Interdependence of Growth, Structure, Size and Resource Consumption During an Economic Growth Cycle

This paper explains how the Human and Resources with MONEY (HARMONEY) economic growth model exhibits realistic dynamic interdependencies relating resources consumption, growth, and structural change. We explore dynamics of three major structural metrics of an economy. First, we show that an economic transition to relative decoupling of gross domestic product (GDP) from resource consumption is an expected pattern that occurs because of physical limits to growth, not a response to avoid physical limits. While increasing operational resource efficiency does increase the level of relative decoupling, so does a change in pricing from one based on full costs to one based only on marginal costs that neglect depreciation and interest payments. Marginal cost pricing leads to higher debt ratios and a perception of higher levels of relative resource decoupling. Second, if assuming full labor bargaining power for wages, when a previously-growing economy reaches peak resource extraction and GDP, wages remain high but profits and debt decline to zero. By removing bargaining power, profits can remain positive at the expense of declining wages. Third, the internal structure of HARMONEY evolves in the same way the post-World War II U.S. economy. This is measured as the distribution of intermediate transactions within the input-output tables of both the model and U.S. economy.

Reduced Use of Fossil Fuels can Reduce Supply of Critical Resources

Previous research has identified that climate change mitigation policies could increase demand for resources perceived as critical, because these are used in many renewable energy technologies. This study assesses how reducing the extraction and use of fossil fuels could affect the supply of (i) elements jointly produced with fossil fuels and (ii) elements jointly produced with a host that is currently mainly used in fossil fuel supply chains. Several critical resources are identified for which supply potential from current sources is likely to decline. Some of these, e.g. germanium and vanadium, have uses in low-carbon energy systems. Renewable energy transitions can thus simultaneously increase demand and reduce supply of critical elements. The problem is greatest for technology groups in which by-products are more difficult to recycle than the host. Photovoltaic cell technology stands out as one such group. Phasing out fossil fuels has the potential to reduce both the supply potential (i.e. primary flow) and recoverable resources (i.e. stock) of materials involved in such technology groups. Further studies could examine possibilities to increase recovery rates, extract jointly produced resources independently of hosts and how the geographical distribution of by-product supply sources might change if fossil fuel extraction is scaled back.

Are We Seeing Dematerialization of World GDP?

Production of commodities and industrial products typically declines in relative terms as countries get richer. Does this mean that economic growth will become dematerialized and take place without being accompanied by a rise in the use of materials? Do we see signs of this already happening? We look at the production of cement and thirteen minerals 1960–2019 and find no evidence of dematerialization. Production of cement and eight minerals has grown more rapidly than world GDP and that of three minerals more rapidly than world population. Extraction of most minerals has accelerated rather than stagnated since the turn of the century.