COMMISSION STAFF WORKING PAPER Analysis associated with the Roadmap to a Resource Efficient EuropePart I
Date: 2011-09-20
Institutions: European Commission
Subjects: conservation of resources, economic resources, economic stabilisation, energy resources, food resources, governance, management of resources, population forecast, productivity, sustainable development

EUROPEAN COMMISSION 

Brussels, 20.9.2011 
SEC(2011) 1067 final 

COMMISSION STAFF WORKING PAPER 

Analysis associated with the Roadmap to a Resource Efficient Europe 
Part I 

Accompanying the document 

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE AND THE COMMITTEE OF REGIONS 

Roadmap to a Resource Efficient Europe 

{COM(2011) 571 final} 
{SEC(2011) 1068 final} 

 
 
 
 
  
 
INTRODUCTION 

Our economic growth has long been coupled with declining resource prices – until recently. 
In the last decade, the increasing affluence and size of the world's population appears to have 
reversed the trend of falling resource prices. An ongoing path of ever greater consumption of 
resources  is  meeting  constraints  in  stable,  secure  availability  of  some  resources.  We  see 
unsustainable  over-use  of  environmental  resources  and  increased  price  volatility  in  several 
markets.  

Already, many countries and businesses have responded to these megatrends. Like them, the 
has EU recognised the essential role in economic stability and growth played by both mineral 
and  environmental  resources  -  including  rare  earth  metals,  water,  climate,  fish,  biomass, 
fertile soils, clean air and ecosystem services. 

So as an over-arching goal – set in the Europe 2020 Strategy - the EU has chosen to move to 
an economic system that is efficient in the way that it uses all resources. We now face choices 
on the pace of change and how to best manage transition. Good policy offers short and long-
term economic, social and environmental benefits from efficiency gains. It need not create net 
additional costs. But there will be winners, and losers. 

Noting the progress already made in resource-efficiency, this Staff Working Paper sets out the 
evidence behind the Roadmap to a Resource Efficient Europe. It identifies the barriers to the 
market delivering on its own and how to remove those barriers. 

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TABLE OF CONTENTS 

Introduction ................................................................................................................................ 1 

1. 

Challenges and opportunities for Europe..................................................................... 3 

1.1.  Why is economic transition needed?............................................................................ 3 

1.2. 

1.3. 

1.4. 

2. 

2.1. 

2.2. 

3. 

3.1. 

3.2. 

4. 

4.1. 

4.2. 

5. 

5.1. 

5.2. 

5.3. 

Challenges and Risks for Europe ................................................................................. 6 

Opportunities for the EU.............................................................................................. 9 

International, Business and other Stakeholder viewpoints .......................................... 9 

Costs and Benefits of the Transition to a Resource-Efficient Europe ....................... 11 

Potential benefits of improved Resource Efficiency.................................................. 12 

Potential Costs around Transition .............................................................................. 15 

Making Europe resource efficient.............................................................................. 19 

Several problems hold back the EU economy ........................................................... 19 

Policy Objectives in the transition to a resource-efficient, low-carbon economy ..... 22 

Transforming the economy ........................................................................................ 24 

Actions in an interconnected world............................................................................ 24 

Target Areas for Action ............................................................................................. 25 

Governance and Monitoring: A new pathway to action on resource efficiency........ 26 

Consequences of Existing Governance Arrangements .............................................. 26 

Governance change for facilitating transition ............................................................ 27 

Other key areas of governance................................................................................... 31 

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1. 

CHALLENGES AND OPPORTUNITIES FOR EUROPE 

1.1.  Why is economic transition needed? 

1.1.1.  Global resource use is increasing 

Global  demand  for  resources  is  increasing,  driven  by  population  growth  and  improving 
standards of living. In the 20th Century, the world experienced a 4 fold growth in population 
and a 23 fold increase in economic output. We increased our fossil fuel use by 12 times, our 
fishing catches by 35, and our water use by 9. Globally, extraction of material resources grew 
by a factor of 8, ores and minerals by 23 times. Materials are now harvested at a rate of 47-59 
billion metric tonnes a year.1  

Almost all predictions are that resource demand will continue upwards, given the underlying 
trends driving demand. In particular, the world's population grows by 200,000 people a day2 
and is expected to exceed 9 billion by 2050, and by  2030, there will be 3 times the current 
number of people with ‘middle class’ consumption levels in the now-developing world3.  

As a result, demand for food, feed and fibre could increase by 70 % by 2050.4 Some predict 
that global food prices will increase by 120-180% by 2030, accelerating past trends in price 
rises.5 Global demand for energy and water is expected to rise by 40 % over the next twenty 
years,  if  no  major  policy  changes  are  implemented.  If  present  trends  continue,  1.8  billion 
people will be living in water-scarce regions in 2025 and two thirds of the world population 
could be subject to water stress.6  

More detail on past trends in resource use and their drivers are set out graphically in Annex 7. 

As a consequence, after decades of growth based on declining real resource prices, there are 
indications  that  the  world  has  entered  a  new  phase,  of  increasing  real  resource  prices  -  see 
Figure below. 

1 
2 
3 

4   
5 
6 

"Decoupling natural resource impacts from economic growth", International Resource Panel (2011) 
http://www.grida.no/publications/rr/food-crisis/page/3559.aspx 
WBCSD, Vision 2050, 
http://www.wbcsd.org/templates/TemplateWBCSD5/layout.asp?type=p&MenuId=MTYxNg&doOpe 
Food and Agriculture Organisation 
"Expanding Food Price Scenarios towards 2030", Willenbroekel et al, 2011  
"The European Environment – State and Outlook 2010", EEA,2010 

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1.1.2.  European and global resource use is interlinked 

In the globalised economy, the EU is increasingly impacted by global changes in resources, 
including  climate,  material  availability  and  food  prices.  We  use  16  tonnes  of  materials  per 
capita/year in the EU, more than 8 billion tonnes/year7, of which one-fifth is imported – often 
the higher value, less bulky resources.  

Global scarcity, volatility  and shocks are transmitted to the EU economy – as  illustrated by 
component  supply  concerns  after  the  2011  Japan  earthquake  or  price  volatility  in  global 
commodity  markets.  Systematic  figures  are  not  available  for  the  importance  of  resources  to 
business  but  as  an  illustration  40%  of  total  German  manufacturing  costs  relate  to  material 
inputs, whilst the energy share of those costs is around 2%8. 

The  growth  in  the  EU  economy  is  also  contributing  to  pressure  on  other  countries  (our 
'footprint').9  Additionally,  every  kg  of  imported  products  is  responsible  for  3  to  6  kgs  more 
materials outside the EU, amplifying pressures. 

1.1.3.  These global megatrends are unsustainable 

We can only grow infinitely in a finite material world by reduction in the material we use to 
grow.  Several  scenario  exercises  back  this  view.  However,  existing  trends  in  resource 
efficiency are not sufficient to reduce the material intensity of our economy, even in the EU. 
Measured purely by mass of material, the EU’s economy’s resource efficiency has improved 
at a rate of between 1 and 2% a year, so below the rate of economic growth. 

7  http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&init=1&plugin=1&language=en&pcode=tsdpc230 
8 

"International  economics  of  resource  productivity  –  Relevance,  measurement,  empirical  trends, 
innovation, resource policies", R. Bleischwitz in International Economics and Economic Policy, 2010,  
"The European Environment – State and Outlook 2010", EEA,2010 

9 

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One  result  is  the  unsustainable  depletion  of  environmental  resources  (fish,  timber,  water, 
fertile  soils,  clean  air,  biomass,  biodiversity)  and  the  environmental  systems  of  which  they 
form  part.  Some  resources  are  already  beyond  their  global  sustainable  limits  or  tipping 
points.10  

Crossing of thresholds can bring about sudden changes in ecosystems (for example, in forest 
collapse,  climate  systems  or  fish  stock  collapse).  This  can  lead  to  similarly  non-linear 
constraints on growth.  

60% of the world’s major ecosystem goods and services - which underpin livelihoods - have 
been degraded or used unsustainably.11 In these, economic growth has come by running down 
natural assets faster than the stocks can regenerate. In the absence of action, the rate of global 
biodiversity  loss  is  not  expected  to  slow.  It  may  get  worse  as  climate  change  increases 
pressures in some regions. For example, changing Mediterranean rain patterns will put more 
pressures on water resources and so biodiversity in the region.  

Figure : Global environmental thresholds 

Earth-system process 

Control variable 

Boundary
value 

Current
value 

Boundary 
crossed 

Preindustrial 
value 

1. Climate change 

Atmospheric 
carbon 
dioxide concentration  (ppm by 
volume)  

350 

387 

yes 

280 

Change 
in radiative 
forcing (W/m2)  since  the  start 
of 
revolution 
industrial 
the 
(~1750) 

1.0 

1.5 

yes 

0 

2. Biodiversity loss 

Extinction 
(number 
rate 
of species per million per year) 

10 

> 100 

yes 

0.1–1 

3. Biogeochemical 

4. Ocean acidification 

Anthropogenic 
nitrogen 
removed  from  the  atmosphere 
(millions of tonnes per year) 

Anthropogenic 
phosphorus 
going  into  the  oceans  (millions 
of tonnes per year) 

Global  mean  saturation  state 
of aragonite in 
surface 
seawater (omega units) 

35 

121 

yes 

0 

11 

8.5–9.5  no 

-1 

2.75 

2.90 

no 

3.44 

5. Land use 

Land 
to cropland (percent) 

surface 

converted 

15 

11.7 

no 

low 

6. Freshwater 

Global  human consumption  of 
water (km3/yr) 

4000 

2600 

no 

415 

10 
11 

"A safe operating space for Humanity", Rockstrom, et al (2009) in Nature 461, p. 472-475. 
"Millennium Ecosystem Assessment, Ecosystem and Human Well-being synthesis", 2005 

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7. Ozone depletion 

Stratospheric 
ozone concentration 
units) 

(Dobson 

276 

283 

no 

290 

8. Atmospheric aerosols 

Overall particulate concentratio
n  in  the  atmosphere,  on  a 
regional basis 

not yet quantified 

9. Chemical pollution 

Concentration 
of toxic 
substances, plastics, disruptors, 
heavy and radioactive 
contamination into 
environment 

the

not yet quantified 

Source: "A safe operating space for Humanity", Rockstrom, et al (2009) 

1.2. 

