SERI WORKING PAPERS

Modelling scenarios towards a sustainable use of natural resources in Europe

Stefan Giljum, Arno Behrens , Friedrich Hinterberger, Christian Lutz, Bernd Meyer

No. 4, January 2007 WP Nr. 3, January 2004

SERI Working Paper No. 4

The Authors: Stefan Giljum (corresponding author): Sustainable Europe Research Institute (SERI), Vienna, Austria T: 0043 1 969 07 28 19, F: 0043 1 969 07 28 17, E: stefan.giljum@seri.at Friedrich Hinterberger Sustainable Europe Research Institute (SERI), Vienna, Austria E: friedrich.hinterberger@seri.at Arno Behrens Sustainable Europe Research Institute (SERI), Vienna, Austria E: arno.behrens@seri.at Christian Lutz Institute for Economic Structures Research (GWS), Osnabrck, Germany E: lutz@gws-os.de Bernd Meyer Institute for Economic Structures Research (GWS), Osnabrck, Germany E: meyer@gws-os.de

SERI Working Papers are the outcome of ongoing research activities at the Sustainable Europe Research Institute (SERI). They present preliminary results, which are open for debate and improvement for publication in scientific journals. All comments and suggestions are warmly welcome. Each SERI Working Paper is reviewed by at least one SERI member.

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Stefan Giljum, Arno Behrens, Friedrich Hinterberger, Christian Lutz, Bernd Meyer

Modelling scenarios towards a sustainable use of natural resources in Europe

Abstract:
The issue of unsustainable patterns of natural resource use currently experiences a steep rise on the policy agenda both in Europe and other world regions. A rapidly increasing body of literature assesses past developments of material use and resource productivities, however, little effort has so far been devoted to forecast future patterns of natural resource use and to provide an ex-ante assessment of environmental and economic effects of different resource policies. This paper presents results from the international research project MOSUS (Modelling opportunities and limits for restructuring Europe towards sustainability), which was designed to fill some of these research gaps. In this project, a global economy-energy model system was extended by a worldwide database on material inputs, in order to run three scenarios for European development until 2020: a baseline scenario without additional policy intervention and two sustainability scenarios, simulating the implementation of six packages of policy measures geared towards decoupling economic activity from material and energy throughput. These measures included, amongst others, taxes on CO2 emissions and transport, measures to increase metal recycling rates, and a consulting programme to increase material productivity of industrial production. This paper presents the evaluation of the three scenarios with regard to the extraction of natural resources on the European and global level. The baseline scenario reveals roughly constant levels of used domestic extraction (DE) within the EU until 2020 and decreasing unused domestic extraction (in particular, overburden from mining activities). The stabilisation of DE is accompanied by growing imports of material intensive products, indicating that the material requirements of the European economy will increasingly be met through imports from other world regions. The implementation of the six sustainability policy measures applied in the sustainability scenarios results in a slight absolute reduction of DE in all European countries and significantly increased resource productivities. The results illustrate that policy instruments aimed at raising eco-efficiency on the micro level can be conducive to economic growth. They should, however, be accompanied by other policies influencing the prices of energy and materials, in order to limit rebound effects on the macro level. With regard to global resource use trends, the baseline scenario forecasts a significant growth of resource extraction, particularly in countries of the global South. This reflects the growing demand for natural resources of emerging economies such as China and India.

