Executive summary Executive summary

boom and bust cycles and the associated price
Resource Efficiency: Potential and Economic Implications • International Resource Panel Report
extraction to their disposal. Achieving this can: proportionately reducing both resource
volatility. The extraction and use of resources
also creates environmental impacts, such as
land degradation, biodiversity loss, and water
and air pollution. Scientists have warned that
“planetary boundaries”, which mark the “safe
operating space” for resource use and pollution,
are close to being crossed, or have already
been crossed, for several environmental impact
categories (Figure 1) (Rockström et al., 2009b,
Steffen et al., 2015).
There is great potential to address these
concerns through increased resource efficiency
and productivity. This involves adding greater
value to resources, maintaining that value by
keeping resources in use for longer, and reducing
the environmental impacts associated with
the whole life cycle of resources, from their
has remained somewhat static. This indicates
reduce pressures on resource supplies, increase
resource security and the resilience of societies to
supply disruptions and associated price increases
and volatilities, improve both local and global
environmental quality, and stimulate innovation,
the creation of new industries and economic
competitiveness. Moreover, greatly increased
resource efficiency will be necessary to meet
the aspirations expressed in the Sustainable
Development Goals (SDGs), agreed by the
United Nations in September 2015, and the Paris
Agreement on climate change adopted at the
COP21 Climate Conference in December 2015.
Improving human well-being (the measurement
of which is both challenging and contentious)
or increasing economic output (which is
more straightforward to measure), while
use (resource decoupling) and negative
environmental impacts (impact decoupling) is
a process known as double decoupling. Such
decoupling is “relative” when resource use and
environmental impacts increase more slowly
than economic output (as shown for resources in
Figure 2), or “absolute” when resource use and
environmental impacts fall while the economy
continues to grow (as shown for environmental
impacts in Figure 2).
Trends in resource use and resource productivity
As shown in Figure 3, the G7 industrialized
economies (the United States, Japan, Germany,
the United Kingdom, France, Italy and Canada)
tend to have much higher resource use per
capita than their BRICS counterparts (Brazil,
Russia, India, China, South Africa), although the
gap has narrowed significantly in recent years.
Figure 4 shows that material productivity in
significant potential for resource decoupling in
the BRICS economies as they grow. However,
this divergence can also be partly attributed to
the effects of international trade flows, which
allow G7 countries to shift resource-intensive
production to BRICS (or developing) countries.
Securing the benefits of increased resource
efficiency
For priced resources, and notwithstanding price
volatility, market forces tend to bring about
relative decoupling over time. Nonetheless,
public policy measures are required to achieve
the absolute decoupling of resource use, or any
kind of decoupling of environmental impacts,
which are often unpriced and external to market
activities.
Such measures are implemented through
resource and environmental governance

Figure 1: Current status of the control variables for seven planetary boundaries
the G7 countries remains considerably above
that of the BRICS economies, and continues to
increase, while that of the BRICS economies
Resource Efficiency: Potential and Economic Implications • International Resource Panel Report
processes. This governance operates through
mechanisms with multiple actors (governmental,
commercial, civil society) and normative

Figure 2: Decoupling of resource use and environmental impacts from GDP growth

Human well-being

Economic activity (GDP)

Resource decoupling
Resource use
Impact decoupling

Time
Source: Steffen et al. (2015).
Environmental impact
Note on Figure: As described by Steffen et al. (2015), “The green zone is the safe operating space, the yellow
represents the zone of uncertainty (increasing risk), and the red is a high-risk zone. The planetary boundary itself
lies at the intersection of the green and yellow zones. The control variables have been normalized for the zone of
uncertainty; the center of the figure therefore does not represent values of 0 for the control variables. The control
variable shown for climate change is atmospheric CO2 concentration. Processes for which global-level boundaries
Source: UNEP (2011b), Figure 1, p.xiii.
cannot yet be quantified are represented by gray wedges; these are atmospheric aerosol loading, novel entities,
and the functional role of biosphere integrity.”