Challenges and Risks for Europe 

Both  the  economy  and  environmental  resources  form  part  of  systems  in  which  imbalances 
present risks, and we now know of some severe imbalances affecting resources. These include  
a  mismatch  between  the  use  and  regenerative  capacity  of  natural  systems.  Noting  this,  the 
OECD has identified risks of major systemic collapse in growth12 due to changes in resources: 

• 

• 

Reduced  competitiveness  of  firms,  or  sectors,  subject  to  price  rises,  security  of 
supply  or  volatility  in  their  resource  inputs,  where  competitors  are  more  resource 
efficient.  

Increasing  supply  security  implications,  with  future  scarcity  in  basic  resources, 
including  water,  food,  climate  services  and  soil  being  a  threats  to  international 
stability, ie through immigration, and social unrest. 

1.2.1.  Volatility, Security of Supply and Price rises 

Increasing scarcity in resources can lead to price volatility in globally traded markets. Even 
for resources where there may not be geological resource scarcity, then scarcity may reflect 
reduced availability due to political issues, and closed or contracted sales of resources. This 
scarcity can make global markets shallower, and more susceptible to price volatility, exposing 
EU companies to economic shocks.  

In particular, there are risks for some critical raw materials that are essential components for 
key  industries  in  the  EU,  such  as  the  ICT  and  aerospace  and  "green  technologies"13  14.  For 
example, platinum is needed for catalysts in vehicles, yet most of the world’s supply of this 
critical  element  is  found  in  South  Africa.  Other  examples  are  gallium,  indium,  Rare  Earths 
(e.g.  neodymium,  platinum  and  tungsten).  Their  short  to  mid-term  availability  is  limited, 
providing good grounds for distortion of the market, particularly as demand growth may be 
very  high  -  for  rare  earth  metals  neodynium  or  germanium  demand  is  predicted  to  increase 
more than 5 times by 2030. 

12 
13 
14 

"Green Growth Strategy Synthesis", OECD, 2011 
COM(2011)25, The Commission's Communication on Commodities Markets and Raw Materials 
"Critical  raw  materials  for  the  EU:  report  of  the  Ad-hoc  Working  Group  on  defining  critical  raw 
materials", Fraunhofer ISI report for DG Enterprise and Industry, 2010,. 

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Source: "Natural Resources Consumption and Sustainable Industrial Development", S. Suh, Sustainable 
Industrial Development, Fall Issue 2008. Price volatility is shown for different key elements 

The Figure above illustrates both the volatility and the annual price increase for certain key 
materials. The one below shows expectations of future prices15. In the past five years, 75% of 
European businesses have experienced an increase in material costs16. 

15  

16 

Eco-Innovation  Observatory  (EIO),  The  Eco-Innovation  Challenge:  Pathways  to  a  resource-efficient 
Europe, report for DG Environment, 2010 
Eurobarometer survey, see http://ec.europa.eu/public_opinion/flash/fl_315_en.pdf 

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A fuller overview of the risks associated with certain materials can be found in Annex 7 

1.2.2.  The Scale and Nature of the transition required 

The scale of improvements in resource efficiency needed in the EU to respond adequately to 
global trends is very large. Whilst different resources have different trends, indications of the 
scale of change can be made by references to resources in aggregate: 

• 

• 

The World Business Council on Sustainable Development, points to the need for an 
increase in resource efficiency of factor 4 to 10 by 2050 (which implies that each unit 
of  production  is  produced  using  respectively  25%  and  10%  of  its  current  resource 
inputs).17 

Scientists researching resource trends point to similarly strong innovation needs, for 
example,  pointing  to  a  Factor  5  improvement18  by  2050  (20%  of  today's  material 
usage/unit of production). 

This level of improvement requires a step change in innovation in resource productivity. This 
change  may  be  one  of  the  future  drivers  of  global  growth.  One  popular  view  of  the  world 
economy  sees  growth  as  a  series  of  'Kondratieff  cycles'19:  periods  of  long-term  prosperity 
arising from structural change. The structural change comes as a response to new conditions 
or  new  technologies.  Some  commentators  believe  environmental  technology/resource 
efficiency to be one of the drivers of profound global structural change that will bring in the 
next long-term period of growth. 

17 
18 
19 

"Vision 2050", WBCSD, 2010 
"Factor Five", Von Wiezsacker et al, 2009 
"As Time Goes By. From the Industrial Revolution to the Information Revolution", Freeman C, Louçã, 
2001 

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1.3. 

Opportunities for the EU 

Megatrends  in  resources  also  bring  opportunities.  They  will  bring  relative  competitive 
advantage for those states and those firms that adapt fastest, most fully and most efficiently.  
Resource  Efficiency  is  one  route  to  adaptation.  It  involves  the  spread  of  technologies, 
business models and behaviours that allows the production of greater value for the EU with 
fewer resource inputs.  

Definitions 

Resources:  are  all  the  resources  that  are  inputs  into  our  economy  -  metals,  minerals,  fuels, 
fish, timber, water, soil, clean air, biomass, biodiversity and land and sea. (See Annex 7) 

Resource efficiency: is a way to deliver more with less. It increases aggregate economic value 
through  more  productive  use  of  resources  over  their  life  cycle.  It  requires  using  those 
resources  in  a  sustainable  way,  within  the  planet's  long-term  boundaries.  This  includes 
minimising impacts of one resource's use on other resources, including the environment. 

Resource efficiency can allow the EU to reduce vulnerability to future resource volatility or 
scarcity,  whilst  reducing  costs  through  productivity  savings.  Many  of  the  win-wins  from 
improved resource efficiency arise from the inter-linkages between different resources that are 
frequently ignored.  

For example, McKinsey Global Institute looked at the strong linkages between resource use 
and  greenhouse  gas  emissions.  They  estimate  that  resource  productivity  improvements  in 
land, water, energy (excluding any changes in primary energy mix) and steel would achieve in 
2030 around 50% of the gap between our current GHG emission path and the path needed to 
keep atmospheric concentrations to 450ppm. 

1.4. 

International, Business and other Stakeholder viewpoints 

1.4.1. 

International 

The  EU  is  one  of  many  to  identify  the  benefits  of  a  transition  to  a  more  resource-efficient 
economy. At the international level: 

• 

• 

• 

20 
21 

the OECD's Green Growth Strategy20 states how economic growth can be combined 
with avoiding unsustainable pressures on the quality and quantity of natural assets. 

the  G20  has  committed  to  phasing  out  inefficient  fossil  fuel  subsidies  as  a  way  to 
reduce budget deficits, deliver growth and reduce environmental harm. 

the  United  Nation's  Environment  Programme  (UNEP)  Green  Economy  Report21, 
makes  the  case  for  investing  two  per  cent  of  global  GDP  in  greening  ten  central 
sectors  of  the  economy  in  order  to  shift  development  onto  a  low-carbon,  resource-
efficient path. 

OECD, Towards a green growth strategy, forthcoming 
UNEP, Towards a green economy - Pathways to sustainable development and poverty eradication, 2011 

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At  the  national  level  too,  many  countries  have  launched  strategic  plans  that  put  resource 
efficiency as their major priority. For example: 

• 

• 

• 

Japan has introduced a number of visions and laws that represent a conceptual turn 
from a throwaway society in order to become a Junkangata Shakai (sound material-
cycle  society)22  and  has  reduced  its  resource  use  by  14%  from  2000-05  on  top  of 
previous periods of reduction. 

China's latest Five Year Plan (11th) represents a change in development philosophy, 
aiming for an ecologically viable society, with greater industrial efficiency. China's 
investment in the green economy has been estimated by some to be greater than that 
of the US and EU combined.23 

The Republic of Korea's 'Framework Act for Low Carbon Green Growth' establishes 
a  legal  framework  to  foster  green  technology  and  industries,  to  create  new  green 
jobs,  to  respond  to  climate  change,  to  control  energy  targets,  to  promote  a  green 
lifestyle for citizens and to promote sustainable development. 

In  Europe,  several  Member  States  have  set  out  strategies  and  goals  for  improving  resource 
efficiency.  Several  reports  summarise  the  wide  range  of  resource  efficiency  strategies  and 
policy actions taken.24 25 26 

1.4.2.  Business Action 

Corporate action highlights the belief of companies in greater resource efficiency to generate 
financial  savings,  and  reduce  exposure  to  future  risks  of  scarcity.  Many  multinational 
companies  have  set  ambitious  goals  regarding  resource  efficiency  and  eco-innovation.  For 
example: 

• 

• 

• 

one consumer goods multinational has committed to halving the resource impacts of 
its products over the next 10 years and source 100% of its agricultural supplies from 
sustainable sources.27 
a large retailer expects to save $3.4 billion from its 5 year plan to reduce packaging.28 

two  international  chemical  firms  have  estimated  that,  respectively,  they  have  saved 
$9 billion over 15 years and $5 billion over 20 years from energy efficiency. 

However, many businesses are not fully aware of the potential risks of potential advantages 
from natural resource scarcity on their futures. 

The  World  Business  Council  for  Sustainable  Development  (WBCSD)  and  the  World 
Economic  Forum  are  representative  of  many  leading  international  business  organisations. 
These  organisations  see  resource  efficiency  as  a  strategic  response  with  short-term  benefits. 