Keywords:
Eco-efficiency; integrated modelling; international trade; material flow analysis; sustainability policies

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1 Introduction
The past 30 years have been characterised by a change in complexity and scope of environmental problems in industrialised countries. Up to the 1980s, environmental policy was mainly concerned with the reduction of local or regional environmental degradation caused by certain environmentally harmful outputs, such as air pollutants and hazardous wastes. Since the mid-1980s, environmental problems have increasingly been perceived as complex, international or global in scope and with multi-dimensional cause-effect-impact relationships, often characterised by time-lags. Global issues such as climate change, loss of biodiversity and desertification, associated with high levels of energy and resource consumption as well as unsustainable land use patterns are part of these new environmental problems and are closer related to the overall volume (or scale) of economic activities rather than the result of the specific potential for environmental harm of individual substances (EEAC, 2003; Giljum et al., 2005; Moll et al., 2005). Natural resource use, being a main driver for these problems, experienced a steep increase in importance on the environmental policy agenda both in Europe and in other world regions. The renewed EU Sustainable Development Strategy (European Council, 2006) and the Thematic Strategy for a Sustainable Use of Natural Resources (European Commission, 2005a) address high levels of resource use as a main obstacle for achieving environmentally sustainable development in Europe and demand de-coupling of economic growth from resource use and environmental impacts. Similarly, OECD environmental ministers adopted a Recommendation on material flows and resource productivity (OECD, 2004), with the aim to integrate resource flow-based indicators in environmental-economic decision making and to better link environmental and economic information for evaluating macro-economic aspects of environmental policies. At the same time, issues related to resource productivity are increasingly taken into consideration when addressing economic growth and competitiveness. The renewed Lisbon Strategy of the EU (European Commission, 2005b) explicitly states that resource and environmental challenges could slow down economic growth if not adequately solved. It also mentions at least two concrete areas, where environmental and economic goals intersect (see also EEA, 2005b): (a) employment in European eco-industry sectors, which already exceeds 2 million and possesses high potentials for further growth, and (b) increased competitiveness through cost savings, which has been supported by some empirical studies (Fischer et al., 2004). A rapidly increasing body of literature assesses past developments of material use and resource productivities, particularly in OECD countries (see Bringezu et al., 2004 for a review of the state of the art and Weisz et al., 2005 for the latest European data set). Furthermore, a number of studies suggest guidelines for the design of an integrated set of resource use policies (Bringezu, 2006; EEA, 2005b; Giljum et al., 2005). However, little effort has so far been devoted to forecast future patterns of natural resource use and to provide an ex-ante assessment of environmental and economic effects of different resource policies (one exemption is the work on outlooks and scenarios for material flows in Europe by the European Topic Centre on Resource and Waste Management; EEA, 2005a). The EU project MOSUS (Modelling opportunities and limits for restructuring Europe towards sustainability; see www.mosus.net) was designed to fill some of these research gaps. The project team constructed a

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comprehensive and detailed economic-energy-resource model, in order to simulate different development scenarios for Europe until 2020 and to evaluate the impacts of (mostly environmental) policy measures on economic indicators (such as growth, competitiveness, trade, national budgets, unemployment) as well as environmental indicators (material extraction, energy use, CO2 emissions). The objective of the project was to better understand the macroeconomic drivers of environmental pressures and the implications of structural and technological changes for aggregated environmental indicators. The project team did not investigate specific environmental impacts of particular material flows or emissions. Some of the main research questions, which guided the work in the area of resource use and material flows included the following: Can environmental policy measures oriented towards higher resource and energy efficiency support goals of economic policy such as growth, competitiveness and employment? How effective are different policy measures in reducing environmental pressures in terms ofmaterial extraction and resource use? What are the implications of the implementation of environmental policy measures in Europe for other world regions?

This paper presents the results from the scenario simulations with regard to indicators on material extraction and material intensity. It provides the first comprehensive forecasts on resource extraction in Europe and other world regions and evaluates the different scenarios regarding their impacts on material flow indicators. The paper is structured as follows: in Section 2, we provide a description of the integrated simulation model with a particular focus on the material input modules. Section 3 summarises the scenario assumptions. Detailed results are presented and discussed in Section 4. Policy conclusions from the scenario evaluations are derived in Section 5. The paper closes with an outline of future research activities to improve and extend the simulation model

