International Resource Politics
The green economy demands new governance approaches.
Heinrich Böll Stiftung | July 18, 2012
Excerpt republished under Creative Commons. For the full text, visit Heinrich Böll Stiftung.
Chapter 6: New approaches to kick-start international resource politics
Incorporating environmental challenges and human rights in approaches to international resource markets is not an easy task. Doing this and making best use of critical materials according to the principles outlined above calls for an international resource politics. The relentless efforts of many people involved in ongoing initiatives—NGOs, academics, politicians, business, and numerous citizens throughout the world—should be seen as an encouraging sign of support. However, it is questionable whether the current system of international environmental governance—with its maze of interlocking multilateral agreements—offers a suitable platform for such an endeavor. Resources have many characteristics that call for a coordinated bottom-up approach, a polycentric type of politics with a high level of participation and transparency. Essential pillars of such international resource politics may also be developed in coordination with business, rather than fighting against them: Consumers and investors are increasingly concerned about environmental and social performance, and the need for a level playing field is widely acknowledged.
Germany and the EU have good reasons to accept their responsibility in that regard. The EU is the largest commodity importer of the world (not China or the United States), and Germany is the major manufacturing hub within the EU, meaning that its industries and its agriculture are both importers and exporters of resources. Moreover and against all current odds, the EU is the largest internal consumer market of the world—with numerous leverage capacities for market access. Leadership indeed will need to be demonstrated at home: Future commitments of the EU and its member states toward resource savings, that is, an absolute decoupling of resource use (measured in total material requirements or any similar comprehensive indicator) from GDP should be central in any such strategy; similar commitments by major corporations (against sales rather than unit-based) should be encouraged. Putting one’s own house in order is a key ingredient for credibility and preparing market actors for long-term changes.
However, strong international outreach is deemed necessary, firstly, because a domestic strategy of using fewer resources is not conceivable, given the internationally exposed position of Germany, the EU, and most other developed societies. Otherwise, it would merely be window dressing and aggravate ongoing problem-shifting to developing countries. Secondly, better international cooperation offers manifold benefits, and in particular the opportunity of turning natural endowments of poor countries into prosperity for its people. Formulating such international resource politics will require a creative junction of international law and private law, as well as interdisciplinary knowledge on governance and regulatory issues in a number of regions worldwide. There are a few precedents, as many common pool resources are predominantly regionally managed. As of today, a strategic interest in an improved sustainable resource management on a global scale has been expressed by the EU, Japan, some processing companies, and some producing countries. Their thoughts, however, are vague and have not yet resulted in a consistent picture. In that regard, the following strategy may encourage the formation of an international resource politics.
6.1 FROM KNOWLEDGE TO ACTION
Generating knowledge for the actors on the ground means the provision of information plus the encouragement of learning processes to make use of it. Again, the key is to incorporate the dimensions of environmental change and human rights into a lifecycle perspective of extraction, production, and use of resources. The following proposed steps shall provide better information and generate knowledge across a large number of stakeholders (see also earlier recommendations made by IIED 2002c: 389ff).
6.1.1 An international data hub on sustainable resource managementThere is a need to provide the following: harmonized, open-access geological data; geo-spatial data; data on critical materials and the resource nexus on the use of resources in economies and across industries; basic socio-economic data; environmental impacts of key materials and agricultural goods; as well as key data for scenario analysis about future use. This should be done in cooperation with existing mechanisms and agencies such as the Environmental Impact Assessment (EIA), the UN Food and Agriculture Organization (FAO), geological surveys, as well as with the UNEP International Resource Panel and research organizations.
6.1.2 An International Resource Management Agency
Furthermore, there should be an international agency to improve dissemination and learning through coordinated programs of awareness-raising and training courses, including broader policy dissemination. It could also host the proposed data hub and serve as a secretariat to the proposed multistakeholder forum (see below). Regional offices are probably good candidates for accomplishing these tasks. These two initiatives have been suggested in earlier publications (Bleischwitz et al. 2009, 284ff; Giljum et al. 2009).