22 
23 
24 
25 
26 
27 
28 

"Dematerialisation and resource efficiency in Japan", Wüppertal Institute  
"Systemic Tools for an EU Resource Efficiency Roadmap", The Resource Efficiency Alliance 2011 
"Economic Analysis of Resource Efficiency Policies", COWI 2011 
http://www.eea.europa.eu/themes/economy/resource-efficiency/resource-efficiency 
"Analysis of key contributions to resource efficiency", Bio Intelligence Service 2011 
http://www.growingforthefuture.com/index.php 
http://walmartstores.com/pressroom/news/5951.aspx 

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The WBCSD Vision's for 2050 (see Annex 1) sets out the steps for transition businesses need, 
with significant changes by 2020. 

1.4.3. 

Stakeholders' views on resource efficiency expressed to the European Commission 

The  Commission  sought  and  received  the  views  of  many  businesses  and  interest  groups 
during  the  development  of  its  Roadmap,  through  position  papers,  personal  interactions, 
debates and a public internet consultation. Broadly, the views of stakeholders are: 

• 

• 

• 

• 

• 

• 

Resources are under pressure: the exact nature of this pressure varies from resource 
to resource, including the groups affected and whether the impacts are local, national 
or global. 

Pressures are increasing: there is wide recognition that growing demands and threats 
to  supply  make  this  a  timely  moment  to  have  a  more  strategic  view  of  Europe's 
resource performance. 

Resource  efficiency  is  central  to  many  objectives:  different  stakeholders  put  the 
stress  on  different  issues  though,  business  of  the  potential  for  it  to  improve 
competitiveness, NGOs on the potential for it to improve environment. 

Industry  groups  are  concerned  about  the  access  to  raw  materials  and  proper 
management  of  primary  and  secondary  resources.  Businesses  called  for  the 
development  of  a  sound  knowledge  base,  more  policy  coherence,  indicators  to 
measure progress and the application of a full life cycle perspective.  

Different  stakeholders  recognise  different  possible  synergies  and  different  possible 
trade-offs,  in  particular  business  is  wary  of  possible  impacts  on  current  business 
plans  of  environmental  policies.  However,  there  is  broad  consensus  that  more 
coherent policy can be beneficial for meeting a wide range of policy objectives. 

Many of the policy tools are already in place or in the pipeline, and focus is needed 
on improving their operation and cross-cutting gap-filling and consistency. 

More details can be found in Annex 2. 

2. 

COSTS AND BENEFITS OF THE TRANSITION TO A RESOURCE-EFFICIENT EUROPE 

The benefits and costs of the transition depend on how smoothly the EU economy adapts to 
the  changing  megatrends  and  how  the  speed  of  response  compares  to  international 
competitors. For example, waiting for sudden or forced change, induced by crisis, or slower 
adaptation than competitors would be likely to impose more costs than gradual change.  

Our  economy  is  in  constant  change  as  innovation  introduces  new  technologies,  consumer 
preferences change and competition encourages some firms to grow at the expense of others. 
The EU's Industrial Policy for the Globalised Era discusses how the technologies, firms and 
sectors which are most successful now will not all be those which are most successful in the 
future. A transition to a resource-efficient, low-carbon Europe is part of this ongoing process 
of renewal.29   

To  assess  the  benefits  and  costs  of  a  transition  to  resource  efficiency,  we  have  to  make 
comparisons between different growth paths, any of which has costs from continuous renewal 
and competition in the economy.  

29  

"Impacts of Structural Change: Implications for transition to the Green Economy", GHK, 2011 

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2.1. 

Potential benefits of improved Resource Efficiency 

In the short to medium term30, a resource efficient growth path would bring: 

1.    

Improved  productivity:  as  businesses  reduce  costs  and  so  improve  their 
competitiveness. 

2.  

3.  

4.  

Growth and job creation: a faster pace of technological and organisational change 
will benefit the EU and open new global markets, supporting new jobs.  

Environmental  benefits  and  resilience:  improved  management  of  resources  can, 
for  example,  be  an  efficient  way  of  reducing  carbon  emissions  at  the  same  time  as 
strengthening EU resilience to the effects of climate change.  

Macroeconomic stability: by reducing security of supply issues, market volatility in 
important  resources  and  so  reducing  pressures  from  asymmetries  within  the 
Eurozone. It can also support fiscal reform. 

2.1.1. 

Improved productivity 

There  is  significant  untapped  potential  for  resource  efficiency  to  quickly  increase  the 
productivity  of  the  economy  by  cutting  costs  for  businesses  and  consumers.  The  values  of 
such gains vary from resource to resource, from business to business. Given this, the potential 
can only be shown based on examples: 

At the level of individual countries: 

-  UK business could save around £23bn per year from resource efficiency measures that 
are  either  no  or  low  cost31.  The  majority  of  these  savings  come  from  using  raw 
materials more efficiently and generating less waste (c. £18 billion). The sectors with 
the  greatest  potential  identified  were  chemicals  /  minerals  (c.  £4  billion),  metal 
manufacturing  (c.  £4  billion),  power  and  utilities  (c.  £3  billion),  construction  (c.  £3 
billion)  and  road  freight  (c.  £2  billion).  A  further  £33bn  per  year  of  annual  savings 
could be realised from expenditure with payback periods of longer than 1 year. 

-  Empirical  evidence  suggests  that  a  10-20%  reduction  in  resource  and  energy  use  in 
Germany is possible, with annual cost savings of 20-30%32. The payback period was 
one year in the case of materials, with estimated increase in resource productivity of 
2.9%  per  year.  For  materials,  this  saving  would  be  worth  up  to  €160bn/year  in 
Germany alone. 

At the European level: 

-  The  Union's  energy  efficiency  target  of  saving  20%  of  energy  by  2020  could  cut 
consumers’ bills by up to €1000 per household  a year and improve Europe’s industrial 
competitiveness creating up to 2 million new jobs by 2020. 

-  20-40%  of  Europe’s  available  water  is  being  wasted.  Losses  of  water  in  the  supply 
network  are  often  substantial  in  water-scarce  regions  in  Europe.  For  example,  in 

30 

31 
32 

The impacts (positive and negative) will be felt over time, and there is a natural blurring between what 
are sometimes termed short-term (direct) and medium-term (indirect) impacts. 
"Further Benefits of Business Resource Efficiency", Oakdene Hollins, 2011 
Distelkamp,  M.,  Meyer,  B.,  Wolter,  M.I.  (2005)  in:  Aachener  Stiftung  Kathy  Beys  (Hrsg.) 
Ressourcenproduktivität als Chance, and MaRess Final Report, Wuppertal et al 2010 

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France  and  Spain  up  to  34%  of  water  is  lost  before  it  reaches  the  consumer,  but  in 
Denmark  only  7%.  Water  efficiency  might  be  improved  by  nearly  40%  through 
technological improvements alone. 

Resource  efficiency  is  an  important  issue  for  EU  industries,  and  a  study  found  that  some 
industries  have  improved  substantially  in  recent  years,  although  there  is  still  room  for 
improvement,  though  the  ease  of  these  improvements  varies.33  Many  of  the  gains  from 
resource efficiency for businesses and consumers can be achieved at low or zero cost or where 
there  are  costs  they  are  not  large  investment  costs.  For  gains  with  longer-term  payback 
periods,  investments  would  be  necessary.  The  absence  of  available  finance  is  one  of  the 
barriers addressed in Annex 3. 

2.1.2.  Growth and job creation 

Resource  efficiency  that  encourages  (or  is  based  on)  eco-innovation  and  improves  the 
productivity  of  the  economy  will  improve  growth  and  job  prospects  at  the  macroeconomic 
level.34 For example: 

-  estimates of the impact of improved resource efficiency in Germany suggest that the 
economic  benefits  would  include  a  creation  of  more  than  1  million  jobs  and  an 
improved growth rate.35 

-  economic  modelling36  points  to  the  possibility  of  policy  measures  bringing  about 
resource  efficiency  that  could  eventually  boost  GDP  by  4%  (after  15  years)  and 
significantly reduce unemployment.37 

Particularly high employment growth potential has been identified in construction, ecosystem 
and  resource  management,  renewable  energy,  and  recycling  sectors.  In  order  to  build  a 
sustainable future growth, employment in these sectors needs to be of high quality and move 
away from precarious and low-paid working conditions. In this respect, jobs created in sectors 
linked  to  sustainable  growth  are  often  more  secure,  with  high  potential  for  exports  and 
economic value creation.  

First-mover  advantage  in  resource  efficiency  can  capture  growing  markets.  The  EU  holds 
roughly one third of the world market for environmental technologies. Currently, the global 
market  for  six  market  segments  in  eco-industries  has  been  estimated  at  €1.7  trillion  per 
annum,38 and is growing by around 5% per annum39.  

The  nature  of  this  advantage  is  continually  shifting.  For  example,  the  EU  used  to  be  the 
dominant  producer  of  solar  cells  but  now  China's  solar  cell  industry  is  the  world's  largest. 
According to a recent report by the World Wildlife Fund for Nature, China's green technology 
sector growth is outstripping all other nations. While Denmark earns the biggest share of its 
national  revenue  from  clean  technologies,  China's  sector  has  grown  by  77%  a  year.  China 

33   
34  
35 

36 
37 
38 
39 

"Competitiveness of European Companies and Resource Efficiency", Ecorys, 2011 
"Studies on Sustainability Issues – Green Jobs; Trade and Labour", GHK, 2011 
‘Wachstums-  und 
Fischer,  H.,  K.  Lichtblau,  B.  Meyer  and 
Beschäftigungsimpulse rentabler Materialeinsparungen [Growth and employment impulses of profitable 
material savings]’, Wirtschaftsdiens, 84 (4), 247-254. 
The EU Commission funded MOSUS project: http://www.mosus.net/ 
Other modelling results are summarised in 'The Economic Benefits of Environment Policy', GHK, 2009 
"Green Tech Survey", BMU, 2009 
Roland Berger Consultancy 

J.  Scheelhaase 

(2004), 

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earns more than 44 billion Euros each year (more than any other country), or 1.4% of its gross 
domestic product from clean technology.  

