SuPo m
lic my- aryM
ak forersResource Efficiency:
Potential and Economic
Implications

Summary for Policy-Makers

Acknowledgements
Editor: International Resource Panel.

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

Lead authors: Paul Ekins and Nick Hughes.
Contributing authors: Stefan Bringezu,
Charles Arden Clarke, Marina Fischer-Kowalski,
Thomas Graedel, Maarten Hajer, Seiji Hashimoto,
Steve Hatfield-Dodds, Petr Havlik, Edgar Hertwich,John Ingram, Katja Kruit, Ben Milligan, Yuichi Moriguchi,
Nabil Nasr, David Newth, Michael Obersteiner,
Anu Ramaswami, Heinz Schandl, Sangwon Suh,
Mark Swilling, Ester van der Voet, Brian Walsh,
Jim West and Henk Westhoek.

Copyright © United Nations Environment Programme, 2016
This publication may be reproduced in whole or in partand in any form for educational or non-profit purposes
without special permission from the copyright holder,provided acknowledgement of the source is made.

UNEP would appreciate receiving a copy of any
publication that uses this publication as a source. No
use of this publication may be made for resale or for
any other commercial purpose whatsoever without
prior permission in writing from the United Nations
Environment Programme.

We are grateful for the valuable comments
received by Hezri Adnan, Shardul Agrawala,
Jacqueline Aloisi de Larderel, Chika Aoki-Suzuki,
Peter Borkey, Werner Bosmans, Hans Bruyninckx,
Mariano Castro Sanchez Moreno, Minpeng Chen,
Patrice Christmann, Jeffrey Herrick, Tim Kasten,
Lea Kauppi, Pawel Kaźmierczyk, Vijay Kumar,
Yonglong Lyu, Anne Miehe, Jonathan Murphy, Kazunobu
Onogawa, Antonio M. A. Pedro, Tlou Ramaru,
Astrid Schomaker, Birgit Schwenk, Yoshinori Suga,
Ernst von Weizsaecker, Anders Wijkman andErinç Yeldan.

Disclaimer
The designations employed and the presentationof the material in this publication do not imply theexpression of any opinion whatsoever on the part of
the United Nations Environment Programme concerning
the legal status of any country, territory, city or area orof its authorities, or concerning delimitation of its
frontiers or boundaries. Moreover, the views expressed
do not necessarily represent the decision or the statedpolicy of the United Nations Environment Programme,
nor does citing of trade names or commercial processes
constitute endorsement.

Special thanks go to Janez Potočnik, Co-Chair of
the International Resource Panel, and Ashok Khosla,
former Co-Chair of the International Resource Panel, fortheir contributions, dedication and commitment.

The full report should be referenced as follows:
UNEP (2016) Resource Efficiency: Potential andEconomic Implications. A report of the International
Resource Panel. Ekins, P., Hughes, N., et al.

The UNEP Secretariat team provided essential
coordination and support, especially Shaoyi Li,
Christina Bodouroglou, Vera Gunther andAbraham Pedroza.

Design/layout: UNEP DCPI
Printed by: UNESCO
All photos ©: AFP

Summary for Policy-Makers

Resource Efficiency:
Potential and Economic
Implications

Produced by the International Resource Panel.
This document highlights key findings from the report and should beread in conjunction with the full report.
The report can be downloaded from www.unep.org/resourcepanel.
Additional copies can be ordered via email: resourcepanel@unep.org

Summary for Policy-Makers

PrefaceResource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

S

ince its inception in 2007, theInternational Resource Panel has
been committed to providing
independent, authoritative and policy
relevant scientific assessments on the futurestate, management and use of natural resources.
With the publication of 15 assessment reports
and continuous dialogues with policy-makers,
industry leaders and civil society, the Panel has
stood out as a credible voice in the international
community that underlines imperatives andthe urgency for the sustainable managementof natural resources and that articulates thetechnological and economic potential ofresource efficiency and ways forward for the
related public policies.

Two historic events in 2015 figure prominently
on resources issues: the 2030 Agenda on
Sustainable Development highlights thatsustainable resource management is criticalto poverty eradication and to the sustainable
future we want; and the Paris Agreement
on Climate Change confirms that
decarbonisation must go hand in handwith decoupling economic growth fromthe escalating use of natural resources andenvironmental degradation as one of the key
components for achieving the transformation
towards a better tomorrow for current andfuture generations.

It is exactly for these reasons that the G7 attheir Summit in Germany in June 2015, as partof their increased commitment to improving
their efforts in resource efficiency, asked theInternational Resource Panel to produce areport on the most promising potentials andsolutions for resource efficiency for all countries- developed, newly industrialized and developing.
This rapid assessment report is the resultof a truly collective effort by scientists andexperts of the International Resource Panel
who thoroughly reviewed the best scienceavailable. The findings of the report point out
the importance of joining forces for acting now
as well as the huge potential that resource
efficiency can have, if it is implemented carefully
and supported across different sectors and at
multiple levels. The pressing need to invest
in resource efficiency could actually lead to a
positive economic outcome. The report shows
how resource efficiency can lead to higher
economic growth and employment, if supported
by well-designed policies.
The assessment demonstrates that because
many areas of resource use are relatively
inefficient, the potential for resource efficiency
is tremendous. This is supported by the resultsof the modelling undertaken for this study,
which shows that resource efficiency combinedwith climate policy could at the same timeSummary for Policy-Makers

stabilise global resource use by 2050 and boost
incomes and economic growth.

Co-Chairs,
International Resource Panel (IRP)

Dr. Janez Potočnik,Ljubljana, Republicof Slovenia

Dr. Alicia Bárcena,
Santiago,
Chile

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

Looking forward, the report demonstrates
numerous examples from different countries
around the world of increasing resource
efficiency in different sectors. It thereby puts
the different challenges ahead into perspective
and illustrates how to learn from each otherand how to scale up what is working.

We are very grateful to Paul Ekins andNicholas Hughes for their tremendous
effort in presenting a comprehensive
up-to-date perspective for understanding thepotentials and economic implicationsof resource efficiency. Their remarkable work
gives us hope that with engaged actors, itwill be possible for us to improve wellbeing
for everyone and protect the planet today
and tomorrow.

Summary for Policy-Makers

Foreword

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

Over the past decade, theimportance of resource efficiency
and sustainable management of
natural resources has increased
considerably, culminating last year in thehistoric adoption of the 17 Sustainable
Development Goals and in the decision by theleaders of the Group of Seven (G7) nations topromote ambitious actions to improve resource
efficiency as a core element of sustainable
development.
As part of that commitment, the G7 asked
the International Resource Panel to prepare asynthesis report that highlights the potential
and most promising solutions for resource
efficiency. This rapid assessment report Resource Efficiency: Potential and Economic
Implications - provides an analysis of the status
and trends of resource efficiency and presents
best-practices and possible solutions fordeveloped countries, emerging economies anddeveloping countries.
While it is essential and significant for the G7
to champion resource-efficiency, that alone
will not be sufficient. Achieving an increase
in resource efficiency will require a concerted
action by all countries to change the waythat resources are produced and consumed
across the economic and development
spectrum. Genuine and effective international

cooperation will make transformation to a
resource efficient future a reality.
Such a transformation presents all countries
with not only a major challenge, but also
an historic opportunity to build dynamic,
sustainable, innovative and people-centred
economies while preserving the natural
resource base and environment for future
generations. In short, the global improvementof resource efficiency represents a major
instrument to achieve the goals we have set in
the 2030 Agenda.
Achieving this will only be possible withfocused political will, action and determination
at all levels, along with the acknowledgementthat there are differences in resource
challenges determined by local contexts thatmake a ‘one size fits all’ solution impossible.
The examples in this report illustrate what
is working and why. The report shows that alandfill tax in the United Kingdom contributed
significantly to increased recycling rates,
reaching nearly 45 per cent for household
waste in 2014, up from 26 per cent for overall
waste in 2012. It also shows that Japan’s ‘Top
Runner’ scheme, which uses as a benchmark
the highest performing energy-efficient
appliances for setting the required average
standard in a future year, led to efficiency

Summary for Policy-Makers

These examples show what is possible if wework ambitiously and jointly and should fill us
with hope and motivation for the way forward.
It is my strong desire that the findings of thisimportant report will inspire determinedaction in increasing resource efficiency.

I would like to express my gratitude to
the International Resource Panel, under theleadership of Janez Potočnik and Alicia Bárcena,
for developing this important report.

Achim Steiner

UN Under-Secretary Generaland Executive Director,
UNEP Nairobi, Kenya, March 2016

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

improvements in different product groupsof 16-80 per cent in the last 12 years. It further
demonstrates that planting trees alongside
crops can improve soil fertility, such as inZambia, where 160,000 farmers have planted
nitrogen-fixing trees among their crops, leading
to average maize yields of 4.1 t/ha from fields
planted with acacias, compared to 1.3 t/ha
outside of the tree canopy.

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers
Summary for Policy-Makers

Summary for Policy-Makers

Contents
36

2. The imperative and opportunity of increased resource efficiency			
2.1 The imperative of increased resource efficiency						2.1.1 Substantial increases in resource efficiency are essential for meeting the SDGs		
2.1.1.1 Future availability of material resources						2.1.1.2 Volatility and long-term increases in resource prices					2.1.1.3 Sustainable use of renewable resources						2.1.1.4 Environmental impacts of resource extraction and use					2.1.2 Substantial increases in resource efficiency are essential for meeting climate changetargets cost effectively									2.2 The economic opportunity of increased resource efficiency				2.2.1 Costs and benefits of increasing resource efficiency					2.2.2 The benefits of reducing externalities							2.2.3 The macroeconomic benefits of resource efficiency					

12
12
12
13
16
17
22

3. Best practices for increasing resource efficiency					

32
34
35
38
38
44
49
55
61

3.1 Overcoming barriers to resource efficiency						3.2 Initiatives and programmes for increased resource efficiency				3.3 Best practice examples of successful resource efficiency					3.3.1 Materials										3.3.2 Land and soils									3.3.3 Water										3.3.4 Energy										3.4 Systems thinking and nexus issues							4. Conclusions										

24
26
26
28
30

4.1 The imperative and opportunity of resource efficiency					4.2 Best practices for increasing resource efficiency						

62
62
63

References										

67Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

Key Messages										1. Introduction 									Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers
Summary for Policy-Makers

Summary for Policy-Makers

With concerted action, there issignificant potential for increasing
resource efficiency, which will
have numerous benefits for the
economy and the environment

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

Key Messages

3Summary for Policy-Makers

1. Substantial increases inResource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

resource efficiency are essential
to meet the Sustainable
Development Goals (SDGs) –enabling development while
protecting the environment

4

Resource use is central to human prosperity.
Of the 17 Sustainable Development Goals(SDGs), 12 directly depend on the sustainableeconomy-wide management of a whole range ofnatural resources. Current patterns of resource
consumption have many negative effects onhuman well-being. Resource efficiency yields
both short- and long-term benefits, andimproves overall economic and environmental
resilience. Increases in resource efficiency are
critical to providing the resource security that isvital for human development, and for balancing
such development with environmental
protection to deliver “the future we want”, asenvisaged by the SDGs.

2. Improving resource

efficiency is indispensable formeeting climate change targets
cost effectively

The extraction, processing and use of resources
require much energy, at present mainly sourced
from fossil fuels with resulting carbon dioxide(CO2) and other emissions. Much land use
and land use change entails emissions of both
CO2 and non-CO2 greenhouse gases (GHGs).
Resource efficiency can reduce these emissions
substantially, as well as the adverse impacts
from the increased material use that is required
for many low-carbon technologies. Without
significant improvements in resource efficiency,
it will be difficult and substantially more costly
to keep average global warming well below
2 degrees Celsius (oC).

3. Resource efficiency cancontribute to economic growthand job creation

There is strong evidence that increasing
resource efficiency can yield higher economic
growth and employment. However, achieving
this will require barriers to resource efficiency
to be overcome through changes to the rateand direction of innovation and technicalchange, and some combination of intelligent
and targeted regulation, appropriate investment
in enabling infrastructure, environmental tax
reform and strategic use of fiscal policy

Summary for Policy-Makers

and sustainable public procurement insupport of resource efficiency and innovation.
Targets for resource efficiency increases
need to be set and progress towards themmonitored.

4. There are substantial areas ofMany areas of resource use are relatively
inefficient, presenting significant opportunity
for improvement in many areas of the economy.
Developing countries have further opportunities
to design their infrastructure and development
paths in a resource-efficient way from theoutset. New modelling undertaken for thisreport finds that resource efficiency combined

5. Increased resource efficiency
is practically attainable

There are numerous examples from countries
around the world at very different stagesof development of increasing the resource
efficiency of different sectors and economic
activities, thereby gaining social, environmental
and economic benefits and helping to realizea world worth living in. The challenge for policymakers is to learn from and scale up these goodpractices, and to conceive and implement a setof transformative policies suitable to countries’
specific circumstances.

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

opportunity for greater resource
efficiency

with climate policy could stabilize global
resource use at current levels through to 2050,
while boosting incomes and economic growth.

5Prospects and Economic Implications of Resource Efficiency • Summary for Policy-Makers

Summary for Policy-Makers

6

IntroductionN

ote: This report on resource
efficiency has been produced by
the United Nations Environment
Programme’s (UNEP) International
Resource Panel (IRP) in response to a request by
G71 Leaders at the Summit held in June 2015 in
Schloss Elmau, under the German Presidency.
It is a Summary for Policy Makers of a much
longer forthcoming Assessment Report by the
IRP, which synthesizes the main work of the
IRP and other international organizations andresearchers in this area (UNEP, forthcoming
in 2016a).
1This is a report about prospects for resource
efficiency. It considers how resource efficiency
can contribute to economic growth anddevelopment, at the same time as reducing theworld’s use of materials, energy, biomass andwater, and the resulting environmental impacts.
2015 was a landmark year, due to theestablishment of two historic global agreements
which confirm the international community’s
shared commitment to achieving equitable andsustainable development. The 2030 Agenda
for Sustainable Development, with its 17

The Group of Seven (G7) nations is made up of Canada, France, Germany, Italy, Japan, the United Kingdom and the United States. The
European Union (EU) is also represented.

Summary for Policy-Makers

Both the 2030 Agenda and the Paris Agreement
are highly significant in that they commit

industrialized and emerging economies andother developing countries to join forces toeradicate poverty, and protect Earth’s resourcesand ecosystems for the benefit of present andfuture generations.
Resources, including renewable and nonrenewable energy, materials, water, air, biomass
and land, are fundamental to human well-being.
Box 1 sets out the definition and terminology ofresources that are used in this report, and how
resource use is measured.

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

Sustainable Development Goals (SDGs), is now
the most complete expression of the positive
aspirations of human societies worldwide
through to 2030. Further, the agreement in Parisat the 21st Conference of Parties (COP 21) tothe United Nations Framework Convention on
Climate Change (UNFCCC) saw 195 countries
pledging to keep global temperature rise to well
below 2°C above pre-industrial levels.