22 23
 Executive summary
frameworks (enacted through treaties or
Figure 3: Per capita domestic material consumption (DMC) in the G7, the BRICS and legislation) at different levels (international,
the global economy, 1970–2010, in tonnes national and local) and on different spatial scales.
The mechanisms, characterized by complex
30 interactions, have developed substantially over
recent decades. Nevertheless, they still need
25 considerable further development if they are to
Per capita Material Footprint
achieve the systematic and absolute decoupling
20 of resource use and environmental impacts from
economic activity. This is required to secure
tonnes
the material and environmental foundations of
15
economic life, and the quality of life for future
generations.
10
Many measures that increase resource efficiency
5 also result in improved corporate performance
and competitiveness that can save consumers
0 money and/or increase consumer satisfaction.
1990 1995 2000 2005 2010 At the macroeconomic level, increased
World ...... BRICS G7 resource efficiency and productivity can bring
about higher rates of economic growth and
employment. However, for reasons that are now
Resource Efficiency: Potential and Economic Implications • International Resource Panel Report
well understood and include both market and
organizational failures, these win-win economic
and environmental benefits are often difficult to
realize in practice. Even if barriers to resource
efficiency (discussed in more detail below)
Figure 4: M
 aterial productivity (MP) in the G7, the BRICS and the global economy, are overcome, this will not necessarily lead
1970–2010 in US$ per kg to reductions in resource consumption. Such
failure to achieve win-win benefits from resource
3.0 efficiency can be due to a “rebound effect”, the
phenomenon whereby financial savings arising
from increased resource efficiency are then spent
Material Productivity (GDP, exchange rates,
2.5
in ways that increase resource consumption,
2.0 negating – either partially or wholly – the
2005 prices per DMC)
reduction in resource use achieved by the
US$ per kg
efficiency measure. Thus, public policy is crucial
1.5
to securing all of the beneficial outcomes from
increased resource efficiency.
1.0
Securing the benefits of increased resource
0.5
efficiency
0.0 For priced resources, and notwithstanding price
1970 1975 1980 1985 1990 1995 2000 2005 2010
volatility, market forces tend to bring about
World G7 BRICS relative decoupling over time. Nonetheless,
public policy measures are required to achieve
the absolute decoupling of resource use, or any
24
Executive summary
kind of decoupling of environmental impacts,
which are often unpriced and external to market
activities.
Such measures are implemented through
resource and environmental governance
processes. This governance operates through
mechanisms with multiple actors (governmental,
commercial, civil society) and normative
frameworks (enacted through treaties or
legislation) at different levels (international,
national and local) and on different spatial scales.
The mechanisms, characterized by complex
interactions, have developed substantially over
recent decades. Nevertheless, they still need
considerable further development if they are to
achieve the systematic and absolute decoupling
of resource use and environmental impacts from
economic activity. This is required to secure
the material and environmental foundations of
economic life, and the quality of life for future
generations.
Resource Efficiency: Potential and Economic Implications • International Resource Panel Report
Many measures that increase resource efficiency
also result in improved corporate performance
and competitiveness that can save consumers
money and/or increase consumer satisfaction.
At the macroeconomic level, increased
resource efficiency and productivity can bring
about higher rates of economic growth and
employment. However, for reasons that are now
well understood and include both market and
organizational failures, these win-win economic
and environmental benefits are often difficult to
realize in practice. Even if barriers to resource
efficiency (discussed in more detail below)
are overcome, this will not necessarily lead
to reductions in resource consumption. Such
failure to achieve win-win benefits from resource
efficiency can be due to a “rebound effect”, the
phenomenon whereby financial savings arising
from increased resource efficiency are then spent
in ways that increase resource consumption,
negating – either partially or wholly – the
reduction in resource use achieved by the
efficiency measure. Thus, public policy is crucial
to securing all of the beneficial outcomes from
increased resource efficiency.
25
 Executive summary Executive summary

