Interaction between energy and material consumption in East Asia
〇Hector Pollitt1, Mary Goldman2, Yanmin He3 and Soocheol Lee4
1. Introduction
The importance of the complex interactions between material and energy consumption
is increasingly recognized. The issue is related to the energy-water-food ‘nexus’. The UN’s
Sustainable Development Goal (SDG 12, responsible consumption and production)
covers the use of mineral and other inputs to production processes. The UN’s overview
of this theme links rises in many East Asian economies, with potentially irreversible
environmental damages as increases in consumption require increased use of various
mineral-based resources. Most East Asian economies are net importers of raw materialinputs. An over-reliance on imported material inputs could also become a security risk if
imported products become too expensive or are made unavailable to the importing state
for a range of geopolitical or economic reasons. As our aim in this study is to find a scenario offuture prosperity in East Asia that is environmentally sustainable, we investigate in this chapter
whether it is possible to simultaneously reduce greenhouse gas (GHG) emissions and mineral
consumption

2. Scenarios and methodology
We apply a materials tax up to 2030 to encourage a reduction in minerals consumption and anincrease in the material efficiency of production using E3ME global macro econometric model. The
policy that we model across China, Japan, Korea and Taiwan is relatively basic, with the tax increasingover time, resulting in a 10% increase in non-energy mineral prices by 2030.
The policy does not address a variety of other goals or revenue-recycling options that might enableindustry to increase the resource efficiency of their production and achieve lower levels of materials
consumption. We show that, while a tax may help to reduce consumption levels, further policies would
be required to yield a large reduction in material consumption levels.
The firstly we presents current patterns of material consumption in East Asia. The secondly wedescribes some of the main linkages between energy and material consumption, and the thirdly themodelling approach is summarized. Finally we present results from the model simulation.

1Dept. of International Modelling, Cambridge Econometrics, Covent Garden, Cambridge, United Kingdom. hp@comecon.com
Cambridge Econometrics, Cambridge, United Kingdom.
3 Otemon Gakuin University, Ibaraki City,Japan.
4 Faculty of Economics, Meijo University, Nagoya City, Japan.

3. Expected results and Analysis
The UN’s Sustainable Development Goal for reducing materials consumption (and increasing
responsible consumption and production) is a priority for countries in East Asia, as living standards
continue to rise, the middle class in China expands rapidly, and Japan and Korea continue to expand
their economies. A burgeoning middle class requires various material inputs to satisfy its consumption
habits. The deleterious environmental impacts of materials consumption are well-identified and theconnection between materials consumption and CO2 emissions is evident. It is, therefore, important torecognize the issue of material consumption when it comes to meeting carbon budgets and climate
goals.
It is possible, through a variety of policy interventions, to encourage increased resource efficiency
and continued economic growth. Such policies are being explored in Europe through its circular policy
roadmap; they are starting to be recognized in East Asia as well (European Commission, 2017).
We have shown in this study that – although a simple materials tax is effective to modestly reducematerials consumption – it does so with potential negative economic effects. A variety of policy
options that draw on the revenues collected from material taxes could mitigate some of these negativeeffects. However, as we have shown in previous chapters using the example of carbon taxes, theirinteraction with other policies is important as it determines the overall impact of any measures. Thisanalysis has yet to be done for material taxes.

4. Conclusion

This study explored some of the key linkages between energy and material consumption,
including the potential resource requirements of reducing greenhouse gas emissions. Using theE3ME model, we estimated the economic and environmental impacts of applying a material (orresource) tax. We find that a simple material tax is effective at reducing material consumption,
but it may lead to negative economic impacts. A broader range of policy options, however, may
mitigate some of these negative economic effects and could even lead to positive impacts on GDP.

<references>
Cambridge Econometrics (2019), E3ME Technical Manual: Version 7.0.
European Commission, DG Environment (2012), Assessment of resource efficiency indicators andtargets: Annex report.
European Commission, (2017), Report from the commission to the European parlimen, the council,
the European economic and social committee and the committee of the regions on the implementationof the Circular Economy Action Plan.