7

Summary for Policy-Makers

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

Box 1: Resources and their measurement

8

In this report the term “resources” is used
to describe elements of the physical worldthat have the capacity to provide goods andservices for humans. Resources therefore
include air (the atmosphere), water(marine and fresh) and land. Land consistsof terrestrial space (for human habitationor the habitats of other species), which inconjunction with soil produces biomass andbiodiversity. Sub-soil resources comprise
metal ores, non-metallic minerals, and fossil
fuels, the combustion of the latter being the
major source of increases in atmosphericcarbon dioxide, which is the principal
greenhouse gas (GHG). Ambient energy(for example, solar or wind energy) is also
an important resource. “Natural resources”
are those provided by nature before their
extraction or processing by humans (forexample, metal ores, rather than metals).
Material resources are often divided into
four major categories: fossil fuels, biomass,
metals, and non-metallic minerals, thequantities of which are often measured intonnes. Land is usually measured by its area(for instance, in square metres) and water by
its volume (for instance, in cubic metres).
Measures may distinguish between
resources produced or environmental

impacts occurring in a territory, and those
associated with or arising from the whole
supply chain of a product or service ora country’s final demand. The latter are
called “consumption-based” indicators
or “footprints”. The four main calculated
footprints are those for land (which includes
the land required for the production of
biomass), water, materials (metals andminerals) and carbon dioxide.
The term “resource efficiency” is here
used to encompass a number of ideas:
the technical efficiency of resource use(measured by the useful energy or material
output per unit of energy or material
input); the resource productivity, or extent
to which economic value is added to agiven quantity of resources (measured by
useful output or value added per unit ofresource input); and the extent to which
resource extraction or use has negative
impacts on the environment (increased
resource efficiency implies reducing theenvironmental pressures that cause suchimpacts). Resource intensity is the inverseof resource productivity, and is therefore
measured by resource use per unit ofvalue added. Environmental intensity issimilarly the environmental pressure perunit of value added.

Summary for Policy-Makers(FAO, 2014). In many parts of the world,
supplies of freshwater are stressed or scarce(WWAP, 2015).
Human activity is changing ecosystems rapidly
and extensively, largely in response to increasing
demands for food, fresh water, timber, fibre,
minerals and fuel (MEA, 2005; UNEP, 2012a).
These changes have depleted and degradedmany ecosystem services, increased risks ofsudden and disruptive environmental change,and exacerbated poverty for some groups ofpeople (MEA, 2005).

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

Earth provides natural resources inabundance, and human populations use
them abundantly. In 2015, 84 billion tonnesof materials were extracted and used by thehuman economy (UNEP, forthcoming in 2016b).
A third of land on Earth is now cultivated tomeet human needs and wants (FAO, 2016;
UNEP, 2014a). Globally in 2005 humans
consumed 25 per cent of the biomass producedon land in that year (Haberl et al., 2014;
Krausmann et al., 2013). An estimated 61 percent of commercial fish populations are fully
fished, and 29 per cent are overfished9

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

Summary for Policy-Makers

10

The world population is projected to reach
9.7 billion in 2050, an increase of 33 per centfrom 2015. Much of the population growthis likely to be concentrated in urban regionsof Africa and Asia (UN, 2015). This increase,coupled with continued economic growth in abusiness-as-usual mode, is likely to dramaticallyincrease pressures on the environment anddemand for resources (Krausmann et al., 2009;
UNEP, 2012a). For example, under ‘business as
usual’, annual global material extraction has
been projected to reach 183 billion tonnes by
2050 (Schandl et al., 2015), more than double
the amount in 2015. Demand for food and fibre
could increase by 60 per cent and 80–95 per
cent, respectively, by 2050 (FAO, 2012). Demand
for water could increase by 55 per cent overthe same period (OECD, 2012).

This report draws on many sources to showthat there are major constraints on the supplies
of some of Earth’s resources, and real limits
to the environmental impacts that can besafely absorbed by Earth’s ecosystems. Whatis required is a decoupling of resource use andassociated environmental impacts from thegrowth of economic output.
The concept of decoupling is represented in
Figure 1, which shows increasing trajectories
for economic performance (measured by grossdomestic product – GDP) and human well-being
such as might be implied by the achievementof the SDGs. However, Figure 1 also shows
resource use increasing at a much slower
rate than GDP (relative resource decoupling)and environmental impacts actually declining

Figure 1: Decoupling of resource use and environmental impacts from GDP growth.
Human well-being
Economic activity (GDP)Resource decoupling
Resource use
Impact decouplingTime
Environmental impact

Source: UNEP (2011a), Figure 1, p. xiii

Summary for Policy-Makers

The capacity of Earth to continue toprovide resources for human populations in theimmediate and more distant future is a matterof critical importance. In order toavoid dangerously depleting that capacity,
it is vital that humans use Earth’s resources
more efficiently.
This report first makes the case that
increased resource efficiency is essential toreducing the environmental impacts associatedwith resource use to within a scientificallydelineated “safe operating space” (Steffen et al.,2015). Remaining within such ecological limits,
as is pledged in the case of climate changeby the COP21 agreement, is an imperative if
the increased human well-being envisaged by
the SDGs is to be realized and sustained, andif economies are to be resilient to resource
supply disruptions and associated resource
price volatilities. It is then shown that with theimperative of increased resource efficiency
come opportunities for increased economic
growth and employment. The report thendocuments some best practices in resource
efficiency in the use of materials, food, land,
water and energy, and how they have been
implemented. The study concludes that theopportunities for resource efficiency are
numerous and beneficial for both the economy
and the environment, and could facilitatesocial development. They are also attainablewith public policy interventions.
There are therefore strong reasons for seriously
addressing resource efficiency and exploring
more deeply the opportunities for it. These
reasons explain the increasing interest fromgovernments and other policy-makers inresource efficiency, and the large volume ofliterature on this subject, on which this reportseeks to build. Indeed, they explain why the G7
governments have requested this report.

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers(absolute environmental decoupling). This
conceptual figure therefore indicates the ideal
goal of resource efficiency through the notion of
decoupling – that economic output and humanwell-being shall continue to increase, at the sametime as rates of increasing resource use andenvironmental impact are slowed, and in timebrought into decline, thereby sustaining resource
use and the delivery of ecosystem goods andservices for current and future generations.

11Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

Summary for Policy-Makers

12

2. The imperative andopportunity of increased
resource efficiency
2.1 The imperative of
increased resource efficiency

Figure 2: Number of Sustainable Development Goals that
directly depend on the sustainable use of natural resources.

2.1.1 Substantial increases inresource efficiency are essential
for meeting the SDGs
While attainment of all the SDGs
requires to a large extent thesustainable management and useof Earth’s natural resource base,no fewer than 12 of the Goals
refer directly to resources and theenvironment as fundamental to theirachievement (Figure 2).

Source: UNEP (forthcoming in 2016a)

Summary for Policy-Makers

2

70

90
80

60

70

50

60
50

40

40

30

30

20

20

GDP
trillion US$, 2005 prices

Past trends show consistently increasing global
resource use. UNEP (2011a) estimates thatthe amount of materials extracted and used
globally – including ores, minerals, fossil fuelsand biomass – increased eightfold between
1900 and 2005. This was twice the rate of
population growth, but somewhat less than
the rate of GDP growth, which increased byan estimated factor of 19, at constant prices,
over the twentieth century (De Long, 1998).
These statistics therefore present long-run
evidence of “relative decoupling” of material
extraction from GDP. However, such relative
resource decoupling does not entail an absolute
reduction in resources used. Figure 3 shows

Figure 3: Global material extraction in billion
tons, and global GDP in trillion US $ (2005 prices),
1970-2015.

Material extraction (used)billion tonnes

2.1.1.1 Future availability ofmaterial resources

trends in material extraction and GDP from1970 to 2015, which illustrates that material
extraction has continued to increase strongly.
Indeed, according to this more recent data,
since 2000 material extraction appears to havegrown at a faster rate than GDP – suggesting thepossibility of “recoupling” if this trend persists.

10

10
0

0
1970 1975 1980 1985 1990 1995 2000
Biomass

Fossil fuels

Non-metallic minerals

GDP2005 2010 2015
Metal ores

Source: Material extraction data from UNEP
(forthcoming in 2016b), GDP data from UNSD (2015).

Of course, the SDGs have other objectives, such as poverty eradication, gender equality and more equitable development outcomes.
The extent to which increased resource efficiency contributes to the achievement of these other objectives will depend on the detail ofthe policies through which resource efficiency itself is achieved. Such policy detail is outside the scope of this report.

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

Resource efficiency contributes to GDP
growth and human well-being in anenvironmentally sustainable manner from four
key perspectives, which are at the heart ofachieving the SDGs presented above2 : future
resource availability, increasing and volatile
resource prices, the present unsustainable useof renewable resources, and the environmental
impacts of resource extraction and use.

13

14

Figure 4 shows that over the period 1970-2010,
material productivity (MP) – measured as theamount of economic output per weight ofdomestic material consumption (DMC)3 – in G7
countries increased steadily at an average rateof 1.9 per cent per year. Material productivity
in the BRICS4 group of countries is substantiallylower throughout the period, though it also
increases slightly, at a rate of 1.2 per cent per
year on average. However, Figure 4 also showsthat at the global scale material productivity
has remained practically constant, and evendeclined slightly since 2000, which reflects thefact that material extraction increased at a fasterrate than GDP during this recent period (Figure3). The recent fall in overall global material
productivity occurred because of a global shiftof production from countries with high material
productivity to countries with much lower
material productivity. This is the result of rapid
industrial transformation in many parts of thedeveloping world. Thus, while the higher andincreasing MP of G7 countries may be partly due
to a more economically efficient use of materials
in these countries, it may also be caused bystructural shifts away from heavy industry andmanufacturing, and towards service-based3

activities. Economies with an increasing
share of services and imported manufactured
goods can therefore increase their material
productivity, on a DMC basis, as a result of
their changing economic structure. However,this does not necessarily increase material
productivity on a global level, and indeed
may rather involve service-based economies“exporting” the material and environmental
burden of their consumption (UNEP, 2015b).
Figure 4: Material productivity of the world,
BRICS and G7 countries, in constant US $ 2005 per
kg of domestic material consumption (DMC) in theeconomy, 1970-2010.
3.0
2.5
Material productivity
US$, 2005 prices/kg

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

Summary for Policy-Makers

2.0
1.5
1.0
0.5
0.0

........................................................................................
1970

1975

1980

1985

World

1990

1995

2000

2005

2010

G7 ...... BRICS

Source: Data from UNEP (forthcoming in 2016b)

DMC measures the total amount of materials directly used by an economy, and is calculated as domestic extraction, plus all physicalimports, minus all physical exports. See: http://ec.europa.eu/eurostat/statistics-explained/index.php/Glossary:Domestic_material_consumption_(DMC)
4
Brazil, Russian Federation, India, China, South Africa

Summary for Policy-Makers

Overall, these data suggest that while
long-run relative decoupling of material
extraction from GDP can be observed at a
global level, this relative decoupling is not
sufficient to prevent a persistent increasing
trend in absolute resource extraction. Indeed,in contrast to the long-run relative decoupling
trend over the 20th century, recent years’
data suggest that resource extraction has
begun to increase at a faster rate than GDP,suggestive of “recoupling”.

Figure 5: Per capita material footprint ofdomestic final demand in the G7, the BRICS
and the global economy, 1990-2010, in tonnes.

Per capita Material Footprint
tonnes

30
25
20
15
10
5
0

1990

1995

2000

World ...... BRICS

2005
G7

Source: Data from UNEP (forthcoming in 2016b)

in these countries. However, the BRICS MF
remains less than half that of the G7 countries,
even after the latter suffered a substantial
drop following the 2008 global financial crisis.
This shows that G7 countries are responsible
for a much higher level of per capita material
consumption than BRICS countries or the world
average, even if the material extraction andresulting environmental impacts do not all takeplace within G7 countries.

2010

Human populations are still growing, as
are their economies. Current trends
suggest that a growing global population
with rising average wealth will continue todrive up the consumption and use of materials.
These drivers have been projected to pushmaterial extraction towards 183 billion tonnes
per year by 2050 as previously mentioned. The
mobilization of such quantities of materials

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

This effect can be seen in Figure 5,
which shows the total per capita material
footprint (MF) of the G7, the BRICS countries
and the world as a whole. The MF measure
allocates all upstream material extraction
related to traded goods and services to thecountry of final consumption, rather than the
country or countries of production. The figure
shows that the MF of BRICS countries has been
rising steadily and is now approaching the
global average, representing rising consumption

15

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

Summary for Policy-Makers

16

within the global economy, in a smoothand timely manner year after year, will be
increasingly challenging. Ores and minerals
are finite, and many are geographicallyconcentrated (UNEP, 2015b). Biomass,
while renewable, has a limited rate of renewal,
which places bounds on what can besustainably consumed. Bulk metals such asiron, copper and aluminium play critical roles
in providing large-scale infrastructure, andelements such as indium, platinum, rhodium
and neodymium, though mobilized in smaller
quantities, will be increasingly critical to efforts
to reduce carbon emissions due to their roles
in low-carbon technologies such as solar
photovoltaic cells, batteries, catalysts and windturbines (BMUB, 2012; UNEP, 2010, 2013b,
2013c). Nitrogen and phosphorus are crucial
inputs to land for the production of biomass(BMUB, 2012; UNEP, 2014a). The efficient use
and recycling of such materials can reduce
the risks and threats of serious disruption totheir future availability.

2.1.1.2 Volatility and long-term
increases in resource prices
The second issue relates to the market dynamics
of resource supply, which have produced
highly volatile resource and commodity prices
over time (UNEP, 2015b), and see Figure 6 forcommodity price movements over 2010-15).
In addition, there is evidence that the long,slow decline in resource and commodity pricesthat characterized the twentieth century cameto an end at the start of the twenty-first, with
commodity prices increasing steadily over2000 to 2012 (Dobbs et al. 2013, Exhibit 1,p.6). Despite the dramatic fall in prices in 2014(see Figure 6), and with the exception of fossil
fuels, demand for which may be constrainedby climate policy, it is likely that in due course
demand growth in emerging countries will set
the prices of commodities, including food, on
an upward course again.
High and volatile resource prices can present
serious economic and social challenges by
restricting market access, particularly among thepoorest and most vulnerable groups; hampering
investment, owing to increased uncertainty;
and even undermining peace and security, as
attested by the riots that broke out in numerous
countries in 2007-2008 partly in response tohigh food prices.
If resource efficiency can reduce the demand
for resources, then it may be able to dampen
the negative economic impacts of price volatility,
improve equitable and affordable access toresources, and increase resource security,especially in resource-importing regions.

