EU warns wasting environmental resources could spark new recession

Janez Potočnik, European Union commissoner for green affairs, says unless habits change scarcity could see prices spike
Fiona Harvey guardian.co.uk 29 Dec 11;

The overuse and waste of valuable natural resources is threatening to produce a fresh economic crisis, the European Union's environment chief has warned.

Janez Potočnik, the EU commissioner for the environment, linked the current economic crisis gripping the eurozone with potential future crises driven by price spikes in key resources, including energy and raw materials.

"It's very difficult to imagine [lifting Europe out of recession] without growth, and very difficult to imagine growth without competitiveness, and very difficult to be competitive without resource efficiency."

Unless consumers and businesses take action to use resources more efficiently – from energy and water to food and waste, and raw materials such as precious metals – then their increasing scarcity, rising prices and today's wasteful methods of using them will drive up costs yet further and reduce Europe's standard of living, Potočnik warned.

He said: "We have simply no choice. We have to use what we have more efficiently, or we will fail to compete. Resource efficiency is a real competitiveness issue for European companies."

Some European regulations will have to be altered in order to ensure the efficient use of energy, water and raw materials, and to protect the natural environment.

Potočnik gave notice that his department was scouring through existing regulations and proposed new ones in order to ensure that none would encourage resources to be used profligately, and to safeguard the EU's natural resources for the future.

The stark warning highlighted the increasing scarcity and rising price of some key resources, including energy and water, but also food and raw materials from metals, ores and minerals.

Although most of the west is still mired in economic woes, much of the developing world including rapidly emerging economies such as China and India are forging ahead financially, and as a consequence are consuming a far greater share of the world's resources.

The current economic models used by businesses and governments have failed so far to take this rapid change into account, and one of the associated problems is that many business models are predicated on cheap resources and an inefficient use of raw materials and energy.

"This is an issue of competitiveness," Potočnik said. "China is understanding that this is a megatrend. We can't ignore it."

Resources are under increasing constraint, as developing countries lift more of their population out of poverty. "If our current living standards are to be maintained, and the aspirations of developing countries satisfied, then the global economy will need to be changed drastically," Potočnik said.

"If we want things to stay the same, things will have to change." He added: "This will be an enormous pressure on resources, which we are already overusing."

Labour costs now make up a much smaller proportion of most manufacturers' overheads than the cost of raw materials and energy, according to Potočnik. A greater proportion of those resources is also coming from overseas, with the attendant potential problems around security of supply. "Europe is importing more than half its resource use in many areas," he said.

Concerns have grown in recent months over the supply of some key resources, such as rare earths. These are used in many modern products, from mobile phones to renewable energy equipment, but the supply is small and China controls many of the sources.

China has about a third of global rare earth deposits in its territory, but it accounts for nearly all of the production because of its efforts in this key market. Recently, the Beijing government has made moves to reduce exports, in order to help its indigenous manufacturers, and this trend has worried western governments.

But these supply constraints are not yet fully priced in to world markets, and while the economic crisis continues the issue is likely to remain overshadowed – which could lay up future problems, according to the European commission.

"There are real problems with security of supply and this is not yet on the radar screen," Potočnik said.

Potočnik called for resource use to become a "mainstream" issue in economics. Recalling his own education as an economist, he noted: "I was taught that water was a free commodity, like air. We really do need to have the internalisation of these costs."