attempt to put together some thoughts that have been bubbling away for over a year.

The talk was at the annual conference of the very cool Modern Church movement – they were founded in the 19th century to oppose religious fundamentalism from within the church, and these days work on areas like religious pluralism, defence of science, and gender equity. Anyway, work in progress – feedback very welcome.

Post-2015: where does sustainability fit in? (Updated)

Climate, scarcity and sustainability are among the most important – and politically challenging – elements of the post-2015 development agenda on what should succeed the Millennium Development Goals.

While sustainability issues did not feature heavily at the recent London meeting of the new UN High Level Panel on the Post-2015 Development Agenda, which was focused mainly on household level poverty, they are likely to figure much more prominently at the Panel’s second and third meetings – in Monrovia in February and Bali in March – since these meetings will focus on national and global level issues respectively.

Before these meetings, sustainability advocates have some hard thinking to do: on both their policy objectives and their political tactics, in both the Panel and the post-2015 agenda as a whole. To try to contribute to that thought process, here’s a 6 page think piece. It’s deliberately provocative, and also still a working draft – so feedback is very welcome.

Update: The paper’s now been finalised and published as a Center on International Cooperation think piece; many thanks to everyone who commented.

Climate, Scarcity and Sustainability in the Post-2015 Development Agenda

What should sustainability advocates aim for in the post-2015 international development agenda – and how should they go about it?

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Resource scarcity in Ethiopia

Global concern is currently mounting all over again about the impacts of a more resource-scarce world, with particular attention focused at present on the risks of a renewed global food price spike following a spate of extreme weather in the US and around the world. Two weeks ago, corn and soyabean prices broke the record they had set during the 2008 food spike, while wheat prices have increased by 50% over the last five weeks.

These global trends have the potential to cause massive problems for a country like Ethiopia – where wheat is by far the country’s biggest import by value. And that’s before you take into account low agricultural yields and farm sizes, major exposure to drought, limited access to energy, and how these challenges will be magnified by high rates of population and economic growth, which will increase demand for resources – as well as intensifying climate change impacts

Against this backdrop, the NYU Center on International Cooperation has just published a new report of mine entitled Resources, Risks and Resilience: Scarcity and climate change in Ethiopia.  This is the first in a series of CIC case studies on the risks that resource scarcity and climate change pose to poor countries – and on how those countries and their international partners can build resilience to them. (A second case study, on resource scarcity in Pakistan, is currently being prepared by David Steven; plans are also in train to undertake a third study on Nigeria.)

While the report sets out a daunting set of scarcity-driven challenges for Ethiopia, it also notes that Ethiopia’s government is well aware of the challenges it faces, and has put in place a battery of policies to address them – including, notably, the breathtaking aim of becoming a middle income country by 2025 with zero net growth in greenhouse gas emissions, as well as an extremely ambitious (and controversial) program of dam-building and large scale agricultural projects.

As well as assessing these policies, the report also identifies a range of vulnerabilities, policy gaps and exogenous risks that will need to be taken account of in future planning by the government and its international partners. It concludes by setting out a ten point agenda on how Ethiopia’s government and partners can improve their performance in managing scarcity issues. Continue reading