Summary for Policy-Makers

Figure 6: IMF commodity price indices,
2010-2015.
(2005=100)

225
Energy

200
175

Total

150
125
100
75
Jan-10Jan-11

Jan-12

Jan-13Jan-14Jan-15

Source: IMF (2016) https://www.imf.org/external/np/
res/commod/index.aspx

2.1.1.3 Sustainable use ofrenewable resources
The third issue relates to the need for thesustainable use of renewable terrestrial
and marine resources, such as soils, water,
biodiversity and fish stocks. These resources
critically underpin the viability of such vital
sectors as agriculture, fisheries and forestry.
Vast areas of land are now cultivated to meethuman needs and wants. According to FAO

Global production of primary crops morethan tripled from 1961 to 2013 (FAO, 2016).
Over the same period, global cropland area
increased by around 14 per cent (FAO, 2016).
This was possible due to steady increases in the

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

Non-Energy

statistics, cropland covers 1,580 million hectares(Mha) or close to 11 per cent of the world’s
land area, with agricultural land in total (alsoincluding permanent pastures) covering 4,930
Mha, or a third of the world’s land area. Total
agricultural land increased by about 11 percent from 1961 to 2013 (FAO, 2016). Globallyin 2005 humans consumed around 25 percent of the total biomass produced on Earth’s
land surface in that year (Haberl et al., 2014;
Krausmann et al., 2013). Recently, increases inagricultural land in regions such as South-East
Asia and South America have offset decreases
in regions such as Europe and North America(FAO, 2016). Dalgaard et al. (2008) associate
reductions in cropland in Europe with increased
imports of soybean for cattle feed from Latin
America, as these replace the domestic growingof fodder crops (Dalgaard et al. (2008), in UNEP
(2014a), p. 25). The location of any expansionof agricultural land is significant in terms ofwhat type of land use it replaces, with the lossof biodiversity-rich primary forests a particularconcern in regions such as South America andSouth-East Asia (UNEP, 2014a).

17

18

productivity of land, which in turn wasdelivered by substantial increases in agricultural
inputs. As shown in Figure 7, the area ofcropland equipped for irrigation doubled overthe period, with the application of fertilizers
increasing by around five times. Pesticides arealso a significant input – their application grewalmost three times between 1990 and 2011
(FAO, 2016).
Figure 7: Growth in cropland, agricultural inputs
and crop yields, 1961-2013. Index: 1961=1.
6

Index: 1961=1

5
Cropland area

4

Cropland yield

3

Fertilisers

2

Cropland area equipped
for irrigation

1
0

1961
1964
1967
1970
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
2006
2009
2012

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

Summary for Policy-Makers

Source: Data from (FAO, 2016)

Although this productivity increase has been
important to support a necessary global
expansion in food production, it comes withchallenges. Fertilizer inputs are finite andgeographically concentrated resources, andresource shortages and price rises are apossible outcome of continued high production(BMUB, 2012; Senthilkumar et al., 2014). As
will be discussed in the following section, theextraction and concentrated application of thesecompounds causes pollution. Furthermore, it is
not clear that increasing application of fertilizers
and pesticides can continue to increase yields
indefinitely. There is evidence that yields forcereals are increasing at a slower rate than inprevious decades, and experts expect yield
growth rates to continue to slow (von Witzke etal., (2008); (Bruinsma, 2009; UNEP, 2014a).
At the same time, an increased demand
for food supply may be expected, driven
by population increases, efforts to combat
hunger and malnutrition, and dietary changes
associated with rising affluence (Msangi andRosegrant, 2009; UNEP, 2014a). Access to food isunevenly distributed. In 2015 about 795 million
people, 11 per cent of the world’s population,
were undernourished. More than half of theundernourished people live in Asia, while subSaharan Africa has the highest prevalence, at
23 per cent. The number of undernourishedpeople has decreased from around 1 billion in
1990, which at that time was almost 19 per centof the global population. In the same period(1990-2015) global meat consumption increased
by 90 per cent (FAO, 2015a). Food derived fromrearing animals requires nearly five times moreland for a given level of nutrition than plantbased food (UNEP, 2009).

Summary for Policy-Makers

for biofuels and biomaterials, and loss of land
to the built environment and soil degradation.
UNEP (2014a) estimates that from 2005 to 2050
current trends will lead to a gross expansion of
320 – 849 Mha (an increase of 21 per cent to 55
per cent) of global cropland.5 The contributionof different drivers to this projected croplandexpansion is shown in Figure 8.

Figure 8: Trend of global cropland expansion from 2005 to 2050 for satisfying food demand andcompensation of soil loss.
Low Estimate

Mha
+ 800

High Estimate

LegendGross expansion:+ 849

Food supply
Biofuel supply

+ 600

+ 400
Gross expansion:+ 320
Net expansion:
+ 123

+ 200

Net expansion:+ 495

Biomaterial supply
Compensation forbuilt environment
Compensation forsoil degradation0

Source: UNEP (2015c)
http://www.unep.org/resourcepanel/Portals/50244/publications/Poster1-LandUse-FinalScreen.pdf

5

Net expansion of cropland results from rising demand for food and non-food biomass that cannot be compensated by higher yields.
Gross expansion also includes the shift of cropland to other areas due to losses from severe land degradation – in particular from soil
erosion – and built-up land.

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

Owing to the expected continued future growthin food demand, the OECD projects global
agricultural land (cropland and permanentpastures) to increase by a further 10 per cent by
2030, and by 14 per cent by 2050 (OECD, 2008).
UNEP (2014a) focuses on cropland expansion
and considers – in addition to food demand –other pressures, including increasing demand19

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

Summary for Policy-Makers

20

UNEP’s estimate of the “safe operating space”
for land only allows cropland to expand to up to
1,640 Mha. This represents an expansion of 140
Mha, or a 10 per cent increase from the 2005
cropland area used as the baseline for the study.
With more recent FAO statistics suggestingthat cropland now covers around 1,580 Mha(FAO, 2016), it is clear that the scope for further
growth within the “safe operating space” isvery limited.
Access to clean water is another fundamental
human need. Water consumption for humanuse grew from 600 billion cubic metres per year
in 1900 to 4,500 billion cubic metres per year in2010. This rate of growth in water consumption

was twice the rate of population growth (UNEP,
2012b), reflecting increasingly water-intensive
lifestyles, as well as industrial and agriculturalintensification. At present, agriculture accounts
for 71 per cent of global water withdrawals, theremainder being divided fairly evenly between
industrial and domestic demand (Addams et al.,2009; FAO, 2011). The importance of water tothe intensification of agriculture is evidenced by
the doubling of cropland equipped for irrigation
between 1961 and 2013, as illustrated in Figure 7.
Though the total amount of water in the global
water cycle is unchanging, water resources inparticular areas can become contaminated,
stressed or critically depleted. A rate of waterSummary for Policy-Makers

withdrawal above 20 per cent of a region’s
available internal renewable water resources(IRWR) “represents substantial pressure on
water resources, and more than 40 per centis ‘critical’” (FAO, 2011). East and South-East
Asia have withdrawal rates close to 20 per cent
IRWR, while Western, Central and South Asia

all have withdrawal rates greater than 50 per
cent. In Northern Africa it is 201 per cent, which
implies that water is being extracted at a muchhigher rate than it can be replenished, resulting
in unsustainable depletion of rivers and aquifers(FAO, 2011). The risk of water stress is unevenly
distributed, as shown by Figure 9.

No dataavailable

Absolute
scarcity0

StressScarcity
500

1 000

Vulnerability
1 700

2 500

7 500

15 00050 000Note: The ﬁgures indicate total renewable water resources per capita in m³
Source: WWAP, with data from the FAO AQUASTAT database (http://www.fao.org/nr/water/aquastat/main/index.stm) (aggregate data
for all countries except Andorra and Serbia, external data), and using UN-Water category thresholds.

Source: WWAP (2015), p.12

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

Figure 9: Total renewable water resources per capita (2013).

21

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

Summary for Policy-Makers

22

It is projected that, with average economic
growth and no efficiency gains, by 2030 annual
global water demand will rise from 4,500 billion
cubic metres to 6,900 billion cubic metres.
This is calculated to be 40 per cent higher thancurrently accessible, reliable supplies (Addams
et al., 2009; WWAP, 2015). The result could bethat “one-third of the population, concentrated
in developing countries, will live in basins where
this deficit is larger than 50 per cent” (Addams
et al., 2009). This may lead to effects on foodprices, and indeed to conflict. Increasing climatechange could further exacerbate such problems(WWAP, 2015). Water scarcity is therefore aserious concern in many parts of the world.
Marine and aquatic ecosystems are also
under pressure, with marine biomass
threatened by unsustainable levels of
exploitation. Of commercial fish populations,61 per cent are fully fished and 29 per cent are
fished at biologically unsustainable levels andare therefore overfished (FAO, 2014). Theselevels of extraction threaten serious collapseof some fish populations.

2.1.1.4 Environmental impacts ofresource extraction and use
The fourth issue relates to the environmental
impacts of resource extraction and use.
Mobilizing billions of tonnes of raw materials

each year has serious environmental effects,
in terms of pollution, land degradation andloss of biodiversity.
The extraction and combustion of fossil
fuels is the largest contributor to anthropogenic
climate change. Global primary energy isdominated by fossil fuels: coal, oil and gas,
which are a major source of a wide range ofnegative environmental impacts in addition
to climate change. These include emissionsof acid pollutants (nitrogen oxides – NOx,and sulfur oxides – SOx) that cause acid rain;
the release of small particulates and othertoxic pollutants, which are harmful to humanhealth; and emissions of nitrogen, whichcauses “eutrophication” –the over-enrichmentof environments such as lakes with nutrients,
causing algal blooms that harm ecosystems
UNEP (2010).
The extraction of metals and minerals also
has significant environmental impacts,
for example the release of toxic or acidic
compounds into water, soils and the air, suchas through smelter stack emissions, withcorresponding effects on human health andbiodiversity (UNEP, 2013b). As shown in Figure
7 the increase in the productivity of agriculturalland has been achieved through considerable
increases in agricultural inputs. The extraction offertilizer inputs such as phosphates can create

Summary for Policy-Makers

as its environmental quality (UNEP, 1997). The
main causes of land degradation are watererosion, wind erosion, nutrient mining, water
logging and salinization caused by irrigation,
lowering of the water table, over-use ofchemical inputs, soil compaction and loss oforganic matter (FAO, 2015b; Scherr, 1999).
Globally, according to FAO, about 25 per centof all land is highly degraded or fast degrading.
Around 8 per cent is moderately degradedwith a moderate degradation trend, while 36
per cent is slightly or moderately degraded but
stable. Only 10 per cent of land has started
improving (FAO, 2011).
Overall, the four issues discussed above
constitute significant threats to achieving

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

pollution through the release of heavy metals
and radionuclides (BMUB, 2012). The increased
application of nitrogen and phosphorus
fertilizers has resulted in considerable nutrient
pollution, including eutrophication, increases
in atmospheric ozone, fine particulatematter, acidification of surface waters, which
contributes to biodiversity loss, and greenhousegas (GHG) emissions due to the production of
nitrous oxide (N2O) (UNEP, 2014a). Moreover,the production of fertilizers is energy-intensive
and generates energy-related CO2. Pesticides,
fungicides and bactericides, which have grownin use substantially since 1990 (FAO, 2016), also
have negative environmental impacts.
Intensive land use can also degrade the“productive capacity” of the land itself, as well23

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

Summary for Policy-Makers

24

the SDGs. Resource efficiency is central todiminishing these threats by increasing theavailability of resources that are crucial tohuman development; improving the ability of
all the world’s people to gain equitable andaffordable access to those resources; andprotecting the ecological systems that underpin
those resources and related provisioning
services.

2.1.2 Substantial increases inresource efficiency are essential for
meeting climate change targets ina cost-effective manner
Meeting at the 21st Conference of Parties(COP 21) to the UN Framework Convention
on Climate Change (UNFCCC) in Paris in
2015, the world’s governments pledged tokeep global temperature rise to less than 2°C
above pre-industrial levels. According to theIntergovernmental Panel on Climate Change(IPCC), scenarios in which it is “likely” that
this goal is achieved, “are characterized byatmospheric concentrations in 2100 of about
450 parts per million (ppm) CO2eq”. Such
scenarios require global GHG emissions in
2050 to be 40-70 per cent lower than in 2010,
and for GHG emissions to be “near zero Gt

6

Gigatonnes carbon dioxide equivalent.

CO2eq6 or below in 2100” (IPCC, 2014). Figure
10 shows the breakdown of anthropogenic
GHG emissions in 2010 by economic sector.
Direct emissions refer to emissions generated
within the economic sector listed. Indirect CO2
emissions refer to the emissions arising from theproduction of an intermediary fuel or energy
vector – such as heat or electricity – which isthen used in one of the sectors.
Figure 10: Total anthropogenic GHG emissions(Gt CO2eq per year) by economic sector: energy,
industry, transport, buildings, and agriculture,
forestry and other land use (AFOLU).
Electricity
and Heat Production
25%

Energy
1.4%

AFOLU
24%
Industry
11%

Buildings
6.4%

Transport
14%

49 Gt CO₂ eq(2010)

Industry
21%

Transport
0.3%

Buildings
12%

Other
Energy
9.6%

AFOLU
0.87%
Direct Emissions

Source: IPCC (2014)

Indirect C0₂ Emissions

Summary for Policy-Makers

In the light of this conclusion, the International
Resource Panel (IRP) sent 10 Key Messages on
Climate Change to the COP21 Climate Summit
in Paris. The IRP concluded these messages
as follows: “Raising resource productivity
through improved efficiency and reducing
resource waste … can greatly lower bothresource consumption and GHG emissions. Suchmeasures also confer additional, highly desirablesocial benefits such as more equitable access toresources and invaluable environmental gains
such as reduced pollution. Decoupling economic
growth and human wellbeing from resource use
has, therefore, to be an integral part and prime
concern of climate policy” (UNEP, 2015a).
Taken together, the challenges of achieving
the SDGs and meeting climate change targets
provide a strong imperative for resource
efficiency, which will be needed to reduce thethreats arising from unsustainable resource
consumption.
But there is also evidence that resource
efficiency can bring substantial economic
benefits, including higher rates of economic
growth and increased employment. Thisevidence is documented below.

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

In order to achieve the emissions reductions
consistent with a 450 ppm scenario, the largescale deployment of low-carbon technologies
in energy and land use systems will be critical,
as is explored in detail in numerous scenarios
by the IPCC and others (IEA, 2010, 2012a; IPCC,
2014). However, in addition to supply-side
decarbonization, energy demand reduction
through resource efficiency will also have a
crucial role. The IPCC states that “efficiency
enhancements and behavioural changes, inorder to reduce energy demand compared
to baseline scenarios without compromisingdevelopment, are a key mitigation strategy
in scenarios reaching atmospheric CO2eq
concentrations of about 450 to about 500 ppm
by 2100 (robust evidence, high agreement)”(IPCC, 2014). Among such scenarios, the medianlevel of demand reduction relative to baselines
in the transport, buildings and industry sectors
is between 20 per cent and 30 per cent ineach case. Some of the scenarios analysedshow even higher sectoral demand reductionsof up to 60 per cent (IPCC, 2014). Increasing
resource efficiency is a critical strategy toenable such necessary demand reductions to beachieved, without negatively affecting humandevelopment and well-being.