6.1.3 A Multistakeholder forum for sustainable resource management
Such a forum does not exist yet. It should comprise high-level policy representatives of the G20 plus at least 10 main resource-rich developing countries as well as industry and civil society. It should use all conceivable means to be open, transparent, and participatory. Main tasks should be as follows:
- Discuss and critically review initiatives on transparency and certification, such as the OECD due diligence guidelines, EITI, as well as related policies such as the Dodd-Frank Act and the proposed EU policy on mining, recycling, and waste policies; it should also have a mandate to compare and review investment agreements, bilateral raw material partnerships, and other relevant policies. More comprehensive transparency is to be achieved regarding the supply relationships within mining industries, authorities, and financial institutions as well as the supply chains and the downstream processing industry. In the end, major parts of the contracts should be publicly accessible. The existing transparency initiatives should also be accompanied by certification efforts in the form of product labeling and/or along mineral supply chains.
- Align these activities with available knowledge on sustainable resource management as provided by, for example, The Natural Resource Charter, the MMDA, the UNEP International Resource Panel (IRP), the World Resources Forum, etc.
- Specify the UN Framework on Business and Human Rights for the extractive industries. A first step might be to appoint a special rapporteur of the UN Human Rights Council on that issue, with a mandate to assess and develop recommendations.
- Invite policymakers and corporations to disseminate best practices and to develop international policies in a high-level forum, similar to the international energy forum.
- Invite civil society to share concerns, point to problematic practices, and introduce innovative solutions.
- Prepare for and accompany an international data hub for observation, monitoring, extraction and entire lifecycle use of materials, including data on indicators, prices, and indirect resource use (such as ecological rucksacks).
- Discuss and develop a conflict-risk radar for both regional and international security issues, in relation to a system of articulating emerging resourcerelated conflicts.
- Establish international working groups to develop scenarios on future resource use, as well as targeted scenarios for certain commodities, product groups, and sustainability.
Assuming that current trends remain stable over the next years, these tasks do not seem to be overly ambitious. However, it will be wise to strive for organizational support or affiliation with an international organization. UNEP certainly has many merits, but still lacks expertise and a mandate on human rights and conflicts, whereas other organizations have less expertise and no mandate on environmental issues. Thus, an affiliation might have to have two or more ties.
Four arguments in favor of legally binding mechanisms
These three institutional mechanisms, however, will not be enough. The analysis in the previous chapters has revealed at least four arguments in favor of legally binding mechanisms in international resource politics:
- Critical minerals, as highlighted in Chapter 2, are poorly governed and almost entirely unregulated. As of today, this favors selected targeted approaches (such as the Dodd-Frank Act in the United States and a potentially similar regulation on the EU level). However, more comprehensive approaches that address the environmental dimension and incentives for managing them toward the principles outlined above should also be discussed.
- Sustainable mining—however challenging this may be—has limitations when entire lifecycle management of resources and, in particular, the demand for resources ought to be governed. Making the mining industry a partner for sustainable resource management requires approaches that address the whole lifecycle of using resources.
- The divergence and heterogeneity of actors as well as possible tradeoffs between competing aims call for better coordination and mechanisms to enhance consistency and strategic orientation. In particular, a global mechanism that moves toward using fewer resources, preserves the commons, and allocates essential services for the poor is desperately lacking.
- On top of this, there is no strategy to deal with structural deficits such as
negative externalities, abuse of human rights, huge volatilities, illicit trade,
- Any gains achieved by material-efficiency increases are counteracted by a destructive exploitation of resources, and the developing countries are further endangered by environmental dumping and "sleazy waste disposal."
- As for future risks, the environmental pressures and the potential for resource-related conflicts are seriously growing and are a threat to human rights and international security (HIICR 2011; Bleischwitz et al. 2009; Transatlantic Academy 2012).
The following section will very briefly introduce new and innovative pillars. Since this is seen as the beginning of a debate on international resource politics, any comments and follow-ups will be appreciated.