This  creates  competition,  but  also  particularly  strong  export  markets  as  China  and  other 
developing countries move to better manage their resources. Parts of the EU have moved up 
the  value  chain:  for  example,  exporting  the  equipment  used  to  make  thin-film  solar  cells 
rather than the cells themselves, as in the past.40 

2.1.3.  Environmental Benefits and Improved Resilience 

Improving  resource  efficiency  will  help  safeguard  the  environment,  and  reverse  the 
unsustainable trends documented in Europe's State of the Environment Report 201041. It will 
reduce pressure on  our 'natural capital': such as biodiversity and ecosystems,  which  provide 
goods and services that benefit the global economy and are essential for key economy sectors, 
for  example  food  and  drink,  raw  materials,  medicine,  cosmetics.  For  a  number  of  other 
resources  (mainly  renewable  resources),  resource  efficiency  can  help  reverse  unsustainable 
trends, for example from pollution.  

Decreased material use reduces harm to environmental resources, and therefore improves the 
resilience  of  ecosystems  and  ability  to  cope  with  natural  hazards.  This  will  have  economic 
benefits,  as  Member  States'  exposure  to  future  fiscal  risks  depends  on  the  resilience  of  the 
natural  and  man-made  infrastructure  to  extreme  events  (flooding,  storms  and  sea-level  rise) 
amongst other factors.42  

Protecting these resources does not necessarily mean lost short-term opportunities: 

- 

In  Scotland,  the  public  benefits  of  protecting  the  Natura  2000  network  of  protected 
areas  are  estimated  to  be  more  than  three  times  greater  than  costs,  including  direct 
management and opportunity costs. 

-  A  programme  to  restore  several  wetlands  in  Danube  (37  sites  in  the  Lower  Danube 
Green Corridor) will  cost  €183 million but  wi ll retain vital adaptive functions of the 
ecosystem  and  will  likely  lead  to  earnings  of  €85.6  million  per  year.  Without 
restoration, the 2005 flood damages were €396 million. 

Much  EU  eco-innovation  should  stimulate  greater  resource  efficiency  outside  the  EU  (for 
example  through  the  sale  of  technologies)  and  so  reduce  the  depletion  of  global  resources. 
PBL43 estimate that global energy use could be reduced by over 30% in 2050 without major 
changes  in  consumer  habits  through  such  dissemination,  halving  the  gap  between  baseline 
greenhouse gas emissions and the 450 ppm CO2-eq mitigation scenario. 

On the other hand, increased productivity from technology also frequently leads to a 'rebound 
effect'  as  improved  efficiency  translates  into  higher  demand  for  resources.  Without  a  well-
designed policy mix this offsets the environmental benefits (and those from reduced resource 
exposure) (see Annex 5 ). 

40 
41  
42 
43 

Economist, 3/2/2011 
"The European Environment – State and Outlook 2010", EEA, 2010 
"The fiscal implications of climate change adaptation" CEPS and ZEW, 2010 
PBL  (2011).  EU  Resource  Efficiency  Perspectives  in  a  Global  Context:  A  fast  track  analysis. 
Forthcoming, will be available at: http://ec.europa.eu/environment/enveco/studies.htm 

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2.1.4.  Macroeconomic stability 

Terms of trade and resilience 

Decoupling economic growth from the use of natural  resources  improves  the  terms  of trade 
and  eases  current  account  pressures.  A  shift  to  energy  and  commodity-efficient  production 
patterns  would  also  strengthen  the  resilience  of  the  EU  towards  price  shocks  in  commodity 
markets. 

Single Market and Eurozone tensions 

It  can  also  reduce  the  impact  on  the  single  market  and  eurozone  of  commodity  price 
developments  asymmetrically  affecting  European  economies  due  to  the  different  weight  of 
energy and food in EU Member State's expenditure. 

Security of supply and market volatility 

Resource  efficiency  is  a  route  to  tackling  security  of  supply  issues  and  market  volatility  in 
important  resources,  including  critical  metals  and  minerals,  fresh  water,  fish  and  food 
commodities.  These  issues  affect  many  sectors  of  industry,  including  manufacturing,  water 
and  energy  supply  and  their  customers  and  place  strain  on  the  single  market  and  eurozone 
through asymmetric impacts of resource price developments. 

Productivity gains and support for fiscal reform 

As  well  as  such  relatively  direct  benefits  for  growth  from  productivity  gains,  resource 
efficiency  can  also  support  fiscal  reform  and  help  balance  public  finances  by  finding  new 
sources  of  revenues  and  promoting  employment.44  This  can  occur  both  through  providing  a 
new source of revenues, and through the reforming of subsidies cutting public expenditure. 

2.2. 

Potential Costs around Transition 

2.2.1.  Costs of slow or retarded transition 

If the EU economy adapts too slowly, costs arise from exposure to the risks and volatilities of 
resource scarcity. Competing firms or countries with relatively better resource productivity or 
resilience  to  resource  shocks  will  gain  competitive  advantage,  which  may  slow  EU  growth. 
Developing  countries  may  develop strategic  advantage  over  the  EU,  as  they  are  less  locked 
into physical infrastructure and institutional rigidities based on old growth models.45 

Slow  transition  now  suggests  more  sudden  transition  later,  in  response  to  crisis  or  lack  of 
competitiveness  which  is  likely  to  incur  greater  transition  costs.  Slow  change  presents 
increased  damage  to  environmental  resources,  making  their  recovery  more  difficult.  The 
opportunities mentioned above are lost.  

44 

45 

A  permanent  one  percentage  point  reduction  in  the  average  tax  burden  on  labour  is  estimated  to 
increase the employment rate by about 0.4% in a typical country. OECD 2006. 
International Resource Panel (2011) Decoupling report 

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The  OECD  has  argued  the  processes  of  economic  restructuring  ultimately  strengthen  the 
competitiveness  of  economies.  As  part  of  this,  new  industries  will  grow  at  the  expense  of 
others, implying a reallocation of resources from old industries to new industries. 

2.2.2.  Costs of the process of change 

Adaptation  to  resource  megatrends  over  time  will  involve  structural  economic  change. 
Structural  change  brings  costs  from  frictions  in  people  or  capital  investments  moving  from 
one activity to another. It involves updating of technologies, innovation, skills.  

The  costs  of  transition  will  also  crucially  depend  on  three  factors:  how  well  change  is 
predicted, the pace of change, and the flexibility of the economy. 

A)  

How well the economy predicts and meets change 

If  businesses  and  economies  are  able  to  predict  changes,  they  can  reduce  costs  by  avoiding 
investments that are soon obsolete. Instead, they can pick investments that will thrive in the 
changed conditions. An example of a stranded investment would be energy infrastructure that 
did  not  factor  in  future  switches  in  energy  sources.  There  are  short-term  actions  that  are 
relatively  risk-free,  but  long-term  investments  depend  on  a  good  understanding  of  future 
resource prices and constraints.46 

B)   

Pace of change 

Overly-fast  rates  of  change  can  exceed  capacity  to  adapt  and  innovate,  leaving  firms  or 
countries stranded with mismatching assets and skills to the new conditions. The ideal rate of 
adaptation is one that matches the capabilities of the economy as a whole to adapt.  

C)  

Flexibility of the Economy 

If an economy is more flexible – if it can more easily move workers and investments into new 
ways  of  production  –  it  suffers  lower  costs  from  change  than  economies  that  have  more 
inbuilt rigidity. Flexibility comes from many factors: including labour markets, modernity of 
infrastructure, the degree of entrepreneurship and the ability to finance investments.  

Box : Transition costs in labour markets 
The transition to a low-carbon and resource-efficient economy will involve change as:47 

(1) 

(2) 

(3) 

(4) 

Substitution of employment will take place, for example due to shifting from fossil 
fuels to renewable energy sources  or from waste land filling to recycling; 

Particular  jobs  may  be  eliminated  without  direct  substitution  (e.g.  when  the  use  of 
certain packaging materials is discouraged and their production ends); 

Additional  jobs  will  be  created  in  several  areas,  such  as  in  the  manufacturing  of 
pollution-control devices which are added to existing production equipment; 

Many  existing  jobs  (i.e.  plumbers,  electricians,  metal  workers,  and  construction 
workers) may need changed skills due to changed best practice working methods. 

46 
47 

"Competitiveness of European Companies and Resource Efficiency", Ecorys, 2011 
"Environment and labour force skills", Ecorys, 2008 

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The net effect is expected to be either no or a slight positive impact on the employment level. 
However,  the  overall  impact  could  be  negative  if  structural  employment  increases  due  to 
workers' existing skill sets not matching future needs. 

The costs from structural unemployment will depend significantly on: 

• 

• 

• 

How  well  workers  and  firms  look  at  future  skills  needs  and  train  for  their  future 
opportunities.   

Whether change in any region or sector is gradual, allowing progressive adaptation 
of  skills  by  individuals  or  whether  the  labour  market  is  suddenly  flooded  with 
redundant workers48; and 

How easy it is for workers to re-train or move to different employment.  

Where  economies  face  costs,  governments  can  choose  to  reduce  these  by  helping  in  any  of 
these  areas,  for  example:  easing  of  transitions  and  the  support  of  workers  during 
transition.  Policies  should  focus  on  preserving  employment  in  the  economy,  not  particular 
jobs.49 50 They can, for example, anticipate future skills needs for green and greener jobs and 
adapt education and training systems accordingly.  

2.2.3.  Comparison with the past and other potential futures 

The costs from adaptation through greater resource efficiency need to be compared against the 
costs  to  the  economy  from  structural  change  in  the  past,  and  compared  to  other  realistic 
scenarios of future growth.  

Structural change is an ongoing process. Any economy is in constant change with growth and 
relative decline of different sectors and skill sets, generating constant costs from change. Past 
structural change has shown that new jobs associated with new businesses are generally more 
productive  than  those  that  have  been  lost  as  a  result  of  new  ideas  and  adaption  to  market 
demands.51  

The table below illustrates this trend of structural change by showing how labour has shifted 
between  the  primary,  secondary  and  tertiary  sector  between  1980  and  2008.  Over  the  same 
period  the  aggregate  size  of  these  economies  increased  substantially,  with  annual  average 
growth rates in GDP or 1.5-2.5%. This indicates that the 'business as usual' of an economy is 
not to stay static, but to undergo change, and the costs that come with it. 