2 Model description
A European or global economic-environmental model for estimating patterns of material use and assessing material productivities in integrated sustainability scenarios needs to fulfil certain properties. These include: a multi-country structure and global coverage; a deep sectoral disaggregation of the country models; bilateral trade models disaggregated by product groups; an endogenous explanation of socio-economic development and its linkage with the environment; and the ability to simulate concrete and realistic policy alternatives with a forecasting approach (see Meyer et al., 2005 for a detailed description). The Global Interindustry Forecasting System (GINFORS) model (Lutz et al., 2005; Meyer et al., 2005) was constructed according to these model requirements. GINFORS is an economy-energyenvironment model with global coverage, disaggregating 54 countries and two world regions. All EU-25 countries, all OECD countries and their major trade partners are explicitly represented with a country model. GINFORS is based on time series of international statistical data from 1980 to 2002. Behavioural parameters are derived from econometric estimations assuming bounded rationality of agents with myopic foresight. The model philosophy is comparable to the COMPASS system (Uno, 2002), which is focused on the Asia-Pacific (APEC) region.
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Bilateral trade matrices for the OECD countries and major trade partners are provided for 25 commodities as well as the trade of services. This allows for consistently linking and simultaneously solving the model system on the global level. Via this trade context, both quantities and prices are properly allocated to the countries. The economic core of each country model consists of a macro-economic model and an input-output model providing the sectorally disaggregated information. Whilst macro models exist for all countries represented in GINFORS, input-output models are available only for 24 countries. The energy-emission models are based on energy balances provided by the International Energy Agency and are available for all 56 countries and regions. These energy balances depict the energy consumption structured by the relevant energy carriers. CO2 emissions are linked to the fossil energy carriers by constant carbon relations. In the MOSUS project, the GINFORS model system was extended by material input models in physical (weight) units. For this task, the first global database on domestic extraction of natural resources was compiled, covering 188 countries in a time series of 1980 to 2002 (Behrens et al., 2005, see also www.materialflows.net). Material input data was collected following the categorisation and methodological standards for economy-wide material flow accounting (MFA) as described in the MFA handbook by the European Statistical Office (EUROSTAT, 2001) and then aggregated to the 56 countries and world regions of the GINFORS model. In addition to economically used material extraction, estimations for unused domestic extraction (e.g. Overburden from mining and harvest losses in agriculture) were provided applying factors (tons of unused extraction per ton of used extraction) taken from the literature (see Giljum et al., 2004 for a technical description). For the purpose of the scenario simulations in the MOSUS project, the detailed national extraction data was aggregated into six material groups separately modelled with the extended GINFORS model: biomass, coal, crude oil, natural gas, metal ores and industrial/construction minerals (also termed other mining and quarrying in this paper). Each of the six material groups was linked to the GINFORS model through drivers, i.e. variables, which explain the development of extraction of a particular resource (see Table 1, see also EEA, 2005a for a similar approach). In the case of biomass, we distinguished three types of material drivers, depending on the availability of data in the different types of country models. A decoupling factor (representing increases in resource productivity) between biomass extraction and sectoral or total output was applied, based on historical evidence from 1992 to 2002. The other categories were driven by only one explanatory parameter in all countries/regions of the model. The extraction of fossil fuels (coal, oil, gas) was directly coupled to the energy models of GINFORS (see above); results in units of oil equivalents were translated into weight units. The development of metal ore extraction was explained by a separate model covering global production and demand for metals. Global metal extraction was then distributed among all metal extracting countries, taking into consideration (a) changes of the geographical distribution of metal ore extraction between the different world regions over the past 25 years and (b) a historical trend of increasing recycling of metals. In the case of industrial and construction minerals, GDP was chosen as the driver for all countries, as construction minerals (making up the major part of this category) are almost entirely used in the domestic economy. A historical decoupling factor was also introduced for this category to reflect past improvements of material productivity in the construction sector (around 1.8% p.a., based on
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observations for the years 1992 to 2002).