25

Summary for Policy-Makers

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

2.2 The economic opportunity ofincreased resource efficiency

26

The economic opportunity of increased resource
efficiency may be expressed in three ways. First,
there are ways to increase resource efficiency
that would provide net cost savings. Second,
the negative environmental effects of inefficient
resource use bring substantial external costs.
And third, the cost reductions arising fromincreased resource efficiency have positive
macroeconomic implications, with the potential
to increase economic output and employment.

2.2.1 Costs and benefits of increasing
resource efficiency
There have been a number of estimates of thecosts of increasing resource efficiency, of which
one of the most often cited is from Dobbs et al.
(2011). This states that from the perspective of a
private investor, the savings in 2030 arising from
implementing all the technologies considered
would be $2.9 trillion per year. In 70 per cent ofcases, the required resource-efficient investment
would offer a rate of return greater than 10 per
cent per year. The total $900 billion investment
required “could potentially create 9 million to 25
million jobs” (Dobbs et al., 2011, p. 12).7
It may immediately be asked why, if there aresuch beneficial cost-saving opportunities frominvestments in resource efficiency, investors
do not make the necessary investments torealize these benefits. This issue has been mostthoroughly explored for energy efficiency, but
the arguments apply equally well to otherresources. Sorrell et al. (2004) suggest that the
failure to make cost-effective energy efficiency
investments is the product of three phenomena:••

Market failure, normally identified as aresult of incomplete property rights, positive
and negative externalities, imperfectcompetition and asymmetric or imperfect
information;
Organizational failure, as a result ofimperfect organizational structure andpolicy8; and7

These benefits have been calculated at the market prices of resources prevailing in 2010. To the extent that resource prices have declined since 2010, and this is especially true of fossil fuels, the benefits of resource efficiency will be proportionally less. But even thenresource efficiency can present opportunities to reduce firms’ and countries’ vulnerability to price volatility, and may provide ways toachieve environmental improvements at lower cost than through other means.

8While Sorrell et al. (2004) seem to be thinking of private organizations in this connection, such failure could apply to publicbodies as well.

Summary for Policy-Makers

Non-failure, where organizations andindividuals are in fact behaving rationally in
not taking up the efficiency opportunities
because of hidden costs. These may
include “overhead costs for management,
disruptions to production, staff replacement
and training, and the costs associatedwith gathering, analysing and applying
information” (Sorrell et al., 2004, p.55).

The existence, strength and persistence of thesebarriers vary from issue to issue. Therefore,
attempts to improve resource efficiency shouldseek to understand the barriers individually, inorder to correctly identify the most appropriate
measures to surmount them. In doing so, thereis evidence that increasing resource efficiency
will tend to strengthen the innovation capacityof economies (Bringezu, 2015).

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers•

27Summary for Policy-Makers

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

2.2.2 The benefits of reducing
externalities

28

The extraction and use of resources often
results in negative externalities – thatis, negative impacts, for example on theenvironment, that are not taken into accountin market transactions. Resource efficiency
measures that reduce these externalities will
improve economic efficiency, over and above
any other benefits (such as cost savings) inwhich they may result.
The environmental externalities ofresource use, which may also be considered
subsidies to that use, are very large indeed.
The IMF (Coady et al., 2015) estimated theexternal costs related to climate change andlocal air pollution from burning fossil fuels
in 2015 to be around US $4 trillion. The
potential global gain in economic welfare
from eliminating all fossil fuel subsidies (thatis, those due to both financial subsidies andexternalities) is estimated to be US $1.4
trillion, equivalent to 2 per cent of global
GDP in 2013. Most of this gain would accrue
to the more than 50 per cent of the world’s
population living in Asia, which experiences
a welfare gain equivalent to 6.9 per cent ofregional GDP with subsidy elimination (Coadyet al., 2015). Much of the required reduction
in fossil fuel consumption could be achieved

Summary for Policy-Makers

through increased energy efficiency rather
than reduction in energy service delivery (IEA,
2012b).
Dobbs et al. (2011) calculate that savings tosociety from resource efficiency would increase
from US $2.9 trillion from a private investor
perspective to US $3.7 trillion from a social
perspective if carbon were priced at US $30
per tonne, energy taxes were eliminated, andFigure 11: The top 15 categories of resource efficiency potential.

Fifteen groups of opportunities represent
75 percent of the resource savings
Societal persepective, 2030

Building energy eﬃciency
Large-scale farm yields
Food waste
Municipal water leakage
Urban densiﬁcation
Iron and steel energy eﬃciency
Smallholder farm yields
Transport eﬃciency
Electric and hybrid vehicles
Land degradiation
End-use steel eﬃciency
Oil and coal recovery
Irrigation techniques
Road freight shift
Power plant eﬃciency
Other³

Energy
Water

Land
Steel

Average societal costeﬃciency²

Total resource beneﬁt¹$ billion (2010 dollars)

0.5
0.4
0.5

696
266
252
167
155
145
143
138
138
134
132
115
115
108
106

0.2
0.9
0.2
0.4
0.5
1.2
0.5
0.4
0.5
0.2
0.7
0.3
892

0.6

1 Based on current prices for energy, steel, and food plus unsubsidized water prices and a shadow cost for carbon
2 Annualized cost of implementation divided by annual total resource beneﬁt
3 Includes other opportunities such as food eﬃciency, industrial water eﬃciency, air transport,
municipal water, steel recycling, wastewater reuse, and other industrial energy eﬃciency
SOURCE: McKinsey analysis

Source: Dobbs et al. (2011), Exhibit 4, p. 14
Note: in the figure above, ‘resource savings’ refers to the financial benefits of resource efficiency

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

financial subsidies to energy, agriculture andwater were removed. 90 per cent of this US$3.7 trillion saving would yield an investment
return of more than 4 per cent. The authorsgroup their resource efficiency “opportunities”
into 15 categories that capture approximately
75 per cent of this US $3.7 trillion saving. These
categories are shown in Figure 11. Of these 15
categories, only electric and hybrid vehicles
have a cost that is greater than the benefit.

29Summary for Policy-Makers

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

2.2.3 The macroeconomic benefits ofresource efficiency

30

Investigations into the macroeconomic
implications of increased resource efficiency
have been undertaken using different models.
All suggest that increasing resource efficiency
yields macroeconomic benefits.
In respect of modelling studies of themacroeconomic effects of increasing energy
efficiency, an example is IEA (2012b), whichcalculated the macroeconomic implicationsof its Efficient World Scenario. It found that,compared with the IEA New Policies Scenario,
global GDP would increase by 0.4 per cent by
2035, with energy efficiency policies benefittingenergy-importing countries, but making energy
exporters worse off.
Another example is a report on the circular
economy, which found that implementing
resource efficiency opportunities in buildings,
food waste and transport could increase
European GDP by 11 per cent by 2030 and 27
per cent by 2050 in a circular scenario, comparedwith 4 per cent and 15 per cent under current
trends (Ellen MacArthur Foundation and
McKinsey Center for Business and Environment,2015). In this case the result was driven by
10

technical progress leading to cost reductions in
the use of resources. However, it should be notedthat in the execution of this modelling no accountis taken of any costs that may be incurred inachieving this technical change, or overcoming
the barriers to increased efficiency mentioned
above (Böhringer and Rutherford, 2015).
A different macro-econometric modelling
exercise undertaken for the European
Commission found that resource productivity
improvements of around 2 per cent to 2.5
per cent per annum could be achieved
with net positive impacts on EU28 GDP (CEand BioIS, 2014). However, in this case theincrease in GDP is driven not so much by theincrease in resource productivity as by thepolicy mechanism used to bring it about – anenvironmental tax reform (ETR).10 Anotherstudy using a similar model found that theresource efficiency measures increase global
GDP by 5.2 per cent in 2050, while the use of
abiotic raw materials falls by more than 50 per
cent, driven largely by higher investment than in
the reference scenario (Meyer et al., 2015).
Finally, UNEP compared the economic
outcomes of Green and Business as Usual(BAU) investment paths UNEP (2011b). The

The analysis assumes that: “an environmental tax such as an emission tax is used to cut GHG emissions, but revenues generated areused to stimulate the economy at the same time.” (CE and BioIS, 2014, p.46).

Summary for Policy-Makers

study found that economic growth in theGreen scenario became higher than that in
the BAU run after about 2017, with the green
investments proving more productive than theconventional investments they replaced(UNEP 2011b, Figure 14, p.523).

It should be noted that, if increased resource
efficiency is achieved, there is a danger that theeconomic growth it has stimulated will increase
resource use and environmental impacts

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

If increased resource efficiency leads toincreased output, then other things being equal
it might be expected that it would also lead toincreased employment, and this is indeed theresult of some studies. Thus the CE and BioIS(2014) study reports a 1 per cent increase in EU
employment (about 2 million net extra jobs) in
its resource efficiency scenario by 2030, withsimilar gains reported by Meyer et al. (2015).
In the UNEP (2011b) Green scenario, global
employment is 0.6 per cent (21 million) lower
in 2020 than in the comparable BAU case, but
28 million higher by 2050. A report by theClub of Rome that uses an input-output model
rather than a full macroeconomic model findsthat measures to increase energy and resource
efficiency, and the deployment of renewables,
can reduce unemployment by up to a third in
the five European countries studied (Wijkman
and Skånberg, 2015)

through what is called the “rebound effect”. This
arises because money saved through resource
efficiency can be spent either on more of thesame good or service, or on other goods orservices, both of which may increase resourceuse. Rebound effects can be mitigated by policy
measures (Herring and Sorrell, 2009), mostobviously where these measures increase
the cost of the resource that has been thesubject of the efficiency measure (for example,
through resource or environmental taxation).
This will be required where the objective of
resource efficiency improvements is actually
to reduce the quantity of resources used or its
associated environmental impacts by a given
amount (for example, if increases in energy
efficiency are intended to aid the attainmentof fixed carbon reduction targets), and explains
why publications focusing on green growth orincreased resource efficiency often advocate
a shift of taxation from labour or capital topollution or the use of resources (for example,
OECD, 2015; UNIDO, 2013; World Bank, 2015).
Macroeconomic modelling results such as
those reported above should include any
rebound effects, which are likely to counteract
to some extent the impact of resource
efficiency on reducing consumption and related
environmental impacts.

31

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

Summary for Policy-Makers

32

3. Best practices forincreasing resource
efficiencyT

he modelling studies cited in the previous
section differ in the size of their estimates,
but all of them show that increasing
resource efficiency can lead to higher
economic growth and employment, for mostof them even when environmental benefits are
not taken into account.

Original economic modelling of resource
efficiency carried out for this study further
11

confirms such trends. The novel analysis
adopts an integrated multi-model framework
to explore potential future pathways for global
resource use, greenhouse emissions, andeconomic activity to 2050, through ambitious
action to improve resource efficiency andaddress climate change.11 The results of thiswork are summarised in the six graphs of
Figure 12, which show that there is substantial
potential to achieve economically attractive

The scenario projections are developed using a multi-model framework, linking a global computable general equilibrium (CGE)
economic model (GTEM) to two other models: GLOBOIM, providing additional detail on land use and biofuels, and MEFISTO, a stockflow model providing insights into resource efficiency potential. This builds on internationally recognized integrated nexus modelling
approach used in the Australian National Outlook (see Hatfield-Dodds et al. 2015). Further details of the analytical approach and resultsof this modelling exercise will feature in the forthcoming full IRP Assessment Report summarized here (UNEP, forthcoming in 2016a).

Summary for Policy-Makers

2050 (top left graph), against the baseline.
When resource efficiency is implemented in
combination with ambitious global action on
climate change, global resource extraction canbe reduced even further by up to 28 per cent,compared to existing trends (top left graph).
In this scenario, the modelling also finds thatthe stronger economic growth associated withresource efficiency policies more than offsets
the near-term economic costs of ambitious
climate action, helping to achieve emissions
reductions of around 60 percent globally (topFigure 12: Global and G7 projected resource use, economic activity and GHG emissions under existing trends,
resource efficiency policies, and resource efficiency plus a 2°C climate pathway, 2010-2050.

50
0

8

2030

2040

2050

30
20

22-31%
reductionin 2050

10
0
2010

2020

2030

2040

2050

2020

2030

2040

62% reduction
from 2015

0

2050

2010

G7 economic activity (GDP) per capita$’000 USD (2015 real )

40

40
20

2010

2060

15%
increasefrom 2015

60

4
0

2020

G7 Resource Use (DMC)
Billion Tonnes (DMC)

1.6%
higher in
2050

12

Gt CO₂e17-28%
reductionin 2050

100

80

16

60

1.3%
higher in
2050

40
20
0
2010

Existing Trends (3�C pathway)

2020

2030

2040

2050

G7 Greenhouse Gas Emissions
2080

15-85%
reductionfrom 201515

Gt CO₂eBillion Tonnes (DMC)

150

Global Greenhouse Gas Emissions

Global economic activity (GWP) per capita$’000 USD (2015 real )Global Resource Use (DMC)
200

10
5

2020

2030

2040

2050

Resource Eﬃciency (3�C pathway)

0
2010

2020

2030

2040

2050

Resource Eﬃciency plus (2�C pathway)

Policy impacts are for Resource Eﬃciency (blue stripes) and Eﬃciency Plus (green solid) scenarios in 2050, relative to Existing Trends of 2015

Source: UNEP (forthcoming in 2016a).

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

resource efficiency, providing win-win outcomesthat reduce environmental pressures while
increasing economic growth. The modelling
projects that, under existing trends, natural
resource extraction will increase from 85 to 186
billion tonnes over the next 34 years to 2050
(top left graph), reflecting a 28 percent increasein population and a 71 percent increase in percapita resource use. In contrast, the modellingsuggests that resource efficiency policies andinitiatives alone could reduce global resource
extraction by around 17 per cent globally in

33

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

Summary for Policy-Makers

34

right graph) and 85 percent in G7 nations(bottom right graph) by 2050, relative to2015 levels. This puts the world on track tolimit climate change to well below 2°C, whileboosting the value of economic activity in
2050, compared to existing trends in 2050, by
1 percent globally (top middle graph) and in G7
countries (bottom middle graph) in 2050.
Though analysis of policy options to support
resource efficiency improvements is beyond thescope of this report,12 it nonetheless provides
valuable information and knowledge forpolicy-makers and other stakeholders on how
increased resource efficiency can be realized inpractice. The ensuing part of the report presents
examples of how barriers to increased resource
efficiency are being successfully addressed,
through international and national programmes,
the implementation of new concepts, andthe committed actions of local and national
governments, businesses and citizens andcommunities. The main part of this section
explores best-practice examples of how resource
efficiency has been successfully increased
across the four main categories of resources –materials, land and soils, water, and energy. It
concludes by stressing the importance of crosscutting, systemic or “resource nexus” issues.
12

3.1 Overcoming barriers toresource efficiency
Section 2 of this report showed that there
are market and organizational failures andhidden costs that prevent increases in resource
efficiency, even when they seem to be costeffective. But there are many other barriers toresource efficiency that arise because of thebasic difference between economic efficiency,
as expressed through well-functioning markets,and resource efficiency, expressed through low
wastage of materials and their retention ofvalue over long periods of time.
The most important of these barriers arises
because of the relatively low cost of materials
and of generating waste, compared to thecosts of labour and logistics. Components andproducts could in many cases be designed withless material to meet their design purpose, withless material wastage during the manufacturing
process, to last longer and to be repaired
more easily. However, this sometimes does
not happen because the added costs in termsof labour and logistics to design, manage andrepair the components and products does
not justify the saved material cost or the
avoidance of a new purchase. For example, inThis task is being undertaken by the Organisation for Economic Co-operation and Development (OECD), which was invited by the
G7 to develop policy guidance to supplement the IRP’s scientific synthesis report on Resource Efficiency: Potential and Economic
Implications.