48  
49 
50  
51 

"Employment in Europe 2009" European Commission, 2009 
"Green Growth Strategy Synthesis", OECD, 2011 
"Studies on Sustainability Issues – Green Jobs; Trade and Labour", GHK, 2011 
"Reallocation, Firm Turnover, and Efficiency: Selection on Productivity or Profitability?", Foster, L., J. 
Haltiwanger and C. Syverson in American Economic Review 2008,  

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Table:  Sectoral Structural Change in Selected Economies (% of Gross Value Added)52 

Selected 
economies 

1980 

2008 

Agriculture  Industry 

Services 

Agriculture

Industry 

Services 

Poland* 

Spain 

UK 

8.2 

6.3 

2.0 

Germany 

2.4 

US 

2.9 

39.4 

37.0 

40.7 

41.1 

33.3 

52.0 

55.7 

57.2 

59.9 

63.7 

3.7 

2.6 

0.9 

0.9 

32.0 

28.4 

23.6 

29.8 

64.2 

69.0 

75.2 

69.3 

1.3** 

21.8** 

76.9** 

The ‘baseline’  levels of adjustment could be taken as the levels that have been  seen in past 
decades  –  for  example,  in  the  UK  some  25%  of  private  sector  jobs  are  lost  every  year  but 
another 25% are created53.  

Whether  the  costs  of  adaptation  to  resource  trends  are  higher  or  lower  than  the  costs  of 
continuous structural change in the past will depend on the factors mentioned in 2.2.2 above. 
Yet,  it  seems  likely  that  the  transition  to  resource-efficiency  could  be  achieved  through  a 
change in the focus of innovation in the economy, rather than in the rate of structural change.   

2.2.4. 

Identifying winners and losers 

In  any  growing  economy  there  are  winners  and  losers.  Policy  makers  can  help  facilitate 
transition by identifying potential winners and losers, to help target policy. Potential losers are 
likely  to  be  particularly  visible,  seeking  to  preserve  the  status  quo  to  postpone  short-term 
costs: 

"The  short-term  negative  consequences  of  structural  change,  i.e.  those  enacted  through  the 
downsizing  (or  closure)  of  enterprises,  are  relatively  identifiable,  publicly  visible  and  often 
strongly concentrated in particular sectors. The positive effects of structural change, both in 
terms of new companies and the expansion in existing companies, are generally less visible, 
much less publicised and more evenly spread throughout the economy"54. 

The  potential  losers  from  the  transition  to  resource-efficiency  can  not  be  easily  grouped  by 
sector.    In  any  sector,  winners  will  be  those  firms  that  adapt  successfully.  This  will  often 
include  those  that  make  investments  in  innovation  earlier  rather  than  later,  even  where  this 
implies short-term costs.   

For example, greater efficiency in the use of metals (eg, in construction) in the economy may 
reduce  the  mass  of  a  metal  sold  but  simultaneously  make  the  metal  more  valuable,  as  it 

52 

53 
54 

Note: The three sectors do not add up to 100%, due to minor errors in original data. *Polish data are for 
1992  not  1980.**Data  is  from  2007,  no  data  is  available  for  2008  (Source:  OECD  Factbook,  2010 
(World Bank data) 
"Job creation and destruction in the UK: 1998-2008", Anyadike-Danes et al., 2011 (forthcoming) 
"Restructuring  and  employment  in  the  EU:  Concepts,  measurement  and  evidence",  European 
Foundation for the Improvement of Living and Working Conditions, 2006 

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achieves its purpose (for, instance structural support) with less. Those firms which adjust to 
capture the added value will thrive at the expense of those that have a mass based business 
model.  

In general, the losers will be those firms or individuals who have heavily invested in capital 
that  is  not  well  adapted  to  a  resource  efficient  economy,  either  in  terms  of  their  production 
processes, infrastructure or the products and services that they offer.  

In terms of individuals or regions, those facing short-term losses will be immobile employees 
without the skills sought in the future economy, and regions which have invested in resource 
intensive industry and which do not have a suitable policy mix to support adaptation. Policies 
for managing transitions may require particular support for low-skilled workers. 

At the same time, the aim of being more resource efficient is not to drive resource intensive 
sectors out of Europe. On the contrary, it is important to keep industry and its supply chain in 
Europe  to  maintain  growth  and  jobs.  Policy  can  respond  to  changing  conditions  by  altering 
the distribution of costs. For example, removing artificially low resource prices provides the 
right  incentives  for  productivity  gains,  but  creates  winners  and  losers  between  competitors 
within an economic sector. It changes the basis of competition – giving added advantages to 
those firms which adapt best.  

3. 

MAKING EUROPE RESOURCE EFFICIENT  

Some  progress  on  resource  efficiency  is  already  happening  as  businesses,  households, 
Member  States  and  international  institutions  are  taking  action.  Resource  productivity  has 
improved  by  around  2%  per  annum  (if  measured  by  Euros  per  kg  of  Domestic  Material 
Consumption);  in  many  contexts  we  have  relative  decoupling  of  economic  growth  from 
environmental  harm;  and  we  are  reducing  our  reliance  on  fossil  fuels  by  increasing  energy 
efficiency and developing alternatives.55 

Yet  there  are  a  number  of  problems  that  reduce  the  economic  system's  ability  to  predict 
change  and  its  flexibility  to  respond  to  that  change.  These  artificially  slow  the  EU's  rate  of 
transition to greater resource efficiency. They constrain the EU's natural ability to respond to 
changing conditions: either to seize the new opportunities and avoid the costs and the risks to 
growth, security and future well-being identified above. 

3.1. 

Several problems hold back the EU economy 

3.1.1.  Constraints on the ability to predict 

Knowledge gaps about future risks constrain firms and policy makers from planning for the 
future.  For  example,  there  are  significant  uncertainties  how  environmental  systems  (like 
weather-linked  water  supplies)  will  change  and  the  impacts  they  will  have.  Many  firms  are 
not aware of risks up their complex, global supply chains.  

Consumers, firms, policies and parts of the economic system (e.g. financial markets) are often 
shaped by short-termism in decision making. Firms and households can have short pay-back 
periods for investments, which could lead to underinvestment for the future. For example, one 
study  found  that  in  a  particular  context  firms  are  so  risk  averse  that  returns  on  investment 

55 

"Competitiveness of European Companies and Resource Efficiency", Ecorys, 2011 

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must  be  perceived  to  be  ‘air-tight’56  with  figures  of  27%  needed57.  Policies  often  focus  on 
short-term goals.  

EconomicImpacts 
- costs for households  
- costs for businesses 
- reduction in growth 
- risks for economy 

Supply threats 
- uncertain global 
supply chain  
- volatile markets 

Social impacts 
- threat to jobs 
- skills base outdated 

Resource Impacts  
- depletion of natural 
resources 
- degredation of 
environmental assets 

Resource 
inefficiency 

Demand threats 
- population growth  
- economic growth  

Ability to Predict 
- knowledge gaps  
- short-termism 

Ability to Respond 
- technology lock-in  
- consumption inertia 
- knowledge lock-in 

Ability to Predict + Respond 
- Policy incoherence 
- Market failures: 
externalities, missing markets, 
not pricing scarcity 

Figure: Resource inefficiency: barriers, threats and impacts 

3.1.2.  Constraints affecting the ability to predict and respond 

Market Failures 

Market  economies  are  good  at  making  the  right  purchases  and  investments  when  they  are 
working well, for example, when the price of a good matches its real cost. Surprisingly often, 
there are still barriers - market failures - that hold back markets from working well. This is 
particularly  the  case  for  decisions  or  purchases  which  affect  quality  of  life  in  the  future,  or 
direct  or  indirect  effects  on  environmental  resources  (like  climate  or  ecosystems).  The 
globalisation of resource supplies has made many impacts and risks more remote, so less well 
reflected by markets.  These include: 

• 

• 

• 

56 
57 

Failure to reflect future scarcity of resources in prices, leading to unsustainable use. 

Misalignment  of  incentives  along  a  value-chain.  For  instance,  the  landlord-tenant 
problem,  where  the  person  responsible  for  investments  (landlord)  will  not  benefit 
from  any  increases  in  energy  or  resource  efficiency,  so  will  under-invest.  This  can 
also apply within supply chains. 

Indirect  costs  or  'externalities':  Where  there  are  indirect  consequences  of  resource 
use, they are often not considered in public and private decisions. Many resources are 
economically valuable, but under-priced and usually  off  firms'  balance  sheets.  This 
leads  to  the  mis-management  of  these  resources,  with  weak  incentives  to  improve 

"Maintaining a Strong Innovation Culture During a Downturn", Arthur D. Little 2008  
http://www.bankofengland.co.uk/publications/quarterlybulletin/qb940308.pdf 

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efficiency of their use or management.58 Many of these are the impacts from the life-
cycle (eg. extraction, processing, use, waste) of one resource on another (for example 
of metals on the climate system, or of agriculture on water availability. 

• 

Problems with management of open access or shared resources, or 'missing markets'. 
There  are  resources  with  unclear  property  rights  (e.g.  fish  stocks,  forests)  where 
people  have  very  weak  incentives  to  collectively  manage  the  resource  well  for  the 
future. 

This  mean  that  market  signals,  particularly  price,  often  point  decisions  away  from  resource 
efficiency. 

Policy Inconsistency 

Some  policy  interventions  do  the  same,  whilst  inconsistency  between  policies  reduces 
predictability.  Policy  –  made  for  good  reasons  in  one  field  -  can  have  unintended 
consequences that holds back efficient use of resources, for example: 

• 

• 

Subsidies that promote resource use can be very large and have significant indirect 
impacts. 

