Resource Revolution

Why do we humans need revolutions to wake us up? Sadly, we do. And now, going by what most of us know, but vindicated time and again, and now by a report from McKinsey, without a resource revolution, we all face the prospect of damage to global growth, welfare, and the environment.

Not to despair, the new McKinsey report Resource Revolution: Meeting the world’s energy, materials, food, and water needs shows that the resource challenge can be met through a combination of expanding the supply of resources and a step change in the way they are extracted, converted, and used. Such resource productivity improvements, using existing technology, could satisfy nearly 30 percent of demand in 2030. Just 15 areas, from more energy-efficient buildings to improved irrigation, could deliver 75 percent of the potential for higher resource productivity.

Meeting the resource-supply and productivity challenges will be far from easy—only 20 percent of the potential is readily achievable and 40 percent will be hard to capture. There are many barriers, including the fact that the capital needed each year to create a resource revolution will rise from roughly $2 trillion today to more than $3 trillion, with additional capital requirements to pursue climate change and universal-energy-access agendas.

Policy makers should consider action on three fronts: unwinding subsidies that keep prices artificially low and encourage inefficiency; ensuring that enough capital is available and that market failures are corrected; and bolstering society’s resilience by creating safety nets to help very poor people deal with change and educating consumers and businesses to heed the reality of future resource constraints.