‘Radically improving’ the efficiency of resource use and reuse is the ‘only reliable way’ the UK can protect the economy from resource ‘price shocks’ in future, a new report from environmental think tank Green Alliance has claimed.

‘The Great Resource Price Shock’ report, released today (3 March) warns that as the price of resources have ‘risen sharply’ over the past decade (in contrast to inflation), it is becoming increasingly expensive for householders to pay their food and energy bills.

Indeed, the report outlines that if resource prices (such as those for food and energy) had ‘just kept pace’ with other consumer prices, the average household could have saved over £1,000 on its food and household energy bills in 2012.

Further, Green Alliance warns that as the UK becomes more dependent on imports, rising resource prices will ‘hurt the economy more’ and the poorest will continue to be the hardest hit. Indeed, it states that if this trend continues, by 2020 household food and energy bills could have risen by another £1,675 ‘over and above’ general inflation.

As such, Green Alliance is calling on the UK government to ‘radically improve’ the efficiency of the UK’s resource use and reuse by reducing dependency on foreign imports to protect the economy from future ‘price shocks’.

Report details

According to Green Alliance’s findings, the ‘great resource price shock’ between 2003 and 2013 saw prices for energy and unprocessed food rise faster than other commodity prices, but did not see inflation rise in accordance. The report outlines that in this decade, annual price increases for energy and unprocessed food averaged 5.8 per cent, compared with inflation in other prices of 2.1 per cent over this period.

It reads: ‘As the overall average inflation rate was 2.6 per cent, the direct effect of the rising fuel and energy costs was to raise the average annual inflation by around 0.5 percentage points over the period 2003-13, leaving the CPI [Consumer Price Index] in 2013 over five per cent higher than it would have been if energy and unprocessed food prices had increased in line with other prices.’

­As well as this, between 2000 and 2012 the UK’s net import dependency for food rose from 33 per cent to 38 per cent, while the UK imported more energy and exported less as the North Sea oil and gas fields went into decline. The report continues: ‘Reflecting these trends, the UK now runs a substantial trade deficit on basic resources. In 2012, the combined trade deficit on food, drink and tobacco, raw materials and mineral fuels and lubricants amounted to £43 billion, or 2.8 per cent of GDP [Gross Domestic Product].’

Recommendations

To mitigate the effect of rising prices, Green Alliance outlines three courses the UK government can follow:

1. Rely on the supply response: Trust that new accessible and secure supplies are discovered to offset rising demand and that these supplies are not disrupted by geopolitics or environmental impacts;
2. Introduce ‘resource nationalism’: Ensure a steady supply of resources by restricting exports and securing foreign sources by purchasing land and extraction rights, or by signing long-term deals with foreign countries; or
3. Implement ‘resource stewardship’: Improve the efficiency with which the UK uses existing resources, by: developing domestic sources of energy; reducing waste; shifting to ‘less resource-intensive’ diets; and remanufacturing and reusing materials such as metals and plastic. Further, the UK should also ‘encourage other countries to do the same’ in this scenario.

According to Green Alliance, resource stewardship would be the ‘only robust solution’ as it is not reliant on external factors, such as the compliance of other countries or global commodity prices.

Indeed, Green Alliance argues that by reducing the need for resources, the UK could also ‘offset some of the damaging effects of past price increases’.

It outlines that to achieve resource stewardship the UK could:

• expand the ecodesign for appliances;
• improve the energy efficiency of buildings, for example, by improving insulation;
• reduce food waste by ‘changing contracts, grading standards and consumer preferences’ so that crops are not rejected on cosmetic grounds; and
• create a concerted infrastructure strategy for remanufacturing to ‘bring the UK’s remanufacturing rate up from one per cent towards 50 per cent’.

Putting vulnerable people ‘in the firing line’

Commenting on the report, its author Julian Morgan said: “When you take full account of the damage caused to our economy and living standards from rising resource prices over the past decade, the case to act becomes compelling. The only reliable way to reduce our vulnerability to future price rises is to improve how we manage and use resources.

“There are many ways we can do this, ranging from widespread insulation programmes for homes and offices, and more effective recycling and reuse of key materials. We need to put resource productivity at the heart of economic and business decision making if we want to make the UK more resilient to volatile commodity markets.”

Chris Huhne, former Secretary of State for Energy and Climate Change, added: “By wasting energy and other resources, we are putting some of the most vulnerable British people in the firing line as food and energy prices go up. This analysis shows that the first step in raising living standards for everyone is to stop food and energy waste.”

Green Alliance has also released an infographic summarising the report findings in pictorial form.