Market rules and regulatory structures can unintentionally hold back innovation. For 
example, bidding systems  for  power sales that are conducted one-day ahead hinder 
the  participation  of  wind-power  generators,  who  can  more  reliably  predict  their 
output around 3 hours ahead.59 

As  external  conditions  change,  policy  is  sometimes  hard  and  slow  to  reform,  leading  to 
policies that hold back transition. For example, tax policies put in place for one reason, may 
have  increasingly  costly  distortions  on  the  market  that  slow  adaptation,  but  these  indirect 
effects are often not considered by segmented policy-making governmental structures.  

Policy  inconsistency  often  also  arises  from  the  complexity  of  trying  to  remove  market 
failures, which can cause high costs of intervention. It also comes from policy being shaped in 
favour of groups for whom policy change bring short-term loss of income, rather than longer 
time period, more diffuse but larger income gains. 

3.1.3.  Constraints affecting the ability to respond 

Economies have a tendency to respond slowly to some changes, because they (and the firms 
and consumers that form them) are partly 'locked-in' to paths determined by past investment 
decisions,  existing  economic  structures  and  prevailing  institutions.  In  addition,  firms  and 
people  tend  to  be  risk-averse,  which  can  constrain  the  ability  of  firms,  consumers  and 
societies to adopt new innovations60. Some examples are: 

• 

58 
59 
60 

Technological  lock-in  when  established  technologies  have  a  price  advantage  over 
innovations,  or  where  the  technology  forms  part  of  a  physical  or  social  system  of 
which  the  other  parts  are  not  changing.  Examples  are  technologies  linked  to 
infrastructure,  as  with  transport  (eg.  electric  vehicles  lacking  charging  points)  or 

"Green Growth Strategy Synthesis", OECD, 2011 
OECD Smart Grids and Renewable Energy, Competitition Committee Roundtable 2010 
OECD Green Growth Synthesis 2011 

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networks  (the  advantage  of  communication  technologies  is  their  ability  to 
communicate with the technologies that other people already have). 

Lock-in  to  consumption  and  behavioural  patterns  (eg.  food  choice,  or  waste 
disposal behaviour). Behavioural studies observe that people tend to stick to habits, 
social  norms  or  past  behaviours.  This  holds  back  diffusion  of  product  and 
organisational  or  social  innovation,  hindering  the  creation  or  expansion  of  new 
markets.61 

Skills  and  business  models  may  continue  to  be  strongly  based  on  techniques  and 
information learnt in previous years. 

Insufficient incentives for innovation in resource efficiency on the scale required in 
particular to stimulate greater financial and human resources in these areas 

• 

• 

• 

3.2. 

Policy Objectives in the transition to a resource-efficient, low-carbon economy 

3.2.1.  The Europe 2020 Strategy 

To  secure  smart,  sustainable  and  inclusive  growth  into  the  future,  EU  governments  have 
agreed on an economic strategy to take the EU to 2020. The Europe 2020 strategy recognises 
that  a  good  transition  to  resource  efficient  Europe  requires  policy  to  remove  the  barriers 
described above. Across the EU, a very wide range of policies aiming at improving resource 
efficiency are already in place62 63 However, even with these policies, current trends – e.g. in 
the environment - are failing to meet EU objectives.64  

The  OECD  argues  that  leadership  is  needed  from  finance  and  economic  ministries,  without 
which the transition goals will be impossible to achieve, although environmental policies play 
a  central  role.65  To  help  deliver  the  necessary  policy  change,  one  of  the  Europe  2020 
Strategy's  key  initiatives66  established  resource  efficiency  as  the  guiding  principle  for  EU 
policies  on  energy,  transport,  climate  change,  industry,  commodities,  agriculture,  fisheries, 
biodiversity and regional development. 

3.2.2.  Objectives of the Roadmap to Resource Efficient Europe 

The Roadmap aims to remove the barriers holding back transition that are not yet tackled by 
sectoral  policy.  It  also  aims  to  create  a  framework  that  improves  coherency  across  existing 
and new policies.  This is partly done by agreeing the long-term goal set out in the Roadmap: 

61 
62 

63 
64 
65 
66 

"Lags in the EU Economy's Response to Change", Ecorys, 2011 
"Economic  Analysis  of  Resource  Efficiency  Policies",  COWI,  2011,  and  "Review  of  the  Natural 
Resource Thematic Strategy", BIO Intelligence Service, 2011 
http://www.eea.europa.eu/themes/economy/resource-efficiency/resource-efficiency 
"The European Environment – State and Outlook 2010", EEA, 2010 
"Green Growth Strategy Synthesis", OECD, 2011 
"A Resource Efficient Europe", COM(2011) 21 

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thus  contributing 

By 2050 the EU has grown in a way that respects resource constraints and within planetary 
boundaries, 
is 
competitive, inclusive and provides a high standard of living with much lower environmental 
impacts. All resources are sustainably managed, from raw materials to energy, water, air, land 
and soil. Climate change milestones have been reached, while biodiversity and the ecosystem 
services it underpins have been protected, valued and substantially restored. 

transformation.  Our  economy 

to  global  economic 

The Roadmap aims at removing the following barriers: 

Barriers to the ability to predict 

• 

• 

• 

• 

Deliver research to fill the gaps in our knowledge and provide the right information. 

Creating  clear  milestones,  indicators  progress  in  resource  efficiency  and  targets  to 
provide guides on the future direction of the economy and policy. 

Increasing  the  flow  of  information  on  resource  risks  and  cost-effective  efficiency 
opportunities  between  commercial  partners  in  supply/value  chains  that  leads  to  the 
uptake of new sustainable practices and stimulates breakthroughs in innovation. 

Encouraging  more  long-term  innovative  thinking  in  business,  finance  and  politics, 
including  information  exchange  within  government  develops  that  forward  thinking, 
cost effective regulation.  

Barriers that hold back both the ability to predict and respond  

• 

• 

• 

• 

Removing  market  failures,  including  improving  management  of  open  access 
resources. 

Reduce  uncertainty  on  future  returns  through  providing  clear,  consistent,  credible 
market signals on direction of relevant policies. 

Promoting exchange of information between government ministries toward common 
goals, to improve policy coherence, find synergies between policy goals and resolve 
trade offs. 

To  tackle  lock-in  to  existing  consumption  patterns  and  behaviours  through  policy 
that take into account most recent science on the influences on consumer behaviour.  

Barriers to the ability to respond 

• 

• 

• 

• 

Addressing taxes and subsidies that distort the real costs of resource use.  

Increase  public  and  private  investment  in  technological  innovation,  including 
through increasing the priority and funding for research and innovation on resources.  

Increase flexibility in labour markets, supporting training in the right skills.  

to 

facilitate  policy 

Ease  short-term  adaptation cost concerns, with complementary, transitionary policy 
measures 
international  short-term 
competitiveness concerns of less-adaptive firms and costs for particular social groups 
-  and  seeking  a  consensus  with  international  partners  to  move  in  a  supportive 
direction. 

including 

reform, 

- 

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4. 

TRANSFORMING THE ECONOMY 

4.1. 

Actions in an interconnected world 

Very  large  opportunities  for  cost  savings  coupled  to  reduction  in  resource  use  and  impacts 
remain,  despite  past  progress  towards  more  resource  efficient  supply.  Seizing  these 
opportunities could allow the EU to transform its economy whilst improving competitiveness.  

The Resource Efficiency Roadmap covers a wide range of areas - energy, transport, climate 
change, industry, commodities, agriculture, fisheries, biodiversity and regional development. 
The  solutions  are  proposed  to  be  taken  at  all  levels  of  society,  by  individual  businesses, 
business associations, consumers, regions, Member States and, where there is added value, at 
EU level.  

The  majority  of  areas  already  have  some  targets  or  objectives  that  are  the  product  of 
longstanding policy discussions between stakeholders. The Roadmap sets out actions to help 
these  objectives  to  be  met  more  easily  (i.e.  at  lower  social  cost),  more  quickly  or  with  less 
chance  of  failure.    Many  of  the  means  to  do  this  lie  in  exploiting  synergies  inherent  in  the 
inter-connections between economic sectors and policy areas.  

There are interlinkages across the economic system, the use of resources and environmental 
impacts: supply is related to demand, investment is related to perceived opportunities, prices 
for one resource depend on prices of its potential alternative. Indirect impacts and feedbacks 
create  complex  relationships.  The  box  below  illustrates  one  example,  of  the  important 
interlinkages between resources and the economy. 

Box: Interlinkages between resources and the economy – Water  

Water: a central resource in a strongly interrelated system 

As  a  connecting  system  water  is  exposed  to  many  different  pressures.  It  also  links  the  effects  of 
some  economic  activities  to  others.  For  example  sulphur  dioxide  and  nitrogen  emissions  from 
industry react with the water  molecules  in the  atmosphere and end up disturbing land, water and 
marine ecosystems and biodiversity through acid rain. Furthermore greenhouse gas emissions from 
all key sectors contribute to climate change, which has an impact on both the supply and demand 
for water.  
Water and energy: a mutual dependency 
Water  makes  vital  contributions  to  economic  activities  including  agriculture  and  energy 
production.  Data  for  the  US  for  example  that  40%  of  industrial  water  use  is  for  power-station 
cooling for energy generation. On the other hand the water supply and sanitation sector is a large 
consumer of energy, especially to transport it over long distances. In California for example it is 
estimated that the water sector consumes 19% of the state's electricity and 30% of its natural gas.  
How resource efficiency can create positive feedback loops 
Using  resources  more  efficiently  would  not  only  reduce  environmental  pressures,  it  would  also 
reduce energy demand leading to further reductions in water. 

