Living with limits: growth, resources and climate change Martin Wolf, Associate Editor & Chief Economics Commentator, Financial Times Grantham Institute for Climate Change Annual Lecture 2011 3 rd November 2011 Imperial College of Science and Technology, London
Living with limits From great divergence to great convergence Affluence and the demand for resources The biggest collective action challenge in history Irresistible forces meets immoveable objects Nightfall for a civilisation? Conclusion 2
1. From great divergence to convergence THE ENERGY REVOLUTION Chart 1: GLOBAL ENERGY OUTPUT FROM FOSSIL FUELS (exajoules) 400.0 350.0 300.0 Source: http://cdiac.ornl.gov/ 250.0 3 200.0 150.0 100.0 50.0 0.0 1751 1762 1773 1784 1795 1806 1817 1828 1839 1850 1861 Solid Liquid Gas 1872 1883 1894 1905 1916 1927 1938 1949 1960 1971 1982 1993
1. From great divergence to convergence ARRIVAL OF AFFLUENCE 250,000 200,000 150,000 100,000 4 50,000 0 0 100 Chart 2: ENERGY CAPTURE IN THE MOST ADVANCED WESTERN AND EASTERN ECONOMIES (kilocalories per head) Source: Ian Morris, Social Development, http://ianmorris.org/docs/social-development.pdf 200 300 400 500 600 700 800 900 1000 1100 1200 1300 1400 1500 1600 1700 1800 1900 2000
1. From great divergence to convergence THE TRANSFORMATION Chart 3: GDP PER HEAD OF RICHEST WESTERN AND EASTERN COUNTRIES (1990 PPP $s) 30,000 25,000 Source:Angus Maddison, http://www.ggdc.net/maddison/oriindex.htm 20,000 15,000 10,000 5,000 0 1 1000 1500 1600 1700 1820 1850 1870 1890 1900 1920 1940 1960 1980 2000 Italy Netherlands UK USA China Japan 5
1. From great divergence to convergence THE TRANSFORMATION $100,000 Chart 4: GDP PER HEAD OF RICHEST WESTERN AND EASTERN COUNTRIES (1990 PPP $s) Source:Angus Maddison, http://www.ggdc.net/maddison/oriindex.htm $10,000 $1,000 $100 1 1000 1500 1600 1700 1820 1850 1870 1890 1900 1920 1940 1960 1980 2000 Italy Netherlands UK USA China Japan 6
1. From great divergence to convergence THE DECLINE AND RISE OF THE EAST Chart 5: GDP PER HEAD RELATIVE TO THE US (1990 PPP $s) 120.0% 100.0% Source: Angust Maddison, http://www.ggdc.net/maddison/oriindex.htm 80.0% 60.0% 40.0% 20.0% 0.0% 1820 1850 1870 1890 1930 1950 1970 1990 2008 Western Europe China India Japan 7
1. From great divergence to convergence PATTERNS OF CATCH-UP GROWTH 100.0% Chart 6: GDP PER HEAD RELATIVE TO US (2009 EK $s) 10.0% 1.0% 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 Japan (from 1950) South Korea (from 1964) China (from 1978) India (from 1978) 8
2. Affluence and the demand for resources EMERGING COUNTRIES OUTPERFORM HUGELY 8 7 6 5 4 3 2 1 0 9 1990 1991 Chart 7: GDP GROWTH RATE IN THE WORLD ECONOMY (10-year moving average, end year) Source: IMF WEO, September 2011 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 World Advanced economies Emerging and developing economies 2012 2013 2014 2015 2016
2. Affluence and the demand for resources CHINA LEADS, BUT INDIA CATCHES UP Chart 8: GDP GROWTH IN ASIA (10-year moving average, end year) 12 Source: IMF, WEO Database, September 2011 10 10 8 6 4 2 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 China India Developing Asia 2009 2010 2011 2012 2013 2014 2015 2016
2. Affluence and the demand for resources ADVANCED COUNTRIES FALL, ASIA RISES 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Source: IMF WEO database, October 2011 4 25 Chart 9: SHARES IN WORLD OUTPUT (at PPP, per cent) 7 24 5 7 14 18 29 25 20 18 1990 2000 2010 2016 20 18 European Union United States Other advanced economies China India Other developing Asia Other emerging economies 11
