What do resource productivities really measure? Julia K. Steinberger, Fridolin Krausmann Marina Fischer-Kowalski, Nina Eisenmenger International Society of Ecological Economics Oldenburg/Bremen, Germany August

2 What is resource productivity? Economy Oil Economy Oil

3 Policy goals for resource productivity: European Union EU Thematic Strategy on the Sustainable Use of Natural Resources, 2005.

4 Policy goals for resource productivity: Japan Japanese 3R policies based on Material Flow Analysis Takiguchi and Takemoto, 2008

5 Resource productivity and income Material Productivity Energy Productivity International data, year 2000 Domestic Material Consumption: Steinberger et al Domestic Energy Consumption: Krausmann et al 2008 Market Exchange Rate GDP: World Bank 2007 R 2 = 0.84R 2 = 0.77 Resource productivity: measure of sustainability – or higher incomes?

6 Analytic framework: 3 extensive and 3 intensive variables BrickTestament.com Oil 2. GDP 3. Resources (Energy and materials) 1. Consumption = Resource / Population 2. Income = GDP / Population 3. Productivity = Income / Consumption Oil 3. Productivity = GDP / Resource 1. Population = ?= ?

7 Balancing income & consumption: income elasticity Income elasticity = b When income increases by 1%, consumption increases by b%

8 Elasticity & the Environmental Kuznets Curve Resource consumption Income b > 0 b ~ 0 b < 0

9 Consumption, income and elasticity Material Consumption Energy Consumption INELASTIC Proportional Somewhat inelastic

10 Income elasticity vs. resource productivity Income elasticity of consumption We find that... productivity depends on income through b! We now know: Which means that if we do some math... Oil

11 Oil Balancing productivity & income: through income elasticity! = 1-b When income increases by 1%, productivity increases by (1-b)% d

12 Is productivity-income-elasticity relation real? Energy ProductivityMaterial Productivity b = 0.9 b = 0.1 b = 0.4 => d = 1 - b

13 Relation is real: what does it mean?  Productivity of material or energy resource use 1.Behaves like an aggregate: between inelastic biomass and more elastic fossil fuels, depending on their shares in the aggregate. 2.If there is a significant inelastic share, productivity will increase with income.  Aggregate productivity does not measure “sustainable” or “efficient” economies: it measures high income economies.  Using resource productivity as a policy goal is (generally) rewarding business-as-usual, and does not imply reductions in resource use.

14 Possibility: income-corrected productivity

15 Productivity and dematerialization in the EU-27 Growth in productivity Growth in GDP Absolute dematerialization Relative dematerialization No decoupling at all Absolute dematerialization Relative dematerialization No decoupling at all

16 Conclusions Resource productivity depends on the relation between income and consumption: income elasticity of consumption. Dematerialization requires increasing productivity faster than economic growth. Which is equivalent to requiring reduced consumption at higher incomes in other words, requiring negative income elasticity. Rather than a policy focus on productivity increases, which encourages business-as-usual, the focus should be directly on reducing consumption.

17 Thanks for your attention! Any questions?