Why Extractive Sector Governance Matters in the Resource Productivity Debate

Issue: Research
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This year for the first time in its history, the World Resources Forum took place in Latin America. From October 20 to 22, the global forum, which promotes innovation for resource productivity, drew more than 1,000 global participants to Arequipa, a city in southern Peru, to discuss the economic, political, social and environmental implications of resource use.

The issue is a pressing one for Latin America, which is particularly rich in oil, gas and minerals, as well as renewable natural resources. Here, governments face the challenge of transforming extractive wealth for development and at the same time protecting the environment and using renewable natural resources in sustainable ways to benefit present and future generations.

Two key terms emerged at the forum as researchers, policymakers, business leaders and civil society actors took up discussions about this challenge. The first was decoupling, or disconnecting economic growth, which must be sustained, from resource use and environmental and social impacts, which must decrease dramatically.

In 2011 the United Nations Environment Programme published case studies on decoupling efforts in Germany, South Africa, China and Japan. Germany in particular has reduced material and energy costs in its manufacturing industry and public sector, “leading to (net) benefits for the private sector, creating new ‘green’ business fields and jobs, and reducing environmental impacts and social tensions from resource extraction,” according to the report.

The World Resources Forum’s workshops and scientific sessions yielded multiple approaches to achieve decoupling. Participants identified a “ping-pong” strategy between resource productivity and resource prices as a viable path towards this end. Decoupling is also a precondition to tackle climate change. Governments need to take a dynamic multifaceted approach, combining resource efficiency with energy policies and promoting more sustainable production and consumption patterns, participants agreed.

The second key term that emerged at the forum was circular economy, which entails a zero-waste approach throughout the lifecycle of resources. Though achieving the zero-waste goal is quite ambitious, there are examples of business models driving the circular economy. Fast Company wrote that such companies “may well define the future of sustainable business, enabling global prosperity on a crowded planet with finite resources.”

Latin America’s oil, gas and mining industries cannot sit out these important conversations about decoupling, circular economies and sustainability, especially where energy and resource policy is concerned. “As climate change emissions are mostly associated with the use of fossil fuels, little attention is paid to the contribution of the use of non-energetic resources (e.g. metals and minerals) on climate change, although those resources are coupled to energy use throughout their life cycle,” a WRF summary document stated. That includes extraction.

To be successful, we need more debate about extractive sector governance, resource productivity and sustainability.

Waleria Schuele, a fellow of the Mercator Program Center for International Affairs and the German National Academic Foundation, currently works as research stagiere at NRGI’s Latin America regional office in Lima.

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