2. Affluence and the demand for resources ENERGY EFFICIENCY IMPROVES WITH WEALTH Chart 10: ENERGY INPUT PER UNIT OF GDP (kilograms of oil equivalent and GDP at 2005 $s) 0.80 0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00 Source: World Bank, World Development Indicators 2011 UK US India China 1990 2008 12
2. Affluence and the demand for resources BUT ENERGY USE STILL RISES RAPIDLY 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 7,672 7,503 Chart 11: ENERGY USE PER HEAD (kilogram of oil equivalent) 3,597 3,395 1,049 1,871 US UK China India 1990 2008 Source: World Bank, World Development Indicators 2011 375 545 13
2. Affluence and the demand for resources AND REAL PRICES OF RESOURCES ROSE Chart 12: MOVING AVERAGE OF REAL COMMODITY PRICES (previous five years) 250.00 200.00 150.00 100.00 50.00 0.00 31/01/1975 31/01/1977 31/01/1979 31/01/1981 31/01/1983 31/01/1985 31/01/1987 31/01/1989 31/01/1991 31/01/1993 31/01/1995 31/01/1997 31/01/1999 31/01/2001 31/01/2003 31/01/2005 31/01/2007 31/01/2009 31/01/2011 Energy Agricultural Industrial Metals 14
2. Affluence and the demand for resources BUT STAGNATION HITS OIL PRODUCTION Source: IMF WEO April 2011 Chart 13: WORLD OIL PRODUCTION (millions of barrels a day) 100 90 80 70 60 50 40 30 20 10 0 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 World oil production Trend Trend Trend 15
3. Biggest collective action challenge EMISSIONS AND THE FOSSIL FUEL REVOLUTION Chart 14: HISTORY OF CARBON DIOXIDE EMISSIONS (million tonnes of carbon) 20000 15000 S Source: http://cdiac.ornl.gov/ 10000 5000 0 1751 1760 1769 1778 1787 1796 1805 1814 1823 1832 1841 1850 1859 1868 1877 1886 1895 1904 1913 1922 1931 1940 1949 1958 1967 1976 1985 1994 2003 Total carbon emissions from fossil-fuels (million metric tons of C) carbon emissions from liquid fuel consumption carbon emissions from cement production carbon emissions from gas fuel consumption carbon emissions from solid fuel consumption carbon emissions from gas flaring 16
3. Biggest collective action challenge HIGH PRICES HELP BUT NOT ENOUGH 1.4 Source: http://cdiac.ornl.gov/ Chart 15: CARBON EMISIONS PER HEAD (tonnes of carbon) 1.2 1 0.8 0.6 0.4 0.2 0 1950 1952 1954 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 17
3. Biggest collective action challenge DESPITE RISING EFFICIENCY 2.5 2.0 2.0 Chart 16: CARBON DIXOIDE EMISSIONS PER UNIT OF GDP (kg and 2005 PPP $s) Source: World Bank, World Development Indicators 2011 1.5 1.0 0.5 0.9 0.7 0.5 0.6 0.4 0.4 0.3 0.0 China India US UK 1990 2007 18
3. Biggest collective action challenge EMISSIONS PER HEAD RISE IN POOR COUNTRIES Chart 17: CARBON DIOXIDE EMISSIONS PER HEAD (tonnes) 25.0 Source: World Bank, World Development Indicators 2011 20.0 19.5 19.3 15.0 10.0 5.0 0.0 10.0 8.8 5.0 2.2 0.8 1.4 US UK China India 1990 2007 19
3. Biggest collective action challenge TOTAL EMISSIONS EXPLODE IN CHINA 7,000.0 6,000.0 5,000.0 4,000.0 3,000.0 2,000.0 1,000.0 0.0 2,458.7 6,533.0 Chart 18: TOTAL EMISSIONS (m tonnes) Source: World Bank, World Development Indicators 2011 4,861.0 5,832.2 1,611.0 690.0 569.8 China US India UK 539.2 1990 2007 20
3. Biggest collective action challenge 40 Chart 19: CO2 EMISSIONS 400 Chart 20: vs GDP & ENERGY 30 350 300 GDP 20 10 Non- OECD OECD 0 1990 2010 2030 Source:BP 250 200 150 100 1990 2010 2030 ENERGY CO2 21