Summary for Policy-Makers

There are also innumerable examples in dailyexperience of when it is cheaper to throw awayeven relatively new products than to have themrepaired, even when repair is possible. Such
resource-inefficient outcomes frequently reflect
an economically efficient calculus of the relative
magnitude of the costs of materials, and thecosts of design, logistics and repair.
Remedying such situations requires public
policies either that change directly the relative
prices of labour and materials, for example
through reduced labour and increased resource
taxation, or which in other ways give greater
value to materials during and at the end of
the lives of the components and products inwhich they are embodied. Such policies areoutside the scope of this report, but it should

be noted that it will be impossible to achieve
considerable increases in resource efficiency
across the economy in their absence.

3.2 Initiatives and programmes forincreased resource efficiency
There are numerous international programmes
and initiatives to increase resource efficiency,
and even more at national levels. This
report mentions a few important initiatives toexemplify what public policy and committed
corporate and citizen action can achieve.
One of the most systematic approaches
to increasing resource efficiency at theinternational level has been throughthe concept of Sustainable Consumption
and Production (SCP). The 10-Year Frameworkof Programmes on Sustainable Consumption
and Production (10YFP) was adopted at
the Rio+20 conference in 2012 as a mechanism
for achieving this shift in consumption andproduction patterns (UN, 2012). The 10YFP
programmes are organized around thematic
areas, which aim to build capacity to implement
policies, voluntary instruments, management
practices, information and awareness-raising
activities to promote the shift to SCP patterns.
Another global programme is the Resource
Efficient and Cleaner Production (RECP)
initiative, which seeks to improve industrial

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

the construction sector, materials are often
found to be over-specified beyond the needsof the safety standards (UNEP, 2014b). Material
wastage during manufacture of products andcomponents can also occur when parts are cut
from standardized intermediate products suchas metal sheets, leaving as much as half ofthe original material behind as waste. In many
situations, “counter to expectations, it makes
good business sense to over-specify materials
when doing so allows a greater saving in labourcosts, and this is a difficult issue to overcome”(Allwood, 2014).

35

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

Summary for Policy-Makers

36

productivity while reducing industry’s
dependence on natural resources anddiminishing the generation of waste andharmful emissions. There are now around
60 National Cleaner Production Centres that
pursue RECP practices in many developing
and transition economies. Activities include
industrial waste minimization, eco-innovation,
eco-industrial parks, transfer of environmentallysound technologies, responsible production
and safe and innovative chemicals management(including chemical leasing), new businessmodels, water stewardship, life-cycle based
approaches, product and organizational foot-printing, eco-labelling and corporate reposting(UNEP, 2016a; UNIDO and UNEP, 2015).
The idea of a “circular economy” is also
promoted internationally, including by China,
the European Commission, Japan and manyothers. A recent example is the initiative of theEllen MacArthur Foundation. The Foundation– which defines circular economy as “one thatis restorative and regenerative by design, andwhich aims to keep products, components andmaterials at their highest utility and value at
all times, distinguishing between technical andbiological cycles” – works through a number

Summary for Policy-Makers

of programmes. These seek to bring together
businesses, governments, cities and universities,
so as to accelerate a shift towards and build
capacity around a circular economy (Ellen
MacArthur Foundation, 2016).

In 2015 the European Commission adopted
a Circular Economy Package to stimulate
the transition of European businesses andconsumers towards a circular economy, where
resources are used in a more sustainable
manner. The mix of regulation and incentives
to encourage greater recycling and reuse isenvisaged to help protect the environment andmitigate climate change, alongside fostering
economic growth, job creation, investment andsocial fairness (European Commission, 2015).
Many countries have found it useful to frame
their policies for resource efficiency in terms ofa resource management hierarchy, one of themost influential of which has been “the 3Rs” –13

The 3Rs concept can of course be built uponand expanded. Each of the terms can beconsidered a broad designator for a varietyof activities. In Japan, the sound materialcycle society (SMCS) policy sets out five steps
in order of priority: reduce, reuse, recycle,
energy recovery and final disposal. A similar
waste hierarchy is adopted in the EU’s Waste
Framework Directive.
The Kobe 3R Action Plan was also thebuilding block for the G7 Alliance on Resource
Efficiency, established in 2015 as a forum toshare knowledge, and to collaborate withbusinesses, small and medium enterprises(SMEs) and other relevant stakeholders toadvance resource efficiency opportunities,
practices and innovation (G7, 2015).

Circular Economy Promotion Law of the People’s Republic of China, http://www.fdi.gov.cn/1800000121_39_597_0_7.html

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

China adopted the Circular Economy Promotion
Law in 2008. The legislation aims to decrease
the use, and maximize the recycling andrecovery of materials in production andconsumption. As part of its implementation,
the country has launched a large number ofprogrammes and projects.13

reduce, reuse, recycle. In the context of
the G7, the 3R concept has played a key role
within resource efficiency strategies. The 3R
Initiative to encourage more efficient use ofresources and materials was launched at the 3R
Ministerial Conference in Tokyo in April 2005
(Moriguchi, 2007; Takiguchi and Takemoto,2008). Later in 2008, the Kobe 3R Action Plan
was adopted under the Japanese presidencyof the G8.

37

Summary for Policy-Makers

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

3.3 Best practice examples
of successful resource efficiency

38

The ensuing part of the report documents a
number of best practices and solutions forincreasing resource efficiency. It distinguishes
between different categories of resources(namely, materials, land and soils, water, andenergy), but without losing sight of their criticaland complex interactions, synergies andtrade-offs.

3.3.1 Materials
In the area of materials, recycling has to datereceived the greater part of policy attention
through national and local government
strategies and targets. However, governments
are becoming increasingly aware of thebenefits of moving upwards through theresource management hierarchy, and seeing
material efficiency policy not just as a fixed
target, but as a transition path. Ideally, reducing
demand would be the first priority of material
management strategies, as it reduces the energy
use and environmental impacts of extracting andprocessing materials. Experience in Germany
suggests that, with guidance, improving material
efficiency can yield quick benefits for somebusinesses. The German government’s material
efficiency agency (demea) offers quantified
material flow analysis to help small and medium-sized enterprises (SMEs) to identify materialsavings potentials. On average, companies saved
2.3 per cent of annual company turnover, withsmaller companies saving a greater proportion.
Investments generally paid off within 13 months(UNIDO, 2013).
More substantial material reductions in productmanufacturing are likely through improved
innovative design approaches. An importantdevelopment in this regard may be advancesin 3D printing. This allows highly customized
components to be produced to specification withno wastage. General Electric is now producing
nozzles for jet engines in this manner, withsignificant material saving reducing the weightof the component by 25 per cent (Despeisseand Ford, 2015). Computerization can also
assist better design of the arrangement ofblanks to fit more closely on a fixed width sheet,reducing material wastage during component
manufacturing. Such techniques are used in the
textile industry and are also being adopted formetals (Allwood, 2014; UNEP, 2014b).
Synergies between companies also offer
potential for mutual benefit. For example,
Abbey Steel in the UK has found a niche using
off-cuts left over from material blanking sheets.
It purchases blanking scrap from car bodymanufacturers and cuts it into regular blanks
for manufacturers of smaller components

Summary for Policy-Makers

The industrial symbiosis concept is also at
the heart of the Japanese Eco-Town
programme, which has led to the establishmentof 26 Eco-Towns across Japan. The aim of thisgovernment-led programme was to reduce
waste going to landfill sites, of which there
was a serious shortage, and to regenerate local
industries. As such a key strategy was
the conversion of waste from one industrial
process into a valuable input for another(Van Berkel et al., 2009).
14

For example, the Kawasaki Eco-Town “aimsprimarily for effective utilization of residential,commercial and industrial wastes generated in
the city and recycling these into raw materials
that can be used by industries located in thecity (for example, cement and iron and steel
works)” (Van Berkel et al., 2009). Specificexamples of recycling activities in Kawasaki
are recycling of plastic as a reductant for
blast furnaces, for concrete formwork and forammonia production; as well as paper recycling
and PET-to-PET15 plastic recycling. As well as
reducing material waste, Dong et al. (2014)
estimate that the industrial symbiosis strategy

The classic definition of industrial symbiosis comes from Chertow (2000, p.313): “[I]ndustrial symbiosis engages traditionally separate
industries in a collective approach to competitive advantage involving physical exchange of materials, energy, water and by-products.”
There are numerous case studies of successful applications of industrial symbiosis, through the work of the National Industrial Symbiosis
Programme (NISP), which was pioneered in the UK but has now been replicated across 25 countries (see NISP 2009 and http://www.
nispnetwork.com/media-centre/case-studies).
15
PET stands for polyethylene terephthalate.

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers(Allwood, 2014). This is an example of industrial
symbiosis.14

39

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

Summary for Policy-Makers

40

in Kawasaki reduced life-cycle carbon emissions
by around 14 per cent, mainly from iron andsteel, cement and paper manufacture.
As a result of government subsidies, 61
recycling facilities have been established acrossthe 26 Eco-Towns, with a combined capacityof nearly 2 million tonnes of waste per year.
However, Van Berkel et al. (2009) find that forevery government-subsidized recycling plant,
a further 1.5 plants were built by the private
sector without subsidy. This suggests thatgovernment actions to establish an industrial
symbiosis “ecosystem” can act as a springboard
for further private sector-led development ofenvironmental industries.

Industrial symbiosis is also well establishedin other countries. In the case of China,
Yu et al. (2014) report on the Xinfa group ofindustries, a cluster of various process plants
with aluminium production at its core.
The cluster has established 11 industrial
symbiosis links, including coal ash frompower plants used to make bricks; carbide
slag used as a substitute for slaked lime inalumina production; carbon monoxide off-gas
from the calcium carbide factory burned forenergy; red mud from alumina production
reused as a building material. The measures
have been estimated to reduce carbon
emissions by 11 per cent (Yu et al., 2014;
Yu et al., 2015).

Summary for Policy-Makers

Remanufacturing is another concept withgrowing interest. It involves the disassembly of
product components and their remanufacture
into modules or products with “as new”
qualities. Potential barriers to remanufacturing
are the public perception of the goods as
second hand, regulations that inhibit re-entry ofmaterial once classified as waste into the supply
chain, as well as market access restrictions ofremanufactured products.
Allwood et al. (2011) list some examples ofremanufacturing, including remanufacturingof engine blocks, tyre remanufacture, theremanufacture of appliances, packaging andautomotive parts. A related observation isthat “successful remanufacturing tends tooccur in more vertically integrated companies,
but it is not clear if this is cause or effect”.
Products that have been amenable tosuccessful remanufacturing “are typically at
the mature end of their life cycle, in a market
with slow technology development” (Allwood
et al., 2011, p. 370). This guards against
components becoming redundant before theremanufacturing cycle is complete.
The frequent coincidence of remanufacturingwith vertical integration and maturetechnologies suggest that potential barriers, inaddition to waste regulation, may be the multiactor and fast-evolving nature of many productmarkets and their supply chains. Considerable
attention to cross- and within-industry
coordination and communication between
various, sometimes competing, actors, may be
crucial to facilitate further development of thispromising area.
Many of the novel approaches to material
efficiency discussed in this section could be
assisted by the emergence of new businessmodels. Product service systems such as leasing
are important and widely transferable models.
In general terms, rather than a customer buying
and owning an individual product, a leasing
model involves a customer contracting with

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

Park et al. (2016) report on the first phase of
the Eco-Industrial Park (EIP) programme in
Korea, from 2005 to 2010. The projects involved
product, energy and water reuse between
industries. They calculate that the 47 projects
reduced material waste by 477,633 tonnes, aswell as saving energy and reducing emissions
and wastewater. The projects also generated
around US $97 million of cost reduction fromenergy and material savings, and US $92 millionof revenue generation from selling by-products.
The authors observe that projects to generate
revenue from by-products tend to have a higher
rate of return than projects to generate savings
from material and energy efficiencies, due tothe larger upfront investment typically requiredin the latter case (Park et al., 2016).