6.2 A TAKE ON KEY AREAS OF CONCERN
In line with our analysis above, internationally coordinated action on critical materials should start now; this seems to meet a high demand from a number of stakeholders and policymakers.
6.2.1 A European and international phosphorus policy
First, it has to be noted that issues surrounding phosphorus—a limited and non-substitutable material for the food supply with very weak governance structures—still play a minor role in policy and public awareness. Awareness-raising should be given a high priority. Second, policy has disaggregated the individual phenomena of phosphorus use and flow in various tasks—there is neither a holistic approach to the problem nor coordination among the actors involved. A legal basis for regulating phosphorus from agricultural sources does not exist, but there are different soft regulations that address phosphorus flows, for example within the context of detergents, wastewater, and sewage sludge. Here, perverse incentives act as barriers to changing the technical structures of recycling plants for phosphorus recovery and closed loops (Werland et al. 2010).
A holistic approach should address the international and worldwide dimensions of a sustainable phosphorus management. Due to close interactions and inter-linkages to other biotic and abiotic resources as well as core challenges such as climate change, agriculture, and nutrition, the initiative should be designed as part of an internationally aligned resource policy. An integrated phosphorus management should start with the monitoring of phosphate flows in Germany (similar to the Swiss activities in this realm) (Binder et al. 2009). In the medium term, the approach should be extended to the European scale. International scenarios have to project future demand and applications and the potential recovery of phosphate (Cordell 2010). It should be especially fruitful with regard to emerging and developing countries as well as for business (WBCSD 2009). Indeed, awareness is key, and NGOs can play an indispensable role in that regard.
The high recovery rate of phosphorus from sewage sludge (up to a 90% recovery rate from sewage sludge by means of mono-incineration) is technically feasible, but it is a downstream and costly approach. Hence, sustainable phosphorus management has to consider quantity regulation in order to achieve a reduction in primary phosphorus input and close loops for secondary phosphorus at the same time (Ekardt 2011), as well as to provide incentives for investments. Inter alia, it would be necessary:
- To address all actors—importers, producers, user (agriculture), research, etc.;
- To achieve a site-specific optimized fertilization that seeks harmonization with the healthy feeding of the world population, i.e. questioning the current livestock-intensive agriculture and diet;
- To generate economic incentives by introducing a pollutant charge or a phosphorus tax on the production of fertilizers;
- To legally bind recovery as a central approach, supported by appropriate incentives (such as a mixture quota for p-containing fertilizers, prohibition of subsurface filling and land-filling of p-containing waste, co-incineration ban of sewage sludge, development of long-time deposits of sewage sludge, recovery of anthropogenic urine);
- To implement a market introduction program for mono incineration plants and adequate phosphorus recovery.
6.2.2 An international metal covenant
Given the high losses (see Chapter 2) of materials through the export of used goods from developed countries, which often ends in low-quality recycling and improper disposal, legally binding mechanisms such as an international metal covenant would be a conceivable option. This could be achieved in a contract (covenant) between key manufacturers and suppliers, the recycling industry, and the relevant public authorities in major export and destination countries.
The covenant should establish long-term goals for increasing resource efficiency through a high-quality recycling market. The covenant defines the responsibilities of the different actors, the policy tools, implementation, and evaluation. The parties, industrial enterprises, or their associations would commit themselves to resource protection goals, and the states would ensure a stable and supportive environment for the agreed term. In contrast to non-binding commitments, the covenant should principally be enforceable in court. At the same time, the contract should provide for effective dispute resolution and sanctions (Wilts et al. 2011).
Such a covenant has the potential to establish a framework toward closing material cycles for consumer goods more effectively at an international level and shows a number of benefits, such as the reduction of transaction costs in new partnerships between industry sectors and public bodies, the increase of states’ regulatory capacities, and industry’s acceptance. It prevents the undermining of the extended producer’s responsibility for exports—material stewardship—and gives incentives for recycling design (Wilts and Bleischwitz 2011).
