Extrapolation or saturation - Revisiting growth patterns, development stages and decoupling

The contemporary debate considering the use of natural resources in economic growth centres around the concept of 'decoupling' driven through improvements in resource efficiency. Many studies extrapolate future demand from a short time series of previous years. However, we believe there should be greater attention on the underlying demand assumptions and the possibility of long-term changes. Accordingly, this paper is concerned with a potential saturation in material use as a result of countries moving through stages of development over decades from early industrialisation, over mass production and into a mature stage. An observation of such saturation is relevant for global environmental change as future demand for resources could be lower than currently expected, leading to less associated environmental pressures. In particular, emerging economies are undergoing changing growth patterns, and their future resource use may be significantly lower than contemporary analysis suggests. This paper combines the analytical strands of resource economics and material flow analysis. It investigates both material-specific demand and stock build-up trends over an extended time horizon of a century. Four materials (steel, cement, aluminium and copper) are analysed applying an indicator called 'Apparent Domestic Consumption' (ADC) and using international trade data for four industrialised countries (Germany, Japan, UK, USA) together with China as the most preeminent emerging economy. Our results confirm the occurrence of a saturation effect for most materials considered. While the evidence is strong for the per capita apparent consumption of steel, copper and cement in the four industrialised countries, it is somewhat weaker for aluminium. Also, such saturation in material use can start at different income levels, with the saturation beginning to occur relatively early for steel and cement ($12,000 GDP/capita) and later for copper ($20,000 GDP/capita). The results suggest a time gap of around thirty + years from the take-off of large-scale adoption of one type of material and any saturation occurring. We also shed light on the build-up of stocks in the economy, where our findings suggest there is a delayed saturation of at least twenty years compared to apparent consumption depending on the lifetimes of capital goods. With regard to China, a demand saturation for steel and copper has already started to occur, and our analysis suggests such saturation will soon take place for cement. These findings provide a more moderate outlook on China's future material demand compared to an extrapolation of recent dynamics. Our new insights on the nexus between economic growth, development stages and the use of natural resources have implications for the decoupling debate and for investments into commodities. From a wider environmental policy perspective, one may expect China and other emerging economies to achieve a saturation effect soon and therefore also peak their industrial emissions of greenhouse gases, supporting the nationally determined contribution (NDC) to the Paris Agreement on Climate Change.