41

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

Summary for Policy-Makers

42

a company for the provision of a service. The
ongoing contract places a greater incentive on
the company to design and provide productsthat can be operated, maintained or replacedin a more resource-efficient manner. Examplesof leasing models can be seen in car-sharing
clubs, building services and office supplies(UNIDO, 2013; WRAP, 2016a). At the industrial
scale an interesting example is chemical leasing.
With chemical leasing the producer sells thefunctions performed by the chemicals – such as
number of pieces cleaned, or area of products
coated – rather than the chemicals themselves.
The responsibility of the producer is thus
extended “and may include the management of
the entire life-cycle” of the chemical products(UNIDO, 2013). One such project, reported byErbel (2008), is a collaboration between PERO,an Austrian manufacturer of metal-cleaningmachines, and SAFECHEM, a subsidiary of the
Dow Chemical Company of Düsseldorf, Germany.
These partners were contracted to provide
chemical cleaning services for an Austrian
manufacturer of car parts, Automobiltechnik
Blau. The model allowed the customer tooutsource the chemical cleaning activities thatwere not within its core competencies. The
stability of the contract enabled the contractors
to invest in high-quality cleaning equipment,
which would not normally be chosen in typicalmarket conditions due to their high upfront

cost, but which yield longer-term returns. Thispilot project was expected to be generating
positive returns by its second year. It isestimated that arrangements of this kind can
reduce energy use by around 50 per cent andsolvent use by around 70 per cent (Erbel, 2008).
Recycling rates vary highly among countries
for administrative, economic and technicalreasons. For some countries lack of access toand cost of technologies are a barrier. Recycling
rates also vary among materials, largely driven
by the convenience with which the materials
can be accessed from waste streams, and thevalue of those materials. Recycling rates ofsome bulk metals such as iron, zinc, copperand aluminium are already high (60 to 90 percent), and rates for precious metals such as
gold, silver and platinum are also quite high
(50 to 70 per cent) (UNEP, 2015a). Recyclingof bulk metals has significant energy benefits
compared to production from extracted
raw material: steel, copper, and aluminium
recycling can reduce 60-75 per cent, 84-88
per cent, and 90-97 per cent of energy used
for primary metal production, respectively(UNEP, 2013b). However, according to a study
by UNEP (2011c), less than one-third of some
60 metals studied have an end-of-life recycling
rate above 50 per cent and 34 elements are
below one per cent recycling. Specialty metals
such as lithium, gallium, germanium, indium

Summary for Policy-Makers

Incentives for resource efficiency are also
important for waste management. For example,
in the 1990s the great majority of UK waste wassent to landfills, because this was the cheapest
mode of waste disposal, once the costs ofcollection and infrastructure for recycling weretaken into account. In 1996 the UK introduceda landfill tax for non-inert waste at the rate of
GBP £7 per tonne, which increased steadilyin the following years, reaching GBP £82 per
tonne in 2015. Recycling rates in the UK havealso increased greatly, reaching nearly 45 per
16
17cent for household waste in 2014,16 while
the overall proportion of UK waste that waslandfilled in 2012 was 26 per cent.17 Whileother policies will certainly have contributed
to this major change in waste management
practices, the landfill tax is likely to have playeda very significant role.
Zero Waste Europe reported two casestudies from different regions of Northern Italy.
In the town of Capannori and in the city ofTreviso, rates of domestic waste segregation
for recycling now exceed 80 per cent. In bothareas, residents segregate their recyclable
waste into multiple streams. They are
incentivized by “pay as you throw” systems,
under which they are charged according to
the weight of non-recyclable waste. Incentives
are also provided in both municipalities toencourage composting. Transparency andcommunication are also important to thesuccess of the schemes. In Capannori residents
were extensively consulted and provided withinformation prior to the introduction of themeasures, and in Treviso an online databaseallows residents to track what waste has beencollected from them and to understand how
their charges have been calculated (Simon,
2015; Van Vliet, 2013).

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/496508/Digest_waste_resource_2016_v2.pdf
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/487916/UK_Statistics_on_Waste_statistical_
notice_15_12_2015_update_f2.pdf

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

and tellurium are amongst those with lower
recycling rates. They are typically used in verysmall quantities in individual products, which
are often not designed in a way that facilitates
disassembly for recycling. They also do nothave the inherent value of precious metals, sothat there is insufficient economic incentive
to collect, extract and recycle them. Increases
in the recycling rates of such metals may befacilitated if products were designed with aview to their disassembly and recycling at
the end of their lives. Recycling of specialty
metals may become increasingly important as anumber of such metals are key constituents of
low-carbon technologies such as solar PV cells,
wind turbines and batteries.

43

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

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44

3.3.2 Land and soils
As noted in Section 2, continuation ofcurrent trends in land degradation could resultin a considerable loss of arable land and needfor further cropland expansion. Hence, therestoration of degraded agricultural land, andthe protection of currently stable or mildly
degraded land through practices that retain
soil nutrients, are important strategies towards
improving the overall productivity of agriculture
whilst reducing resource and environmental
impacts. UNEP (2014a) estimate that a mix ofsuch resource efficiency strategies could reduce

the projected 320-849 Mha increase in grossglobal cropland shown in Figure 8 by about 160320 Mha.
High-input agricultural systems tend to entail
greater environmental impacts, and may in any
case be unaffordable for low-income farmers.
Monteith (1990) describes a sustainable land
management system as one in which “outputs
do not decrease when inputs are not increased”.
There are a number of integrated approaches
that aim towards this ideal, such as agroecological approaches, conservation agriculture,organic agriculture, agroforestry and integrated

Summary for Policy-Makers

crop-livestock systems (FAO, 2011). As one
example, Altieri (2002) identifies a number ofprinciples of sustainable agroecology:
•
•

•
•

The specifics of implementing these principles
vary in different contexts. Plant diversity has
been shown to improve soil health, nutrient
cycling and biodiversity – for example theplanting of legumes among other crops canenhance nitrogen fixation. Planting trees
alongside crops can improve soil fertility
through nitrogen fixation, by creating moresoil organic matter, and due to the fertilizing
effect of dung from animals that graze in theshade of the tree. In Zambia, 160,000 farmers
have planted nitrogen-fixing trees among
their crops. It sheds its leaves during early
rainy season and remains dormant during thecrop-growing period. This means it does notcompete for light, nutrients or water during thecrop growing season. According to Zambia’s

Zero- or no-till practices can help to protect
soils and reduce moisture loss. The benefits ofreusing all available biomass may pay particular
dividends in integrated crop-livestock systems.
In such systems manure from livestock may betransferred to the soil to improve its fertility,
and crop residues may provide additional feed
for animals (FAO, 2011).
Restoring degraded land can be capitalintensive, and this can constitute a barrier inregions where the ownership of land is notclear, and where farmers occupying the land
do not have the capital to make the required
investments. However, many of the principles
described above do not necessarily require
major capital investment. Nonetheless, they
do require knowledge, in order to implement
the right combination of measures given eachspecific context, to maximize synergies. Thus,
another important barrier is lack of informationand education. As UNEP (2014a) notes, “there
is a large need to expand the outreach andextension education efforts to ensure that
research results on improved management
practices are transferred and adopted rapidly
by farmers”.

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers•

Recycle and reuse all available biomass
within the farming system.
Grow plants by building soils, soil organic
material and biotic activity.
Minimize soil losses by protecting fromdirect solar radiation, strong winds anderosive water flows.
Maximize diversity to increase resilience.
Enhance biological interactions andsynergies.

Conservation Farming Unit, maize yields
from fields planted with acacias averaged
4.1 t/ha, compared to 1.3 t/ha outside of thetree canopy (FAO, 2011).

45

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

Summary for Policy-Makers

46

Numerous efforts to improve farming
practices focus on improving knowledge
sharing and communication between farmers.
In many cases progress can be made withinterventions of low capital intensity. For
example, projects in Tanzania and Malawi
showed the importance of networking between
farmers for disseminating knowledge (Majule,2011). “Plant clinics” have been set up in
14 countries, as local meeting places where
farmers can seek advice from local experts.
Boa and Bentley (2009) estimate increases
of income averaging US $801 per hectare forfarmers receiving advice from plant clinics. In
Central America, the Campesino a Campesino(farmer to farmer) network is another example
of knowledge sharing (UNEP, 2014a).
The most cost-effective strategy for sustainably
increasing production is often simply better
matching land use with land potential througheffective land use planning (UNEP, 2014a).
This both limits the need for restoration
by minimizing degradation, and focusesintensification and climate change adaptation
investments where they are likely to yield thehighest financial returns (Herrick et al., 2016).
There are numerous environmental benefits
associated with less-intensive farming methods.
In a comparison of conventional and organic
farming systems, Hülsbergen and Küstermann(2007) found the GHG emissions to be threetimes higher in the conventional case. However,in developed countries the market pressuresand tight margins experienced by farmers meanthat high-input systems are incentivized. A
challenge of organic farming in this context isthat yields can be significantly lower, depending
on soil type and other conditions (Seufert etal., 2012). However, Ponisio et al. (2014) findthat diversification techniques such as multicropping and crop rotation can substantiallyreduce the yield gap between organic andconventional systems.
In the EU context, Buckwell et al. (2014) also
call for “added knowledge which will affect how
physical inputs are combined and managed”, orin shorthand “more knowledge per hectare”.
Buckwell et al. (2014) report on a study by Elliot
et al. (2013) comparing 20 UK farms on fiveindicators: food production intensity, carbon
footprint, nitrate losses to water, ammonia
losses to air and biodiversity. One of the farms(a mixed farm) was performing well on all
indicators, and three others were performing
well on at least three criteria and moderately
on the others. The study shows, first of all, thatmeasuring performance is possible and may be
a useful guide to improving performance; it also
shows that good performance across a range
of environmental criteria at the same time asachieving high food productivity is possible.

Summary for Policy-Makers

Buckwell et al. (2014) describe this outcome as“sustainable intensification”.

Health, climate and land pressure issues
can all be ameliorated by reducing the overconsumption of meat, and excess calories
more generally. Barriers to progress in thisarea are the preference and increasing abilityof people to pay for meat-intensive diets; thelow prices of meat available through mass
production; and general habits and cultural

The provision of nutritional guidelines is a clear
way to address this issue. For example, theofficial Nordic nutritional recommendations
give strong guidance towards less meatintensive diets, citing environmental arguments
as well as health reasons (Fogelholm, 2013).
There are examples of voluntary informationraising schemes that aim to improve consumers’
understanding of healthy diets. One example isthe “Livewell for Life” project (WWF and Friendsof Europe, 2015). This makes suggestions fordifferent healthy diet combinations, tailoredto the cooking cultures of three different
countries – France, Spain and Sweden. As well
as being nutritionally beneficial, it is calculated
that the proposed country-specific “LiveWell
plates” if widely adopted would cut GHGs

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

Nutrient loss from soils can be mitigated byefforts to recapture nutrients from food chain
waste, as well as other waste streams, andreapply them to soils. Senthilkumar et al. (2014)
report that, in the case of France, the recycling
efficiency of phosphorus is 51 per cent acrossall waste streams. BMUB (2012) reports that
the German government is examining potential
measures to increase rates of phosphorus
recovery from waste streams such as sewage
sludge, waste water, slurry and fermentation
residues. Significant dissipation of phosphorus
also occurs in industrial processes. In Japanthe quantity of phosphorus contained indephosphorization slag from steel making iscomparable to its total imports of phosphateore. Technologies are being proposed to recoverphosphorus from this source, which could
create a significant new phosphorus stream(UNEP, 2013c).

factors. However, a potential “win-win” is thatless resource-intensive diets would in manycases have significant health benefits to theindividuals concerned. In particular, meat
consumption in most industrialized nations ismuch higher than is deemed to be healthy. In
the EU currently, protein intake is 70 per centhigher, and saturated fats 42 per cent higher,
than the World Health Organization (WHO)recommendation (WHO, 2007); red meat
consumption is more than twice the maximum
recommended by the World Cancer Research
Fund (WCRF and AICR, 2007; Westhoek et al.,2015).

47

Summary for Policy-Makers

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

from food supply chains by 25 per cent by 2020.
There is currently very little information about
what, if any, impact such schemes have had –nonetheless there seems to be very substantial
potential for co-benefits of improved healthfrom more resource-efficient diets.

48

Reduction of food waste is also a major resource
efficiency opportunity. Figure 13 shows thequantities of food losses and waste per capita,
at consumption and pre-consumption stages,
in different world regions. It shows that there
are high levels of consumer waste (consumers
throwing away unwanted food) in industrializedcountries. Supply chain waste is also significant
in industrialized countries, due to economies
of scale and the “supermarketization” process,where high levels of waste are a by-product ofa system geared towards ensuring shelves arecontinuously stocked with products that meethigh uniform cosmetic standards, as well asbasic food quality standards.

The Courtauld Commitment, convened by WRAPin the UK, is an agreement among retailers andsuppliers designed to reduce waste. During
its second phase (2010-2012) it worked withretailers to reduce packaging and increase theshelf-life and fridge-life of foods. It reports thatduring the same period, food packaging was
reduced by 10 per cent, wasted household foodand drink by 3.7 per cent, and supply chain
wastage by 7.4 per cent (WRAP, 2016b).
Supply chain waste also occurs in developing
countries. Feedback (2015) reports on
factors driving food wastage in the Kenyan
horticultural export sector, which include theneed to discard edible food due to exacting
cosmetic specifications, market volatility
causing cancellation of orders after crops havebeen grown, and the lack of domestic markets
for export products. One example is given of
the effectiveness of simply relaxing cosmetic
standards. Supermarket retailers of French

Figure 13: Per capita food losses and waste, at consumption and pre-consumption stages, in different regions.
Per capita food losses and waste (kg/year)
350

Consumer

300

Production to retailing

250
200
150
100
50
0
EuropeSource: Gustavsson et al. (2011)

North
Industrialized Sub-Saharan North Africa,
America andAsia
West andAfricaOceania
Central Asia

South andSoutheast
Asia

Latin America

Summary for Policy-Makers

Supply chain waste in developing countries canalso be caused by poor storage and processing
conditions. In such cases, significant resource
efficiency gains may be available with relatively
simple measures. The Rathkerewwa Dessicated
Coconut mill in Sri Lanka was assisted under
UNIDO’s RECP programme to identify material
efficiency measures. These included laying
rubber carpets on the floor of the loading bays
to reduce the likelihood of damage to coconuts
during loading and unloading, which would
cause them to be thrown away; awarenessraising among employees to avoid waste at
the paring stage; reduction of wash water; andre-using coconut shells to fire the boiler. These
measures enabled significant reductions ofbiomass wastage, and also saved energy. The

combined measures provided savings of
US $200,000 for an investment of less than
US $5,000 (UNIDO, 2013).

3.3.3 Water
There are examples of relative and absolute
decoupling of water use from GDP, particularly
in countries and cities in which water shortage
and scarcity are issues of concern. Between
2001 and 2009 Australia’s GDP grew by 30 per
cent, while its water consumption reduced
by around 40 per cent. This was achieved at
negligible cost, through cost-effective measuresin water efficiency and demand reduction(UNEP, 2014b).
Around 70 per cent of water extraction is for
agriculture, hence more efficient irrigation
techniques offer major potential for watersaving. Frequently such techniques also offer
the co-benefit of increasing agricultural yields.
Compared to traditional flood irrigation,
irrigation techniques such as sprinklers or drip
irrigation can reduce water consumption andincrease yields, by applying the irrigation more
directly to where it is needed. Drip irrigation
involves providing water through a system of
perforated pipes that are laid on or beneaththe ground. Water drips slowly through theperforations directly to the roots of the cropResource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

beans typically require the beans to be of a
specific length to fit uniformly into packaging.
This means that farmers must grow long beanvarieties and then “top and tail” them to therequired length. Feedback (2015) report that
this results in an average wastage of 30-40 per
cent of the usable mass of beans. However, one
major customer was persuaded to change its
buying policy and opt for just topped beans,enabling Kenyan exporters to reduce waste
by a third. Further gains would be available if“topping” of French beans were also eliminated;and more still, if cosmetic standards on otherproducts were also relaxed.

49Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers
Summary for Policy-Makers

50Summary for Policy-Makers

In Israel, major constraints on water supply
have encouraged a range of water-saving
innovations. About 84 per cent of the country’s
domestic wastewater is reclaimed for irrigation
purposes. This helps to ensure that about 52
per cent of agricultural water demand comesfrom non-potable sources – the domestic
wastewater supplemented with brackish(salty) water. Israel has extensively adopted
drip irrigation in its agriculture sector, in
combination with computerized control systems
that provide the exact required amount ofwater directly to the plant roots. The uptakeof water efficiency measures across sectors is
stimulated by a range of incentives as well as
penalties targeted at different users. A water
quota system for farmers places a strict limit on
consumption of potable water, but also rewards
under-consumption. For domestic users,

differentiated tariffs are available, allowing
low users to benefit from a lower charge, withextensive metering providing consumers with
the information to monitor their consumption.
Farmers benefit from a lower tariff for using
non-potable water for irrigation. Incentives andpenalties are also directed at the water supply
utilities, who are charged for avoidable losses.
They are allowed to keep low water pressures
as this reduces leak-loss rates. The government
also supports the research and developmentof new technological innovations in the area of
irrigation (Rejwan, 2011).
Significant barriers to the application ofadvanced irrigation techniques include lack of
information and lack of capital to invest in suchtechnologies, especially for smallholders andfarmers on marginal land. However, there areother less capital-intensive ways of achieving
a similar aim. Tensiometers are devices thatcan precisely measure the moisture content of
the soil, thus allowing more precise irrigation.
These have been employed by rice farmers in
Punjab, India, who have reported 33 per centwater savings (UNEP, 2014a). “Smart irrigation
scheduling” aims to provide the specificamount of required water at the specific time itis required, to avoid over-irrigating (McCready
et al., 2009). Modern ICTs have also beenused in Uganda to enable farmers to accessinformation on weather forecasts, improving

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers(Rejwan, 2011). Dobbs et al. (2011) estimatethat sprinklers can reduce water use by 15 percent while increasing yields by 5 per cent to 20
per cent, and drip irrigation can reduce water use
by 20 per cent to 60 per cent, while increasing
yields by 15 per cent to 30 per cent. However,this is dependent on soils, crop, climate andhow the irrigation system is implemented (vander Kooij et al., 2013). Sustaining drip irrigation
systems is limited in many areas by salinization
associated with soil and water quality issues(Hanson and May, 2011).

51

Summary for Policy-Makers

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

timing of irrigation and water management(UNCTAD, 2011).

52

Even relatively simple interventions, where
advanced technologies are not available, canimprove water efficiency. Action Aid report thatin West Africa stone barriers built alongside
fields can reduce the flow of water runoff
during the rainy season. This improves soil
moisture, reduces soil erosion and replenishes
groundwater. This simple technique can
improve water retention by the land by 5 to 10
times, and the biomass yield by as much as 10
to 15 times where runoff can be captured fromupslope areas (ActionAid, 2011). Other effective
soil moisture management techniques forrain-fed areas are structures such as furrows,
vegetative strips or bench terraces (FAO, 2011).
Reducing water consumption in toilets andbathrooms, and reducing leakages in thepipeline distribution system, are considered
the most efficient approaches to water
conservation in urban areas (Sharma and
Vairavamoorthy, 2009). Specific technologies
include low-consumption toilets, low-flow
showers and water-saving sinks (Sharma and
Vairavamoorthy, 2009). Fittings on appliancesthat reduce their water flow have been
implemented in Australia in cities such as
Melbourne (UNEP, 2013a); in New South Wales,
new building developments and renovations

must submit a certificate showing 40 per centreduction in potable water use (Burgin andWebb, 2011).
Reducing leaks from water supply is also apriority in many areas. Water losses due toleaks and unaccounted flows range widely, withestimates ranging from 5 per cent to 80 per
cent of supply. The variation depends on thelevel of infrastructure development, as well as
management and operational practices (UNEP,
2016b). Dobbs et al. (2011) estimate that there
is significant potential to reduce water leakage
from municipal sources, calculating that 100120 billion cubic metres of water could be savedby 2030 as a result of reducing leakages in the
supply to commercial, residential and publicbuildings. Persistence of high water losses
has been linked to lack of revenue collection
for water. The World Bank estimates that 40
per cent of water produced in Indian cities iseither lost in leaks or not billed to the customer(Agrawal, 2008), and UNEP estimates that nonrevenue water proportions can be as high as 70
per cent in some countries (UNEP, 2014b). Also
due to lack of revenue collection, water utilities
may have little incentive or available capitalto make timely investments in infrastructure(Dobbs et al., 2011).
Water is subsidized in many countries. Kochhar
et al. (2015) estimate that in 2012 global

Summary for Policy-Makers

effective, provide funds for re-investment andmaintain incentives for conservation.
In the Paraiba do Sul river watershed in southeast Brazil, gradual increases in the price of water
began in 2003. The higher prices increased
the income earned by the water utility, whichthen invested the additional money into water
management. The higher prices also prompted
more water conservation – extraction was
reduced by 16 per cent and consumption by 29
per cent between 2006 and 2008. Companies
were motivated to invest in water-saving andreuse technologies (UNEP, 2014a).
An important principle for further improving
the efficiency of water use is that of cascading

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

water subsidies totalled $456 billion. Thismeans that there is little incentive to conserve
water, and if the utility is unable to capture
sufficient revenue to enable re-investment in
the infrastructure, this can in the long run makethe efficiency of the system even worse, andundermine its financial sustainability. Kochhar
et al. (2015) note that whereas “getting
incentives right, notably by reforming water
pricing, can help rationalize water use, promoteneeded investment, and protect the poor”,
subsidies may in contrast be inequitable, as
they disproportionally benefit upper-income
groups, who have better access to, and use
more water. If the purpose of the subsidy is toprotect the access of the poor to water, this canbe achieved in other ways that are more cost-53

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

Summary for Policy-Makers

54

uses of water. This principle suggests that
not all uses of water will require a water quality
as high as that required for drinking water.
Harvested rainwater can be used for various
purposes, and is now common in Australia(Burgin and Webb, 2011). Grey water – waterthat has been used for washing – can be reused
without treatment for other uses, such as
watering plants or flushing toilets. More thanhalf of all households in Australia reuse grey
water in some form (Maheshwari, 2006). In
California in the mid-1990s, grey water was used
for irrigating landscapes, golf courses and crops,
supplying industrial processes and flushing
toilets (Weizsäcker et al., 2009). In Accra, Ghana,a kind of cascading water use has emerged,
albeit an unsafe one – domestic wastewater
was flowing untreated through streams thatwere the primary source of irrigation for smallscale urban farmers. A project intervened to
set up a low-cost natural treatment system totreat the wastewater sufficiently to make itsafe for irrigative uses (Reymond et al., 2009).
If contaminants can be removed to avoid
health risks, wastewater can be highly suited toirrigation, as it has the advantage of being richin nutrients (FAO, 2011).
Given the trends of population increase andurbanization, efficient use and applicationof water, and its reuse through recycling
or cascading systems, as discussed above,

are crucial strategies. However water-use
efficiency has to be seen in the context of thecomplete hydrological cycle. In those parts of
the world where withdrawals of groundwater
are unsustainable (FAO, 2011; WWAP, 2015),
sub-basin level recharge strategies, including
watershed management, have to be made partof water-use efficiency.
Rivers and oceans are also sources ofbiomass, and in many cases these are being
depleted at unsustainable rates. As discussed
in Section 2, the majority of the world’scommercial fisheries are either fully fished orover-fished. The problem is a result of a complex
food system comprising multiple actors fromfishermen to retailers, food companies andconsumers, all of whom are locked into a highly
competitive market in which typically only pricematters. One possible response to this is shownin the emergence of quality assurance labels
and standards, such as the Marine StewardshipCouncil (MSC) label. This label is intended tosignify to consumers that the product was
responsibly caught from a sustainable source(MSC, 2016). Information labels such as thiscan enable consumers to make sustainabilityled purchasing decisions. In highly competitive
industries this opens up the possibility for
consumers to drive the industry in a moresustainable direction.

Summary for Policy-Makers

3.3.4 Energy

As shown in Figure 10, buildings account foraround 18 per cent of global GHG emissions(IPCC, 2014). Investments in improving theenergy efficiency of buildings are common.

The Four Centres building at Red Deer College,
Alberta, Canada shows the importance of designand simulation modelling in optimizing theenergy performance of buildings. The buildings
are designed to optimize natural lighting, withsensors automatically dimming electric lights
when they are not required. Efficient ventilation
design is combined with heat exchange torecapture heat from exhaust air, and thebuilding fabric has high thermal resistance.
The design process was guided by the Green
Building Council’s LEED certification process,and by computer modelling and simulation, that
helped to test the energy and cost savings ofalternative strategies. The result was a buildingthat exceeds the minimum mandated efficiency
standards by 61 per cent (National Resources
Canada, 2015).

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

Energy use is the largest source of demand
for fossil fuels. Therefore the energy sector hasa central role in addressing climate change, as
well as other environmental impacts associatedwith fossil fuel use. Scenarios produced bybodies such as the IPCC and IEA show theimportance of technological change in energy
systems to replace fossil fuel energy sources
with low-carbon alternatives. However, such
scenarios also emphasize the importanceof demand reduction (IEA, 2010, 2012a;
IPCC, 2014). Increasing resource efficiency
in the energy sector is a critical strategy toenable such necessary demand reductions
to be achieved without negatively affecting
human development and well-being. Suchconsiderations provided the evidence base for
the IRP’s 10 Key Messages on Climate Change
to the COP21 climate summit in Paris (UNEP,
2015a), which, as noted in Part One, stressed
the role of resource efficiency in the costeffective achievement of the climate targets
in the Paris Agreement. This conclusion also
emerged from the modelling carried out for thisstudy, as reported at the beginning of Section 3.

Finnish municipalities have made substantial
energy efficiency improvements in buildings
to reduce CO2 emissions, aided by mandatory
energy efficiency performance codes andsubsidies for measures to improve energy
efficiency (UNEP, 2013a). Building efficiencies in
Melbourne, Australia, have been raised throughmandatory energy efficiency performancecodes, implementation of energy efficiency
measures in public buildings and lighting, ahouse-auditing programme, and a green officealliance that works with commercial tenants(UNEP, 2013a).

55

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

Summary for Policy-Makers

56

In addition to reducing emissions, an
important objective for improving building
efficiencies is in many cases to improve thehealth and well-being of vulnerable, lowincome citizens. The Residential Energy
Programme in Boston and the Public Housing
Fund in Ljubljana, Slovenia (both discussed
in greater detail in the Scientific Assessment
Report – UNEP, forthcoming in 2016a) show
ways in which programmes for local authorityled sustainable housing, with lower energy
consumption and lower carbon emissions, canreach low-income households in developed
country cities. In countries of the Global South,
improvements in the building and construction
sector are also crucial to address needs forhousing, employment and public infrastructure,but in this case in a context of rapid urbanization
and urban population growth. As an example,
the Kuyasa project in Cape Town, South Africa,
has seen energy-efficient lightbulbs, insulated
ceilings and solar water heaters installed
in low-income housing buildings, reducing
bills and improving the comfort of homes
for the residents. Due to its CO2 savings, theproject qualifies under the clean development
mechanism (CDM18). The project has also

18

provided opportunities for local employment
and skills development (UNEP, 2013a).
A barrier to increasing the efficiency of
consumer energy use is the lack of information
available to customers, and their cost-sensitivity.
This has been addressed within the EU withenergy-efficiency labelling. The effect of theEnergy Labelling and Ecodesign Directives has
been projected to deliver an energy savingof 19 per cent below business as usual by2020 (Molenbroek et al., 2014). Mandatory
standards are also possible. In Japan the “Top
Runner” scheme uses the performance of thehighest-performing energy-efficient appliances
as a guide for setting the required average
standard in a future year. A review of the first
12 years of this programme confirmed it had
been successful in driving up energy efficiency
performance and encouraging innovation – eachtargeted product group has met the required
Top Runner standard, often in excess. Efficiency
improvements in different product groups haveranged from 16 per cent to 80 per cent in thetarget year (Kimura, 2012). Some cities areundertaking investments in computer-controlled
technologies that can reduce electricity

A mechanism established within the Kyoto Protocol of the UN Framework Convention on Climate Change, to facilitate countries withemission reduction commitments to transfer investment to emission reduction projects in developing countries. The projects create
certified emission reduction (CER) credits, which could be counted towards meeting Kyoto targets. See: http://unfccc.int/kyoto_protocol/
mechanisms/clean_development_mechanism/items/2718.php

Summary for Policy-Makers

wastage. In Songdo, Republic of Korea, buildings
have been fitted with computer-controlled
lighting and temperature controls to minimize
energy wastage, and San Jose, California hasinvested in LED street lighting connected via asmart network (UNEP, 2013a).

Research conducted and summarized by
the United States National Research Council(NRC, 2009) finds that five “Ds” are importantin shaping energy use and transportation:
population density; diversity of uses (such as
mixed residential/commercial); distance to public
transit; design to support multiple modes oftravel, including pedestrian, bicycle, automobile
and public transit; and access to destinations,with focus on job locations.
The city of Ahmedabad in India has used planningsuccessfully to reduce vehicle miles travelled(VMT) through both mixed use development(diversity), design (for multi-modal transport),
access to destinations, having a short distanceto public transit, and more compact, higher
density development. This illustrates all five Ds ina developing world setting. An important factor
was the decision of the municipality to undertakeits transportation planning alongside its broader
development plan, and to give the resulting
Integrated Mobility Plan a time horizon of 20
years. This integrated plan therefore consideredmobility in the context of high density, mixed-use
urban infrastructure. It chose to use all forms oftransportation as complementary to each other,

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

Transport accounts for around 14 per cent of
global GHG emissions (IPCC, 2014). There isconsiderable potential to reduce transportdemand through design and planning oftransportation infrastructures. For example,
Vauban, Germany, is an eco-city development
near the city of Freiburg. It was brought about
when the city bought a former army barracks inorder to develop needed housing. This provided
an opportunity to embed sustainability into thedesign of the project itself. The area is designed
to enable sustainable transport, with a tramline connecting to the centre of Freiburg, and all
homes within easy walking distance of a tram
stop. The layout of the district has also been
designed to actively encourage walking andcycling and discourage car use. This is achievedby reducing the number of streets throughwhich cars can pass continuously through theneighbourhood. Most local streets are crescentsand cul-de-sacs, which create dead-ends forcars – however these car dead-ends connect toa network of pedestrian and bicycle paths thatpermeate the neighbourhood. Thus, transport isprimarily on foot or bicycle.

57

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

Summary for Policy-Makers

58with local public transit systems connecting tomass transit systems at hub points. Dedicatedpedestrian and bicycle lanes were also included
alongside the bus rapid transit corridors (Swamy
and Bhakuni, 2014).
In large cities with extensive existing urban
infrastructure, it can be difficult to implement
the 5Ds extensively. Nonetheless, low-energy
transport innovations are still possible. An
example of this is the concept of the bicyclesharing scheme, which has now been developedin a number of cities in various countries.
Though taking different forms, the essence ofsuch schemes is to provide cheap, quick andspontaneous access to bicycles to cover shorturban distances. A pioneering example of thisis the Velib initiative in Paris. It comprises a
network of 1,200 automated hire points and a
total of 20,000 bicycles across the city, available
24 hours a day. Users can pay on demand for a
day or a week of access, or sign up for a longer
subscription (UNIDO, 2013).
There are considerable untapped opportunities
for increased resource efficiency in many
major energy-using industries, but they differ
by country, by industry, and by process within
industries. According to IEA (2012a), theimplementation of best-available technologies
could reduce industry energy consumption by
20 per cent from today’s level. Here, examples
of increased efficiency potential are given for
two important sectors: steel-making and mining.