One  of  the  main  conclusions  in  EEA’s  State  of  the  Environment  Report  2010  states: 
‘environmental  challenges  are  complex  and  can’t  be  understood  in  isolation’.  This  applies 

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24 

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equally  to  most  issues  around  transition  to  resource  efficiency.67  Within  the  web  of 
interconnections,  changing  one  resource  (or  policy)  may  either  cause  other  consequences  - 
e.g. unexpected impacts elsewhere, or achieve little change to the system. This leads to many 
potential synergies: 

• 

• 

• 

a  number  of  feasible  dematerialisation  strategies  such  as  increased  recycling,  lean 
manufacturing  and  prolonging  product  lifetimes  could  save  up  until  5162.5  PJ  of 
energy.  These  energy  savings  would  not  only  entail  a  reduction  in  the  EU's  GHG 
emissions of 15.6%, they would also reduce the need for water for energy generation, 
reduce the need for land to produce biofuels, and reduce the pressures on biodiversity 
from acidification and eutrophication.68 

a  number  of  strategies  including  reducing  food  losses,  improving  agricultural 
practices and reducing power savings in farming could lead to a reduction of 25% of 
global warming and respiratory organics, a reduction of aquatic ecotoxicity of 68% 
and a reduction of 31% of acidification and terrestrial eutrophication.69 

mitigating  climate  change  would  halt  adverse  effects  on  ecosystems,  whereas 
undisturbed  ecosystems  have  been  proven  to  play  a  crucial  role  for  climate  change 
mitigation and adaptation.70   

Many of the interlinkages can also lead to trade-offs: 

• 

• 

• 

• 

the production of biofuels:  on the  one hand the  production and  use of biomass can 
lead to greenhouse gas savings and have potential benefits to the environment, but on 
the other hand it can also increase other environmental pressures.71  

deployment  of  'green'  vehicles  reduces  the  use  of  fossil  fuels  but  increases  the 
demand for electricity and certain raw materials, some of which are subject to supply 
restrictions and concentrated in a few geographical areas (e.g. rare earth elements for 
electronic components and fuel cells, lithium for batteries). 

land  used  to  produce  food  may  compete  with  land  use  for  energy  and  both  may 
compete with land which supports biodiversity or provides ecosystem services such 
as absorbing carbon from the atmosphere. 

some additives used in plastics can extend the preservability of packaged food, but 
pose serious challenges to plastics recycling. 

4.2. 

Target Areas for Action 

The  actions  to  help  smooth  transition  can  be  grouped  into  6  areas  for  easier  explanation, 
corresponding to the main barrier they seek to remove. This can tend to hide the inter- very 
significant connections between them. These areas of action are:  

67 
68  
69  

70  
71  

"Globalisation the environment and you", EEA, 2011 
"Links between dematerialisation and energy use", Bio Intelligence Services, 2010 
"Environmental Improvement Potentials of Meat and Dairy Products (IMPRO)", B.P. Weidema et al., 
JRC, 2008 
"The European Environment – State and Outlook 2010", EEA,2010 
"Climate  change  impacts  on  water  quality  and  biodiversity",  European  Topic  Centre,  2010;  "The 
European Environment – State and Outlook 2010", EEA,2010 

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• 
• 
• 
• 
• 
• 

Improving products and changing consumption patterns  
Boosting efficient production  
Turning Waste into a Resource  
Supporting Research and Innovation  
Phasing out inefficient subsidies  
Getting prices right 

Issues between resources differ. The application of these actions is particularly needed on the 
where  the  existing  barriers  have  the  greatest  effects.    In  Annex  3  to  this  Staff  Working 
Document,  the  rationale  for  areas  of  action  and  their  application  to  key  resources  are 
described. These are:  

• 
Ecosystem Services 
• 
Biodiversity 
•  Minerals and Metals 
•  Water 
• 
Air 
• 
Land and Soil 
•  Marine Resources 

Co-ordination  of  actions  becomes  important  because  each  action  has  direct  and  indirect 
effects that pass further through the  economic and environmental  systems.72 For example, a 
change in consumer purchasing has effects on suppliers' behaviour and, in turn, on their input 
suppliers. As these indirect effects can be very significant, bringing coherence would need the 
most important of these indirect effects to be considered in policy making.  

In  economic  systems,  the  primary  flow  of  interactions  runs  up  and  down  from  the  final 
consumer  through  intermediary  economic  actors  to  raw  materials  suppliers.  (This  is 
sometimes  called  the  'value  chain'.)  Consideration  of  interactions  in  these  value  chains  is  a 
necessary  step  to  finding  synergies  and  new  ways  to  remove  long-standing  barriers.  The 
Roadmap considers what would be needed for three key areas of economic value: 

• 
Food and Drink 
• 
Buildings  
•  Mobility  

Annex 3 describes the rationale behind working with these value chains. 

5. 

GOVERNANCE  AND  MONITORING:  A  NEW  PATHWAY  TO  ACTION  ON  RESOURCE 
EFFICIENCY 

5.1. 

Consequences of Existing Governance Arrangements 

Uncertainty around future policy and incoherence between policies are one of the barriers that 
hold  back  the  economy's  ability  to  predict  change  in  resource  scarcity  and  in  its  ability  to 
respond.  Weak  coordination  can  lead  policies  to  be  working  against  each  other.  This  can 
happen where policy is formed on the basis of different information or different prioritisation 
of  political  interests,  and  can  leave  business  and  citizens  facing  contradictory  policy  and 

72  

"Green Growth Synthesis", OECD, 2011 

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market  signals.73  Several  policy  bodies  have  pointed  to  the  removal  of  these  barriers  as 
essential. At EU level, the Council has called for integrated approaches working over the life-
cycle of products and materials from extraction to end of life.74  

The  OECD  in  its  'Towards  Green  Growth'  strategy  refers  to  broad  recognition  that  further 
progress  can  only  be  achieved  if  governments  turn  to  more  integrated  policy  approaches75. 
Business  stakeholders  have  called  for  clear,  unambiguous,  credible  and  reliable  market 
signals  to  give  security  to  investment.  Experience  with  existing  structures  for  integrated 
policy development at EU level suggests that a change is needed to steer the transition to a 
resource efficient economy.  

Weak coherence has been found to come from: 

• 

• 

'Silo-based'  policy  making  arrangements  -  policy  responsibilities  relating  to  the 
economy's  transition  to  resource  efficiency  are  spread  among  different  departments 
with  governments  and  decentralised  to  the  appropriate  level.76  Departments  or 
regional administrations can form divergent objectives. 

Political  emphasis  on  short-term,  direct  effects,  particularly  reactions  to  negatively 
perceived change.  

Together, these reduce the predictability of change for firms, weakening belief in announced 
strategic policy and the implementation of the policies which would deliver it. These factors 
also affect the scope of relevant knowledge within policy making bodies. Knowledge of the 
existing and future potential for greater efficiency between sectors in value chains often falls 
outside the expertise of policy makers. The focus on particular areas and direct effects tends 
to reduce knowledge of indirect effects on systems and the optimal rate of change for area of 
the economy.  

5.2. 

Governance change for facilitating transition 

Governance  arrangements  are  a  key  factor  in  the  level  of  policy.  The  Roadmap  sets  out 
actions to change governance in 3 areas:  

5.2.1. 

Sharing information on future opportunities, milestones and targets 

Bringing  together  information  from  different  parts  of  the  supply/value  chain  can  identify 
short-term  win-wins  that  each  sector  or  organisation  could  not  realise  without  the  co-
operation of other parts of the value chain. It can also provide information for policy makers 
that allow them to identify the packages of policy that would need to be provided to give the 
right market signals and incentives to support further opportunities.  

The  Roadmap  considers  structures  that  would  bring  business  representatives  from  across 
supply/value  chains  together  with  policy  makers.  These  platforms  would  facilitate 
information  exchange  about  resource  supply  risks,  possibilities  and  barriers  for  greater 
efficiency. The exchange of information can help set commonly agreed goals for the optimal 

73  
74  
75  
76  

"Green Growth Synthesis", OECD, 2011 
December Council conclusions on Sustainable Materials Management: Council Document 17495/10 
"Green Growth Synthesis", OECD, 2011 
"Making reform happen: Lessons from OECD countries", OECD, 2010 - P. Ekins, Chapter 5  

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rate of transition in any particular area of the economy and identify the most appropriate set of 
policy reforms to drive innovation.  

The discussion of potential common objectives, for 2020 and beyond, and knowledge of the 
potential  of  increased  innovation  to  achieve  them  may  help  change  expectations  of  future 
markets  (e.g.,  for  innovation)  and  to  lead  to  increased  investment  by  reducing  barriers  to 
predictability. It can also serve to bring policy makers with different expertise together in the 
formation of common goals. 

Within  Europe,  many  organisational  structures  have  been  set  up  which  attempt  to  improve 
policy  coherence  and  exchange  with  business  with  varying  success.  In  Member  States' 
policies  some  transition  is  taking  place  to  integrated  resource-efficiency  policies  (e.g.  in 
Finland) from past segregated policies (energy efficiency, water, waste, etc.) A few Member 
States apply a holistic approach to focus on greening the  whole  economy, instead of giving 
attention to particular resources (e.g. United Kingdom) In a few cases, the whole life-cycle is 
considered  and  impacts  abroad  are  taken  into  account,  through  e.g.  focusing  on  sustainable 
trade (the Netherlands) or the impacts of consumption (Sweden). 

There  are  many  examples,  at  EU  and  MS  level,  of  structures  to  shape  policy  and  business 
action through co-ordinated discussion. For example: CARS 21 (an EU level grouping of the 
vehicle  supply  chain  and  policy  makers),  Member  State  transition  platforms  (eg.  in  the 
Netherlands which brought together 5 ministries77), civil society initiatives (eg. the European 
Re-Building Forum78). Positive and negative experiences with the reform of environmentally 
harmful  subsidies  have  demonstrated  the  importance  of  this  approach.79  The  successful 
Covenant of Mayors, which has driven energy efficiency in over 2000 cities and regions, can 
expand  its  scope  to  realise  the  synergies  between  energy  efficiency  and  wider  resources 
efficiency in urban settings. 

International  round  tables  bringing  together  the  wide  range  of  relevant  stakeholders  to 
promote  resource  efficiency  along  the  life-cycle  have  been  established  for  several 
internationally traded goods, notably palm oil, soy, and cocoa. 