6.2.3 Transform bilateral agreements toward sustainable resource management
Bilateral trade and investment policies offer ample leeway for leadership from the EU and Germany. Any such agreement should refer to common principles such as those provided by the Natural Resource Charter, the Mining Model Agreement, and others. In line with due diligence supply chain efforts, this could be accompanied by sectoral investment agreements in areas relating to smelters and refineries, metal and recycling industries. The collaboration in the field of environmental technologies should be aligned to encourage large-scale investments into renewable energies and a green infrastructure while minimizing environmental and social risks.
The existing bilateral raw material partnerships (e.g., Germany with Mongolia, Kazakhstan) should also adhere to such principles and fulfill basic conditions of transparency, accountability, and sustainability. The EU could openly discuss market leverage into the EU as well as standards for human rights and sustainable resource management, as outlined above in this process—possibly in coordination with other OECD countries. In addition, the EU and Germany should offer support for technology transfer and capacity-building. The latter is important for measures in these countries such as national plans for sustainable resource management, extraction taxation schemes, and raw material funds; they will also help to promote constitutional legality, good governance, and the development of macroeconomic institutions in the resource-rich countries (Collier and Venables 2011; Bleischwitz 2011).
Indeed, all documents should become publicly available. The institutional implementation should be done in alignment with the international multistakeholder forum to encourage other countries to follow and disseminate experience.
6.3 TOWARD A SUSTAINABLE WORLD ECONOMY
The normative principles outlined above are well in line with an understanding of markets as being guided by rules and serving purposes of higher ends. The knowledge generated through the activities proposed above will lead to a better basic understanding of how resources, nature, and development processes interact. This will support the resilience of societies with a number of transition processes moving in new directions. However, the implication is not that all processes of nature or within societies are proposed to become part of the global market or any scrutinized financialization of services. To stimulate debates on how the world economy ought to be transformed, our outline of an international resource politics suggests a few directions. A more detailed discussion is certainly beyond the scope of this paper.
6.3.1 Cutting subsidies and introducing resources taxes
The EU shall go ahead and reduce environmentally harmful subsidies on fossil fuels, mining, agriculture, and land use in its member states and at lower levels of policymaking (Usubiaga et al. 2011); it should eliminate all export subsidies and refrain from using food aid to promote exports. Furthermore, it should promote this objective in bilateral and plurilateral agreements and support a Global Subsidies Initiative toward these aims.
To get the prices right and to counteract the rebound effect, the tax base should be broadened toward natural resources. Given that construction minerals account for the biggest share resources and are less sensitive to international competitiveness than most commodities, the EU should introduce a tax on construction minerals (Bahn-Walkowiak et al. forthcoming). It should also consider taxing water and land use. Such taxes can be seen as a precursor toward a more inclusive taxation of resources in general. Practical experiences with the taxes on aggregates have been gained in some EU member states (in particular in the United Kingdom, Sweden, Italy, and the Czech Republic), which all levy taxes or charges for sand, gravel, and crushed rock (EEA 2008; Bahn-Walkowiak et al. 2010).
Developing countries will have to consider their respective needs and the mixed experiences with taxing minerals extraction (ICMM 2009; Otto et al. 2006; WTO 2010, 12). However, carbon taxation is planned on being introduced in China, and more economic incentives will be a pillar of international resource politics. Taxing resources in developing countries, however, can be done in a sustainable manner and offers incentives for savings along the whole international value chains. On an international scale, coordinated domestic measures, such as an agreement to increase taxes uniformly beyond a nationally defined level, could be an option to avoid international distortions.
