Download Aled Jones – Resource Constraint

Dr Aled Jones
Global Sustainability Institute, Anglia Ruskin University
Resource Constraints
Sharing a finite world
© 2011 The Actuarial Profession  www.actuaries.org.uk
Resource constraints research project
•
Taking a systems view of the natural and social (human) capitals what do
scarce resources potentially mean for the system flows in a global
economy and in particular to financial capital?
–
Energy availability
–
Food availability
–
Water availability
–
Land availability
–
Metals availability
–
Social mobility and health
–
Capital availability
–
Environmental loading
Global pressures & trends
A growing world population
But…
Local challenges: Water availability
Slide 6
Local challenges: Degradation of soils
Slide 7
Global challenges: resource constraints
Oil
150
Tin
Gas
100
50
Copper
Coal
0
Zinc
Uranium
Indium
[1]
Silver
Current global reserves divided by current annual consumption (assuming no growth in demand).
Data taken from BP Statistical Review 2012, http://bp.com/statisticalreview and
David Cohen, 'Earth's natural wealth: an audit', New Scientist, Issue 2605 (23 May 2007) pp. 34-41
[2]
Global challenges: Environmental loading
Economic losses already occurring
Limits to growth: financial imbalances
Summary
• Resources are getting more
expensive
• Environmental damage is getting
more expensive
• Capital is becoming more
constrained
• (Global) population will peak
• … and they are all interconnected
So What?
So What? Commentary
• Growth is the solution
• Green growth
• The end of growth
• Beyond the limits
Possible financial impacts
•
Reduced economic growth.
•
Reduced access to many commodities, and hence increased
prices (or price shocks) or lack of availability.
•
Reduced international security and coordination.
•
Repression of investment returns by governments.
•
Possible changes to life expectancy and morbidity.
Inflation
• A series of economic price shocks from lack of availability of
resources would lead to short-term inflation.
• Government response to price shocks, in particular their
approach to money supply, is key for long-term inflation.
• Wage expectations will go up with more expensive resources
however capital may be needed for resource extraction
potentially keeping wages down.
Demographic assumptions
• Impact of climate change: increase the incidence of premature
deaths from heat-waves but lower cold winter deaths.
• Lack of access to resources: Certain elements, such as rare
earth metals, may become unavailable and could lead to
disruption in medical supply chains.
• Change in societies’ priorities: economy as a whole will have to
devote more (economic) resources to securing (physical)
resources which could lead to less investment in healthcare.
Scenarios for the future
Scenario runs for actuarial model
• Each scenario has an optimistic and pessimistic outcome
– 4 scenarios deliver 8 sets of outcomes that are tested
• Compared to a ‘no constraints’ world
No resource constraints basis (N):
Under this scenario resources to do not constrain growth
Discount rate: 3%
Investment return: 3%
Wage inflation: 2%
Mortality: PMA92/PFA92 (Medium cohort 2005 projections): life expectancy to increase by 1 year every 5 years
Business as usual (B)
Severe Decline (Scenario B1):
Discount rate: 3%
Investment return: 3% reducing to 0% with severe
periodic negative shocks
Wage inflation: 2% reducing to 0%
Mortality: PMA92/PFA92 (Medium cohort 2005
projections): life expectancy to increase in line with N,
then remain static with periodic negative shocks
Islands of stability (B2):
Discount rate: 3%
Investment return: 3% reducing to 0% with periodic
negative shocks
Wage inflation: 2%
Mortality: PMA92/PFA92 (Medium cohort 2005
projections): life expectancy to increase in line with
N, then remain static
Defined contribution replacement ratios
Defined benefit assets
Defined benefit (increasing contributions)
Contact details
Dr Aled Jones, Director
Global Sustainability Institute
Anglia Ruskin University
Tel: 0845 196 2931
[email protected]
http://www.anglia.ac.uk/gsi