Summary for Policy-Makers

Opportunities for increased efficiency include
cogeneration, and the recapture of waste heat,to be reused at various stages in the process.
Other measures within different phases of theprocess include sinter plant heat recovery, theuse of waste fuel, and coal moisture control –these can reduce direct energy use by 50 per
cent. In BOF steelmaking, rolling (for example,“hot charging, recuperative burners, andcontrolled oxygen levels”) can reduce directenergy use by 88 per cent and electricity by 5
per cent. Pulverized coal injection, top pressure
recovery turbines and blast furnace control
systems can reduce direct energy by 10 per
cent and electricity by 35 per cent. In EAF
steelmaking, improved process control, oxy
fuel burners and scrap preheating can reduce
electricity consumption by 76 per cent (Dobbs
et al., 2011).

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

The steel industry accounts for around 6 percent of global final energy consumption. Theenergy efficiency of steel production has
consistently improved, but at a declining rate.
Between 1960 and 1980 annual efficiency
improvements were in the range of 2 to 4 percent, but between 1980 and 2005 the annual
rate of efficiency improvements fell to 0.5 to 1
per cent. McKinsey’s base case assumption isthat efficiency will improve at the rate of 0.7 percent per year between 2010 and 2030, mainly
driven by a shift from blast furnaces and basic
oxygen furnaces (BOF) to electric arc furnaces(EAF) (Dobbs et al., 2011).

59

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

Summary for Policy-Makers

60

Another optimistic account of the potential
for energy saving in heavy industry is given
by BCS (2007) in relation to the US mining
industry. As shown in Figure 14, the widespread
adoption of best practices would reduce energy
demand from the industry by 258 trillion
Btu per year, a reduction of around 20 per
cent. Targeted investment in R&D to develop
improved technologies would deliver a further
saving of 409 trillion Btu per year, providing
a total reduction of over 50 per cent fromcurrent energy consumption levels.

Figure 14: Energy consumption and saving potential
by equipment type in the US
mining industry.

Barriers to implementing such newtechnologies and best practice techniquesin heavy industry include, in some regions,information failures and lack of access toappropriate engineering resources. They
also require capital investment, which canbe deterred by volatility in both energy andmaterial prices, which creates uncertainty
about the future of specific operations.

Source: BCS (2007), p. 23, Exhibit 18

Summary for Policy-Makers

3.4 Systems thinking andnexus issues

Energy systems are highly interconnected,
with demand changes or fuel substitution
in one sector having impacts on another.
Food systems are complex webs of interacting
actors in which powerful multi-national
companies have significant influence.
Cities are themselves systems of major
importance through which all of the major
resources flow.
The overlaps and synergies between
resources, or “nexus” interactions, create
important effects and are potentially valuable
sources of win-win opportunities. For
example, water-stressed areas may resort toenergy-intensive water production measures suchas desalination – therefore water-saving measureswould save both water and energy. Increased
efficiency in food production and consumption
can save land, water and energy.

All of these issues present considerable
complexities for policy-makers. For purely
practical reasons, different ministries typicallytake responsibility for each of the resources
and systems described in this report. This isunderstandable and largely beneficial as itallows policy-makers to achieve tractable anddemonstrable progress on particular issues.
However, it is also highly desirable thatpolicy-makers should attempt to balance a
resource- or sector-focused approach witha more cross-sectoral, cross-resource andfull supply chain perspective. This is both to
avoid undesired consequences of individual
policy actions going unnoticed, and tomaintain awareness of the potential for winwin opportunities if sectors or resources are
considered in a more holistic way.

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

The best practices explored above havebeen categorized according to the four criticalresources – materials, land and soils, waterand energy. However, it is also important toconsider resource and resource efficiency
challenges in terms of overlapping andinterdependent systems.

It is also important to consider resources froma supply chain perspective, using life-cycle
analysis. This, for example, affects the perceived
resource efficiency of service-based economies,much of whose resource footprint is felt inother countries. It can also affect the perceived
benefits of resource substitutions. For example,
bioenergy products can substitute for fossil fuelsin energy demand – however the full life-cycle
impacts of both options need to be compared, in
terms of land use, processing and transportation
emissions, before it can be clearly establishedwhich has the lowest impact.

61

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

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62

4. Conclusions
4.1 The imperative and opportunityof resource efficiency
The imperative for increased resource
efficiency arises from the pressures that
population and economic growth, combinedwith current patterns of production andconsumption, are putting on natural resources
and the environment. These pressures amountto threats which, if not addressed, could makeit impossible, or much more expensive, for the
global community to achieve the SDGs andthe Paris Agreement climate targets, thereby
hindering sustainable development and abetter future for all.

These threats need to be addressed andaverted as far as possible, inter alia by asystematic effort by policy-makers to achieveboth incremental as well as larger innovationdriven increases in the resource efficiency withwhich their economies operate. This would
entail an increase in the technical efficiency
with which economic processes turn material
and energy inputs into useful outputs, a
reduction in associated environmental impacts,
and an increase in resource productivity, or thevalue that economic processes add to each unitof material and energy input.
The opportunities offered by increased
resource efficiency arise from its potentialSummary for Policy-Makers

to result in higher economic growth andemployment. The benefits from increased
resource efficiency would be even greater if the
avoided costs of resource bottlenecks, pollution
and climate change were taken into account.

4.2 Best practices for increasing
resource efficiency
There are no magic bullets to increase resource
efficiency. The necessary measures – technical,
economic and other policy-related – vary fromsector to sector and from resource to resource.
The evidence in this Summary for PolicyMakers, and in the Assessment Report upon

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

However, markets will not achieve thesehigher levels of resource efficiency unaided.
The studies that show higher growth andemployment from greater resource efficiency
suggest that this is driven by a number of
mechanisms. These include higher rates ofinnovation and technical change than markets
alone can achieve. They involve policy-led higher
investments in resource-efficient infrastructure
and products, intelligent and targeted regulation,
as well as environmental tax and other fiscal
policy reform that adjusts the balance between
the costs of labour and materials, thereby
increasing the economic return to resourceefficient products and processes. Environmental
tax reform is especially important as a means of
avoiding the rebound effect, whereby increased
economic activity arising from increased
resource efficiency reduces the benefits fromlower resource use and pollution that would
otherwise have been achieved. For detailed
analysis and guidance on policy options to
support improvements in resource efficiency,
readers should refer to the complementary
OECD report on this precise topic as requestedby the G7 as well.

The financial and employment benefits
from increased resource efficiency are muchenhanced by the non-financial benefits thatare often invaluable for human well-being.
These benefits derive, inter alia, from resource
security, reduced pollution, improved health,enhanced environmental quality and lower lossof biodiversity. Moreover, resource efficiency
provides opportunities for improving the social
allocation of resources. Reducing the stresson the quantity and quality of resources will
enable the disadvantaged and the poor toaccess more easily the resources that they need.
The resource efficiency agenda is therefore
also one that offers the potential to reduce
inequalities and poverty in all countries throughmore secure and equitable access to resources.
Pursued through well-informed and appropriate
public policy, increased resource efficiency
can therefore deliver multiple benefits acrossall the dimensions – economic, social andenvironmental – of sustainable development.

63

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Summary for Policy-Makers

64

which it is based, has provided many examplesof resource efficiency solutions, showing
how greater efficiency in the management of
resources can be achieved. The measures differ
in detail – dealing as they do with different
resources, economic sectors and processes –but some common messages emerge, which
are highlighted here.
There are significant barriers to increases inresource efficiency. Such increases will not
emerge through the operation of market forcesalone. Were this not the case, much greaterlevels of resource efficiency would alreadybe the norm. Different economic actors, incollaboration with policy-makers, must takeconcerted action for rates of resource efficiency
to increase. For this to happen, there must
be strong new incentives for more resourceefficient practices.
There is the issue of short-term versus
long-term returns. For firms in industries
with volatile prices requiring short paybacktimes, or for other actors with limited capital
availability, some investments in resource
efficiency are not possible. This may also be anissue with developing economies, which areexpanding rapidly but lack the resources tomake strategic resource-efficient interventions,for example in urban areas. This issue can beaddressed in a number of ways: by providing“patient” capital or development funding that
focuses on improving long-term productivity
and maintaining or restoring land quality, andnot on generating quick returns from highinputs; by offering support for businesses
in price-volatile sectors, or providing a clear
outlook on future policy trajectories acrosssectors, to help businesses make or justify longterm investments; and by providing financial
support to enable developing countries andcities to make long-term resource-efficient
infrastructure planning decisions.
Resource efficiency and economic efficiency
are not always linked. For example, the tradeoff between low material costs and high labourcosts can make it cheaper to waste materials
than invest in the labour required to avoid such
wastage. There are numerous possible ways toovercome this barrier: by pricing externalities;
by introducing resource extraction taxes toincrease prices of materials and thereby the
economic incentive to use them efficiently; byusing dynamic taxes to buffer price fluctuations,
thereby reducing volatility and future
uncertainty; or by creating other incentives toencourage actors to pay for labour to save onmaterials, rather than pay for materials to saveon labour.
Ongoing processes of urbanization must
become more resource-efficient. ResourceSummary for Policy-Makers

A range of issues must be addressed aroundlogistics and supply chains. The reuse andrecycling of resources require used materials
to flow in the opposite direction to productsupply chains. This requires various actors
to adopt a coordinated approach to theplanning of resource management, and to thelogistics of material and product supply andreturn. Synergies and benefits can occur fromconsidering these areas in an integrated way,for example through industrial symbiosis.
Regulations that discourage resource efficiency
should be changed. For example, rules set up
to manage a linear material management chain
may prevent materials classified as waste fromre-entering the supply chain. This suggests that
regulations that govern materials, water andenergy flows, while continuing to safeguard
human health and the environment, should
be revised to enable more circular resource

flows. This could include revisiting definitions
and provisions for waste management, andremoving counter-productive subsidies.
The issue of possible “losers” from resource
efficiency needs to be addressed. In someindustries reduced material extraction willtranslate into reduced revenues and job losses.
In this context it is important that transitional
issues are properly addressed and appropriatecompensation for “losers” considered. However,it should be noted that resource efficiency has
the potential to create jobs in other areas, sothat rather than resist resource efficiency or
support resource-inefficient activities, which
may anyway be in decline, it may be preferable
to set up programmes to transfer redundant
workers to, and re-train them for, resourceefficient sectors and activities.

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

efficiency needs to be a guiding principle forthe towns and cities springing up and being
extended in many countries around the world.
This applies to buildings, transport systems
and infrastructure to enable the coordinatedmanagement of materials, water and energy,
making full use of modern information andcommunication technologies. Public as well asprivate investment in such infrastructure may
be required.

65

Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

Summary for Policy-Makers

66

There may be limits to some aspects ofresource efficiency. In particular, there may
be points after which recycling is no longer
energy efficient. There may also be complexities
and unintended consequences, in terms ofother environmental impacts of resourceefficient initiatives, and from the interactions
between different resources. To guard
against such situations, a whole-systemapproach needs to assess resource use andthe impacts of products on a life-cycle andconsumption-production basis, with the insights
used to inform and amend policy where
necessary.
National and international targets forresource efficiency should be adopted andprogress towards them monitored. This
would give a greater incentive to policy-makers
and businesses to prioritize resource efficiency.
To some extent this situation will be improved
if it is realized that resource efficiency is infact essential to the attainment of the SDGs.
However, it should also be recognized that a
specific resource efficiency target, or a small
set of targets covering key resources suchas materials, water, land and carbon, could
be effective in driving performance, andestablishing a common view of the future
between government, industry and society.
A monitoring process to assess the resource
use and resource efficiency of countries, withharmonized metrics and results published atregular intervals, could give resource efficiency
a higher profile and lead to greater ambition toincrease it, in the same way as currently occurs
for GDP growth.
Given its links to the attainment of
the SDGs and the aspirations for GHG
emissions reduction in the Paris Agreement,
an increase in global resource efficiency
ranks among the top priorities for enablingsustainable development now and in the
future.
The new G7 Alliance for Resource Efficiency
is a welcome initiative, with G7 nations wellplaced to take a leading role in demonstrating
what is possible in some of the world’s
wealthiest and most dynamic economies. At
the same time, there is both significant room
and a pressing need for further concerted
action in these and other industrialized,
emerging and developing nations to adopt a
more resource-efficient and sustainable path ofdevelopment, to the benefit of all humankind.
The global community can support this througha process of continuous exchange, partnershipand cooperation at all levels, involving mutual
support, learning and capacity building thatgives practical expression to the spirit andcommon aspirations that led to the agreementof the SDGs.

Summary for Policy-Makers

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Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers

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Resource Efficiency: Potential and Economic Implications • Summary for Policy-Makers
Summary for Policy-Makers

Despite enormous progress in the past
decades towards improving human prosperity
and well-being, this has come at the lasting
cost of degradation of the natural environmentand depletion of natural resources. Meetingthe needs of a growing and increasingly affluent
population, will require natural resource
extraction to increase from 85 to 186 billion
tonnes by 2050. This can cause irreversible
environmental damage and endanger thecapacity of Earth to continue to provide
resources which are essential for humansurvival and development.
Analysis in the report shows that policies
and initiatives to improve resource efficiency
and tackle climate change can reduce global
resource extraction by up to 28 per cent globallyin 2050, against the baseline. In addition toslower growth in resource extraction, suchpolicy actions can also cut global greenhousegas emissions by around 60 per cent, while also
boosting the value of world economic activity
by 1 per cent.
This report has been produced by the
UNEP’s International Resource Panel in response
to a request by leaders of the G7 nations in thecontext of efforts to promote resource efficiency
as a core element of sustainable development.

The report conducts a rigorous survey toassess and articulate the prospects andsolutions for resource efficiency. It considers
how more efficient use of resources cancontribute to economic growth, employment
and development, at the same time as reducing
the world’s use of materials, energy, biomass andwater, and the resulting environmental impacts.
The report documents many examples ofbest practices for increasing the resource
efficiency of different sectors from countries
around the world. The challenge for policymakers is to learn from and scale up thesegood practices, and to conceive and implement
a set of transformative policies that will
enable countries to reap the associatedsocial, environmental and economic benefits.
Ambitious action to use resources in a more
efficient and sustainable manner can help
place the world on the right track to meetits commitments under the 2030 Agenda on
Sustainable Development and the Paris Climate
Change Agreement, and thereby to realise amore equitable and sustainable future.
For more information contact:
International Resource Panel Secretariat
United Nations Environment Programme
Division of Technology, Industry and Economics,
Email: resourcepanel@unep.org
Web: www.unep.org/resourcepanel