Asia set to dominate world's resource consumption
Fast-paced economic growth across Asia will lead to greater pressure on food, energy and water resources over the next two decades, according to a special report by Standard Chartered. Extreme weather conditions, as a result of climate change, will exacerbate the resource strain. The pressure on resources will mean higher prices for coveted commodities and a dependence on Asia to manage its own consumption and lead the transition to a low carbon economy.
Food demand will continue to grow on the back of population and economic growth, albeit at a slower rate than the last couple of decades. The world will require more grain to respond to this demand, as rising incomes and urbanisation lead to higher protein based diets requiring increased grain production.
With the largest and fastest growing population, Asia is set to become the largest consumer of grain until 2050. Asia is also the world's largest supplier of food and, therefore, balancing its food demand is critical to global food security. Currently, Asia lacks sufficient land to produce the amount of food required for its growing population. To further increase food production, it must improve crop yields, which requires significant investment. As a result, overseas investment in agricultural land is set to rise, particularly in Africa where land and water is less scarce than the Middle East or North and East Asia. At a local level, food affordability will become a key focus of fiscal and trade policy in developing countries in Asia and beyond. While higher prices have positive implications for farm incomes and investment incentives, they will hinder the drive to improve food security for the poor.
Energy - meeting demand and mitigating climate change
Meeting the global energy needs of a growing economy, while significantly decreasing greenhouse gas emissions is the challenge. As the largest energy user, China's energy evolution is essential to the solution. Due to its growing population, China's energy needs will rise more than 150 per cent by 2030, according to the report.
The sheer scale of China's energy needs means it will continue to source a significant amount of its energy from fossil fuels, particularly coal. The country's coal market is set to grow to 8.6 billion tonnes by 2030 - 67 per cent of global demand and also double the size of today's market. The 2008 financial crisis has delayed some 33 million tonnes (mt) of supply from new coal mines. This suggests a global deficit in as large as 30mt by 2018, which will put upward pressure on coal prices. Australia, and others, will need to invest heavily in railway and port infrastructure to sustain the necessary supply to satisfy Asia's demand.
China's energy demand will also encourage investment in emissions abatement technologies, particularly carbon capture and storage. The country will continue to play a leading role in the development of the renewable energy sector, largely due to supportive government policy and commitment to shift towards more non-fossil fuels. Chinese government has also set targets to increase nuclear capacity to 80 GW by 2020 and 200GW by 2030.
Crude oil prices will double in order to ensure adequate supply to meet the future demand according to the report's GDP forecasts, even when accounting for greater efficiency and substitution for other fuels. Expenditure on oil as a proportion of GDP will need to remain at a higher level than was seen during the 1985-2000 period, putting a burden on personal budgets or, where subsidies are prevalent, government finances. Countries and regions with resources (e.g. Middle East, North Africa, Russia and Latin America) will clearly benefit from economic growth, while those lacking resources and are heavily import-dependent will need to adapt.
Transformation of the energy sector, both in China and beyond, will require an enormous investment opportunity in the following areas:
- De-carbonisation of the power sector, including a switch to natural gas, investment in renewable energy, nuclear and carbon capture and storage
- Bio-fuels production
- Transport - improving energy efficiency and developing hybrid/electric technology
- Industry - developing more energy-efficient technologies, particularly for steel, cement and glass
- Buildings - improving energy efficiency and developing renewable energy technology
For water, the issue is one of management and regional disparities rather than global availability. Water scarcity is already a critical issue in many regions, and will be exacerbated by the climate variability that is becoming increasingly evident. To make the issue more challenging, food and energy can be water-intensive processes and will also have a significant impact on water availability in particular regions
The physical distribution of water is uneven across countries and regions. Growing demand as a result of population growth and changing consumption patterns will be most rapid in the least developed countries. Unfortunately, lack of funding or poor policy planning and implementation has hindered the development of the infrastructure needed to allow access to clean water.
The solutions to water scarcity involve a mix of the following:
- Improving efficiency - through investment and technological development
- Water treatment - cleaning/desalination
- Agricultural trade - this is effectively trade in virtual water, as water in the exporting country is used to produce food for the importing country
Helen Henton, Head of Energy and Environment Research, Standard Chartered, commented: "As the world experiences a sustained period of economic growth over the next two decades, countries will adapt their response to the rising resource challenges. As the economic power shifts from the West to the East, we will look closer to Asia to lead the global resource balance. We will also depend on government policies to foster innovation and investment."
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Notes to Editors
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