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Resource scarcity will be a growing threat for government and businesses

A UK government report commissioned and launched by Defra and completed by AEA has identified resources at risk of future scarcity, the consequences these could have to the economy and how UK businesses should work with government to ensure continuity in their operations. Analysis, forecasting, innovation and cooperation are essential to achieving future growth and meeting low carbon policy targets.

Defra’s Sustainable Consumption and Production (SCP) Evidence Programme commissioned AEA to carry out the study. AEA presented a series of recommendations to DEFRA, including:

•     Business must develop analytical tools and methods to enable cross supply-chain risk assessment;
•     Resource risks need to be factored into ongoing decisions by businesses in the UK;
•     Businesses need to better understand their supply chains and the impacts they have on their everyday operations;
•     A new partnership between business and government should be considered to ensure that businesses can understand future challenges and opportunities around resource scarcity.

A key trend identified in the report was one of increasing overall demand, mainly due to growing population levels and increased global economic development.

Work recently developed for Defra also identified that UK business could save over £6 billion per annum through adopting resource efficiency measures that cost nothing or would pay back within a year.

Phil Dolley, resource efficiency director at AEA, commented: “There are some major challenges ahead for government and businesses that require a coordinated approach. Even businesses that don’t consider themselves affected by the issue of resource scarcity may be vulnerable through their supply chain. It is imperative that organizations start looking at how they will manage resource risk to ensure their future prosperity”.

Dolley continued: “However - the picture isn’t all negative. Opportunities for innovation do exist commercially in terms of substitute inputs, alternative or diversified existing markets for recycling and recovery, development of new raw material sources and through product innovation.” 

The results of this project will enable Defra to engage efficiently with individual sectors and will inform Defra of the need for policy relating to resource risks and of any requirements for future engagement with relevant business sectors.

Examples of future scarcity risks:

The UK’s Rare Earth Elements supply is likely to be challenged as global demand continues to rise with implications for low carbon technology applications including wind turbines and hybrid and electric vehicles.  Aggregates (land and marine) have limited future availability owing to increased financial and environmental costs from transportation issues and restricted access and UK planning restrictions.  Major fish stocks are currently overexploited although those of UK sources were generally well managed, but concerns remain over food security, feed and associated energy consumption increases.  Indium (used in electronics and solar energy) will see an increase in demand and restrictions on exports by supplying countries could result in market uncertainty.  Lithium (used in electric vehicles) is subject to geopolitical issues and capability to extract it from known resources.  Reserves of Phosphate rock (used in fertilizer) are rapidly being used up and we are heading toward a ‘peak phosphorous’ in 2030. Steep prices will impact UK farmers and agriculture.

•Date: 26th Jan 2011 • Region: UK •Type: Article •Topic: Operational risk

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