Sectoral breakdown of resource efficiency
opportunities
There have been a number of estimates of the
costs of increasing resource efficiency, with
Dobbs et al. (2011, p. 10) being among the
most cited. This estimate states that in 2030,
implementing all the technologies considered
would save private investors US$2.9 trillion per
year. This Figure increases to US$3.7 trillion
from a social perspective if financial subsidies
to the energy, agriculture and water sectors, as
well as energy taxes are removed, and carbon is
priced at US$30 per tonne. Seventy percent of
these savings would offer a rate of return greater
than 10 percent per year. The US$900 billion
investment required “could potentially create
9 million to 25 million jobs. Over the longer term,
this investment could result in reduced resource
price volatility that would reduce uncertainty,
encourage investment, and also potentially spur a
new wave of long-term innovation” (Dobbs et al.,
2011, p. 12). Figure 5 shows the 15 economic
sectors identified by the McKinsey Global
Institute as offering the biggest potential for
increased cost-effective resource efficiency.
These opportunities are examined in considerable
detail in this scientific assessment report by the
International Resource Panel, which is hosted by
UN Environment. Part III - Chapter 1 considers
a range of initiatives being pursued in the areas
of public procurement, tourism, construction, Overcoming barriers to resource efficiency
food, consumer information, and lifestyles
and education under the United Nations- Despite the obvious cost savings, there are many
sanctioned process of Sustainable Consumption reasons why both businesses and consumers
and Production (SCP). This is followed by more do not use resources efficiently. Figure 6 shows
detailed sectoral chapters that cover respectively: some of these barriers, and the drivers that may
the 3Rs (reduce, re-use, recycle), resource be used to overcome them. The external drivers
efficiency in urbanization, food systems, mobility, shown to be policy-related will be essential to
power generation, and land, water and energy stimulating and strengthening the internal drivers.
use in different sectors. Unless appropriate policies are put in place,
Figure 6: Barriers to resource efficiency and drivers to address them
Barriers Drivers
Inconsistent policies & messages Consistent policies

Figure 5: The top 15 categories of resource efficiency potential Lack of clear pricing signals Taxes, levies and charges

Lack of consumer demand Regulation

Increasingly External Barriers

Increasingly External Drivers

Fifteen groups of opportunities represent
Resource Efficiency: Potential and Economic Implications • International Resource Panel Report

Resource Efficiency: Potential and Economic Implications • International Resource Panel Report
Energy Land Supply chain constraints Macro-economics and volatility
Water Steel
75 percent of the resource savings Thresholds in technologies & Material and commodity prices
infrastructure capacity
Societal persepective, 2030
Total resource benefit¹ Average societal cost Physical limitation Consumer specifications
$ billion (2010 dollars) efficiency² (e.g. location/space)

Building energy efficiency 696 0.5 External support and assistance External support and assistance
Large-scale farm yields 266 0.4
Positive customer feedback
Food waste 252 0.5 Incentives to invest
Municipal water leakage 167 0.2 Information on benefits of RE
Urban densification 155 0.9 High cost and low ROI
Iron and steel energy efficiency 145 0.2
Access to capital Sustainability & Leadership
Smallholder farm yields

Increasingly Internal Drivers

143 0.4

Increasingly Internal Barriers

Transport efficiency 138 0.5 Lack of targets & benchmarks Corporate Responsibility
Electric and hybrid vehicles 138 1.2
Land degradiation 134 0.5 Business & commercial model Business risk and resilience
End-use steel efficiency 132 0.4
Oil and coal recovery 115 0.5 Knowledge and expertise Shareholder pressure
Irrigation techniques 115 0.2
Competing priorities Competitiveness
Road freight shift 108 0.7
Power plant efficiency 106 0.3 Internal capacity & resources Cost savings and avoided costs
Other³ 892 0.6
1 Based on current prices for energy, steel, and food plus unsubsidized water prices and a shadow cost for carbon Habitual behaviour Positive attitudes & cultures
2 Annualized cost of implementation divided by annual total resource benefit
3 Includes other opportunities such as food efficiency, industrial water efficiency, air transport, Negative attitudes & cultures
municipal water, steel recycling, wastewater reuse, and other industrial energy efficiency
SOURCE: McKinsey analysis

Source: Dobbs et al. (2011), Exhibit 4, p. 14. Source: AMEC and BioIS (2013), Figure 1, p.vii.