At EU and MS level, existing structures can be used, with changes where needed. The nature 
or  participation  and  engagement  in  these  organisational  structures  defines  their  success.  For 
instance, the technological and organisation potential for efficiency gains is often outside the 
knowledge for some companies, in particular of SMEs80.  For this reason, the World Business 
Council  for  Sustainable  Development  (WBCSD)  points  to  the  importance  of  making  new 
alliances  to  bring  trust  between  government,  academia,  business  consumers  and  civil 
society).81 It uses the example of the construction industry, where developing energy efficient 
buildings on a large scale needs the co-ordination of professionals along the value chain.  

Small, progressive businesses are likely to be under-represented as they do not have the time 
to invest in such processes,  but their voice is essential for an understanding of the potential 

77  

78  
79  
80  
81 

The  Dutch  government  put  in  place  'transition  management'  as  national  policy  in  2001,  with  five 
ministries jointly developing transition polices for mobility, food production, energy and biodiversity. 
Referenced  in  "Towards  Resource  Efficient  Economies  in  Asia  and  the  Pacific",  Asian  Development 
Bank 
http://www.epe.be/Default.aspx?p=112&n=134 
"Competitiveness of European Companies and Resource Efficiency", Ecorys, 2011 
"Competitiveness of European Companies and Resource Efficiency", Ecorys, 2011 
Vision 2050, WBCSD, 2010 

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opportunities.  Views  from  business  associations  may  tend  to  represent  a  consensus  view 
influenced  by  the  least  progressive  companies.  Information  on  the  existence  of  barriers  to 
change is also needed, so that these can be reduced. 

Agreed targets would take time to discuss. In the meantime predictability can be increased by 
the formation of strategies that indicate the direction and pace of transition. Milestones within 
these  strategies  –  such  as  the  Roadmap  –  provide  guidance  on  appropriate  stages  for  a 
smoother transition.  

5.2.2.  Economic governance 

The effect of policy strategies in reducing uncertainty and incoherence is dependent on their 
credibility.  This  credibility  rests  on  a  number  of  factors,  including  their  political  strength, 
their incorporation into existing governance arrangements and their monitoring.   

Member  States  have  the  lead  in  defining  their  economic  strategies  for  greater  resource 
efficiency.  To  support  those  strategies,  the  Commission  will  highlight  progress  in  resource 
efficiency within its surveillance of economic governance of Member States. This 'European 
Semester' monitoring of Member State policy reforms can help strengthen co-operation with 
Member  States,  increasing  chances  of  policy  change  and  the  adoption  of  appropriate 
governance structures at Member State or regional level. It will focus initially on prioritising 
sustainable growth friendly expenditure and savings.82 83  

Agreements on goals and setting up of governance structures are not a panacea to overcoming 
obstacles to reform84 and experience with the Sustainable Development Strategy and Lisbon 
Strategy  points  to  the  need  for  complementary  policies  and  political  leadership  if  policy 
reform  is  to  be  successful.  However,  an  additional  benefit  from  EU  governance  change 
derives from one of the barriers to progress. A lack of co-ordination between Member States 
has  given  rise  to  perceived  competitiveness  concerns  for  those  who  act  first.  Improving 
discussion and analysis can help to overcome this perceived barrier.  

As part of its efforts, the EU will add a review of a small, suitable, selection of indicators for 
resource efficiency into the European Semester monitoring exercise during 2012 for full use 
in  the  Annual  Growth  Survey.  Those  indicators  will  complement  the  existing  carbon 
transition targets. 

5.2.3. 

Indicators 

The  identification  of  indicators  enabling  Member  States  and  others  to  measure  progress  in 
how resource efficiency contributes to economic goals would support political action and goal 
setting  on  resource  efficiency.  Major  barriers  to  policy  integration  are  strongly  rooted  in 

82 

83  

84 

Areas  such  as  research  and  innovation,  education  and  energy;  eliminating  environmentally  harmful 
subsidies  or  tax  exemptions;  "green  tax  reforms“;  exploiting  the  EU's  first  mover  advantage  on 
competitive environmental goods and services. 
One tool the EU can use to do this is the indicator-based assessment framework iGrowGreen, currently 
being developed by the Commission with Member States. It examines the shift to a competitive and 
greener economy by evaluating Member States’ performance in domains reflecting the key links from 
environmental performance to macroeconomic and fiscal considerations. Quantitative results are 
qualified by country-specific qualitative information. Detailed information is provided at: 
http://ec.europa.eu/economy_finance/db_indicators/igrowgreen/index_en.htm 
"Fostering structural reforms in industrial countries", IMF, (World Economic Outlook Chapter 3), 2004 

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differing  stakeholder  perceptions  of  the  issues  involved  and  indicators  can  help  harmonise 
understanding.  The  indicators  will  provide  additional  information  on  the  competitiveness  of 
European nations.  

Resource  productivity  can  be  estimated  by  GDP/DMC85  (euro/tonne).  However,  as  an 
indicator this has some shortcomings: for example it measures resources by weight, whilst the 
economic  value,  scarcity  and  environmental  impact  of  some  natural  resources  is  only  not 
strongly  correlated  to  their  weight.  It  also  takes  a  national  production  perspective,  which 
implies  that  it  is  insensitive  to  changes  in  environmental  pressures  that  occur  outside  the 
national borders. In addition,  

therefore  any  single 

Resource Efficiency covers many different uses of different resources with different economic 
and environmental impacts. High level aggregate indicators must be based on assumptions on 
that  aggregation,  and 
indicator  has  some  weaknesses.  The 
recommendations  of  the  Stiglitz-Sen-Fitoussi  Commission86  point  to  the  benefits  of 
complementing a headline indicator with a concise dashboard of macro-indicators on water, 
land  and  carbon.  A  range  of  thematic  indicators  can  also  provide  additional  information. 
Further  work  on  indicators  would  allow  agreement  on  an  indicator  on  natural  capital  and 
environmental impacts of resource use. A technical discussion of indicators that Commission 
proposes to use can be found in Annex 6. 

In addition, progress to resource efficiency would be supported by the use of complementary 
measures  of  societal  and  economic  progress  in  political  and  economic  debate.  The 
Commission, several Member States and international commentators have pointed to the need 
to complement GDP (which measures only some aspects of the economy). Further integrating 
environmental  externalities  into  national  accounting  and  developing  a  composite  index  on 
environmental  pressures  to  help  complement  GDP  would  help  align  political  goals  with  the 
policy needed to remove barriers to transition. 

5.2.4.  Factoring knowledge of interactions into policy decisions 

Many  economic  policy  decisions  are  informed  by  modelling  results.  A  review  of  models 
carried out for the Commission highlights the need for economic models that better factor in 
(1) the impacts of limits to stocks and (2) the kind of large scale change or unexpected shocks 
that the EU faces from changes in resources in the rest of the world. In particular, given the 
interactions  between  resources,  models  tend  not  to  factor  environmental  change  into 
economic growth, for instance though the feedbacks from climate change, water shortage or 
air pollution. 

Often,  computable  general  equilibrium  (CGE)  models  are  not  well  set  up  to  model  the 
dynamics of transition.87 Whilst some models link energy production and use, agriculture and 
land use and related GHG and air emissions88, and whilst the two way linkages between the 
economy and energy demand are common in economic models, most models do not factor in 

85 
86 
87 
88  

Domestic Material Consumption 
"Report of the Commission on the Measurement of Economic Performance et Social Progress", 2009 
European Economy. Economic Papers 413. June 2010. 
See for examples the modelling work done by the Joint Research Centre and others for COM(2011)112/ 
SEC(2011)288,  or  the  work  on  linkages  between  different  models  done  by  the  EU  funded  European 
Consortium for Modelling of Air Pollution and Climate Strategies (www.EC4MACS.eu)  

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material  demand  in  the  same  way.  This  requires  greater  understanding of  the  linkages  from 
land use, climate and material use back into the economy.  

These  models  of  interactions  will  be  able  to  be  improved  through  increased  scientific 
knowledge  about  resources,  how  environmental  systems  respond  to  pressures,  potential 
thresholds  and  interactions  between  resources.  They  can  use  different  modules  that  treat 
specific sectors in detail, perhaps using a common interface. Work can be developed by the 
research  and  development  programmes  including  international,  European,  national  and 
industrial  programmes,  as  well  as  the  European  Environment  Agency  (EEA),  the  Joint 
Research Centre and Eurostat. 

Improved  models  will  assist  firms  and  policy  makers  to  shape  policies  for  the  transition  to 
resource efficiency. The Commission's most recent work on this, including a 2011 study by 
PBL89 is described in Annex 8. 

5.3. 

Other key areas of governance  

The application of more integrated governance is a key factor in finding solutions to barriers 
in  the  areas  of:  finance,  skills,  policy  action  outside  the  EU  and  good  implementation  of 
existing policy. Action in these areas is needed as part of the policy mix. 

For  example,  in  finance:  UNEP  estimates  that  the  annual  financing  needs  for  making  the 
world  economy  more  resource  efficient  are  between  US$1.05-2.59  trillion  -  around  10%  of 
annual global capital investment90. In the EU, and elsewhere, this financing will need to come 
mainly from private sources91. Yet, for the scale of financing necessary, the current financial 
systems bias towards the short-term would have to be reversed, and some unfamiliarity with 
investments in resource efficiency would need to be reduced. Public and private sector action 
to achieve this may be identified from discussions with EU, and Member State level, round 
tables on finance. 

Meanwhile,  the  costs  of  current  environmental  legislation  not  being  fully  implemented  are 
estimated at around €50 billion per year.

 92 

The  significance  of  barriers  and  solutions  in  finance,  skills,  international  action  and 
implementation is described in Annex 3. 

89 
90 
91 
92 

"EU Resource Efficiency Perspectives in a Global Context: A fast track analysis", PBL,  2011 
"Green Economy Synthesis", UNEP, 2010 
"Green Growth Synthesis", OECD, 2011 
"The costs of not implementing the environmental acquis", COWI, 2011 (forthcoming) 

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