6.3.2 Leveraging finance for sustainable resource management
Leveraging finance for sustainable development is a task that clearly goes beyond politics and addresses the private sector (IIED 2011). The question of sources of finance is high on the political agenda in all fora that deal with international sustainability and development issues such as the UNFCCC and other conventions, Rio+20, and the G20. The public sector has a key role to play and serious regulations will be needed to increase state income, reduce tax evasion practices, and improve intranational equity. But the current financial and economic crisis makes it all the more important to think about more structural ways to redirect investment away from the old brown economy to a green, sustainable, and equitable economy. Pressing problems of food and water scarcity in many regions of the world, the infrastructure needed for better energy services for all, and the research that is still needed to use critical minerals in the most sustainable manner all require new and additional finances. It will simply not be enough to create incentives for greener products. Much caution and thought should be given to the right design of new mechanisms to leverage additional private capital through scarce public resources. Here, some important lessons can be learned from existing practices in development finance. The current trend of financialization in the form of commodification of natural resources (or even "development benefits") that are then turned into tradable financial market products in that context can even contribute to a distraction from the real problem. The development and ecological impacts of such measures are often highly questionable.
Some current proposals on mobilizing innovative sources of finance include:
- The Global Subsidies Initiative launched by the International Institute for Sustainable Development (IISD) aims at cutting environmentally perverse subsidies (Runnals 2011). Many developing countries spend billions of dollars on such subsidies (e.g., India spends $15 million on fuel subsidies annually). McKinsey (2011) estimates the global amount of subsidies spent annually on resources in the order of $1.1 trillion. Reporting on such subsidies is a first step that should be followed by coordinated efforts to reduce them. Indeed, this needs to include all unsustainable subsidies (e.g., on agriculture); it does not exclude targeted subsidies for environmental goods, for example, and it should go along with social programs and reforms.
- A levy on international aviation and shipping (eventually: taxing volatility of commodities).
- A transaction fee on international emissions trading (including auctioning) and a Financial Transaction Tax.
6.3.3 Rethinking international trade
In addition to the proposals made above—and since all attempts to govern commodities will have to take the world trade law into account—a rethinking of international trade policy is at stake. This clearly goes beyond the recent decision by the United States, the EU, and Japan to file a formal complaint against China with the WTO on the question of rare earths. In general, social or environmental resource regulations are usually seen as a restriction to free global trade by the WTO jurisdiction (see, also on the following, Ekardt 2011, § 7 C; Ekardt et al. 2009; Ekardt and Schmeichel 2009). Although the WTO rules allow for exceptions (such as Article XI: 2 GATT on critical shortages; Article XX GATT on the protection of human, animal or plant life or health; or Article IX: 3 on a possible waiver) more should be done to formally align good governance practices in countries with international trade (Meléndez-Ortiz and Biswas 2011). This effort will have to go against sweeping resource nationalism and trends favoring bilateral or plurilateral agreements—and it should exactly counteract these trends and stress the necessity of global rules for a fair trade. The proposals made above point in this direction; especially an initiative to eliminate subsidies for exports could re-open the doors in the ongoing negotiations.
Using this to level the playing field for trading environmental technologies could contribute to their deployment internationally. Internalizing the externalities of international shipping and aviation should also become a priority. All this may be seen as tinkering with the current system, however, it may not only buy time but also come closer to shifting patterns of production and consumption. Such shifts, in addition to the principles mentioned above, should trigger fresh thinking about balancing local livelihoods, resilience, and international trade.
6.3.4 New legal mechanisms at the international level
In the short run, new legal mechanisms at the national level will trigger sustainable resource management. In the long run, new legal mechanisms such as an international convention for sustainable resource management will deem it necessary to constitute fundamental legal principles for sustainable resource management. Such a convention, however, will probably be established in a stepwise manner via mechanisms such as the multistakeholder forum proposed above and, in particular, toward developing incentives for resource conservation and the legally new area of material stewardship in cooperation with industry. Thus, it is imaginable that initially mainly information exchange and certification will be undertaken (Bleischwitz et al. 2009). A main task will be to align such a legal mechanism with national and international climate politics. Areas of overlap are, for example, certification of biofuels, sectoral agreements, and product-specific regulations. Having expressed this, one should keep in mind that key actors such as business, developing countries, and emerging economies have expressed their interest to become engaged in better governance of resources, which should help to facilitate synergies.
External Link: FULL TEXT: International Resource Politics [PDF]blog comments powered by Disqus