26 27
 Executive summary
resource efficiency will not increase sufficiently to
address the challenges outlined above.
Resource use and resource efficiency in the
future
In its GEO-5 publication, United Nations
Environment Programme (UN Environment)
compared and contrasted two different
possible world scenarios (“conventional world”
and “sustainable world”) across a range of
environmental and resource issues. Under the
conventional world scenario, current trends
were projected to 2050. On the other hand, the
sustainable world scenario envisages radical
increases in resource efficiency and productivity,
with no reduction in economic output.
For example, under the “conventional”
projections, water stress could affect 3.9 billion
people by 2050 (UN Environment, 2012b,
p. 437), leaving many without secure access
Resource Efficiency: Potential and Economic Implications • International Resource Panel Report
to safe drinking water and sanitation. While
levels of water stress even in “sustainable”
scenarios remain significant, greater resource
efficiency means that the proportion of the global
population without access to safe drinking water
Figure 7: Projections of water withdrawals by sector under different scenarios
Conventional world withdrawals, km3
6 000
5 000
4 000
3 000
2 000
1 000
0 0
2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
Source: New calculations for GEO-5; WaterGap model from Alcamo et al. 2003 and Flörke and Alcamo 2004
Source: UN Environment (2012b), Figure 16.11, p. 437.
28
in 2050 could fall to 3–5 percent (from 23 percent
in 2000) and without access to sanitation to
15–18 percent (from 51 percent in 2000).
Figure 7 shows the different projected water
withdrawals under these different scenarios.
A number of scenarios of resource efficiency
and climate change mitigation were newly
modelled for this report. They offer overall
quantitative insights into the resource,
greenhouse gas and economic outcomes from
climate policy, resource efficiency policy, and a
scenario that included both kinds of policy, as
shown in Figure 8. The Existing Trends scenario
is calibrated to historical trends in per capita
resource use, across major world regions,
accounting for changes in income and GDP
per capita. The Resource Efficiency scenario
assumes the same climate pathway as that of
Existing Trends, but introduces a package of
innovations, information, pricing incentives
and regulations to promote ambitious but
achievable improvements in resource efficiency,
while compensating for the tendency for such
improvements to induce a “rebound effect”. The
Ambitious Climate scenario assumes resource
usage that is line with historical trends, but
Sustainable world withdrawals, km3
6 000
5 000
4 000
3 000
2 000
1 000
2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
Figure 8: Scenarios for assessing resource and climate futures
Historical
resource trends (H)
3°C+ pathway
(RCP6.0)
Existing
EMISSIONS AND
Trends (H3)
GREENHOUSE
CLIMATE
2°C+ pathway
(RCP2.6)
Ambitious
Climate (H2)
Source: Project team.
that the world shifts decisively to a 2°C climate
pathway, involving more ambitious emissions
reductions from 2020. Lastly, the Efficiency
Plus Climate scenario combines the settings
for the Resource Efficiency and Ambitious
Climate scenarios to explore potential policy
interactions.
The Existing Trends scenario projects that natural
resource use will increase from 85 billion to
186 billion tonnes over the next 35 years to 2050,
reflecting a 28 percent increase in population size
and a 71 percent increase in per capita resource
use. Modelling resource efficiency and ambitious
Irrigation
climate policies and initiatives against this
Livestock background suggests that they could:
Manufacturing
Energy
Domestic
• reduce natural resource use globally by
28 percent in 2050, in combination with
ambitious global action on climate change,
and stabilize per capita resource use at
current levels in G7 countries
• reduce greenhouse gas emissions by up
to 20 percent in 2050 (for a given set of
greenhouse policies), with global emissions
falling to 63 percent below 2015 levels and
G7 emissions falling to 74 percent below
2015 levels by 2050, in combination with
29
Executive summary
RESOURCE USE
Resource
efficiency (E)
Resource
Efficiency (E3)
Efficiency
Plus Climate (E2)
ambitious greenhouse gas abatement
policies
• more than offset the economic costs of
Resource Efficiency: Potential and Economic Implications • International Resource Panel Report
ambitious climate action, so that income and
economic growth are slightly higher than in
the Existing Trends scenario
• deliver annual economic benefits of more
than US$2 trillion globally in 2050 relative
to Existing Trends, including benefits of
US$600 billion in G7 nations, while also
helping put the world on track to limit climate
change to 2°C or lower.
Moreover, these benefits are delivered
compared to an Existing Trends baseline
that does not assume significant bottlenecks
and disruptions from resource supply failing
to meet rising resource demand in a timely
way, or significant damage from unabated
climate change, biodiversity loss or other
environmental impacts. These issues all pose
very serious risks to the sustained continuation
of economic growth and development, and
improvements in human well-being. Given the
need to mitigate these risks, the arguments
for policymakers to seek step-changes in
resource efficiency and productivity are truly
compelling.