Table 1: Explanatory parameters for the six material categories in the material input models
Category Explanatory parameters / driving variables Type 1 country Biomass Output of agriculture and forestry sector Type 2 country GDP and demand for agriculture and forestry exports Type 3 country GDP

Coal Crude Oil Natural Gas Metal Ores Industrial/construction minerals

Energy model of GINFORS Energy model of GINFORS Energy model of GINFORS Global production and demand for metals GDP

Note: In GINFORS, type 1 countries are represented with an input-output model on the sectoral level and a detailed bilateral trade model. Type 2 countries consist of a macro model and a detailed bi-lateral trade model. Type 3 countries consist of a macro model and an aggregated trade model.

The evaluation of the scenario results focused on two main groups of indicators for the European Union (and worldwide): Used (and unused) DE in absolute terms and per capita Used DE per unit of GDP (intensity of domestic material extraction)

We want to emphasise that a comprehensive evaluation of European material use patterns needs to take into account the material flows associated with imports and exports, including up-stream (or embodied) indirect requirements. Quantification of the total material base of the European economy, including indirect effects linked to international trade, requires the application of more comprehensive material flow-based indicators, such as Total Material Consumption (TMC) (see Moll and Bringezu, 2005). GINFORS allows integrating all indirect economic effects on material extraction in the different countries, but does not enable a direct allocation of material extraction to specific economic variables (be it domestic consumption or trade). Therefore, for the assessment of trade implications in this paper, we are restricted to a proxy analysis using direct monetary trade flows between Europe and the rest of the world.

3 Scenario assumptions
In the MOSUS project, three main scenarios were developed and simulated up to the year 2020. The baseline scenario (BASE) projected trends observed between 1980 and 2002, without additional sustainability-oriented policy strategies and instruments put into force. The low

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sustainability scenario (LOW) reflected sustainability policy goals and measures derived from strategic documents of the European Union, such as the Sustainable Development Strategy and the 6th Environmental Action Programme. The high sustainability scenario (HIGH) defined policy goals and instruments, which were more ambitious from the point of view of sustainable development compared to those included in current EU documents. The scenarios assumed the implementation of six areas of policy measures (sub-scenarios), as shown in Table 2. 1 The policies implemented in the HIGH scenario were the same as in the LOW scenario, however, implemented with higher intensity (except for sub-scenario 5).

Table 2: The six sub-scenarios in the LOW and HIGH sustainability scenarios
LOW (1) Technical Change HIGH

Assumptions on sectoral changes starting in 2010 starting in 2020 + 10% until 2020 + 0.3% p.a. + 0.4% p.a.

(2) Transport costs (3) (a) Higher levels of metal recycling (b) Higher efficiency of non-metallic minerals (4) Increase in material productivity in sectors 1-14 (Aachen scenario) (5) (a) R&D of Firms (b) Technical Progress (6) Emission trading (a) Changes in consumption structures (b) CO2 tax prices in 2020 (c) Share of biofuels in 2020 (exogenous)

+ 5% until 2020 + 0.1% p.a. + 0.2% p.a.

+ 10% until 2020

+ 20% until 2020

Subsidised with 1% of public consumption between 2006 and 2010 Total factor productivity (excl. labour productivity) increases by 0.15% p.a. Target: Kyoto Target: IPCC

Based on Kratena and Wger (2004) 40 /t 8-10% 120 /t 15-20%

Sub-scenario (1) on technological change assumed changes of the input coefficients in selected sectors and supply-chains, such as a reduction of the consumption of chemicals in agriculture due to biotechnology, the introduction of new materials in the automotive sector and changes in the electricity and gas supply sectors due to a shift towards renewable energies. Sub-scenario (2) dealt with transport costs and assumed that all existing taxes in the transportation sector are replaced by a kilometre charge, covering the social costs of transportation. The price
1

The selection of policy measures was restricted to variables for which data was available and which could be exogenously modelled in the GINFORS model. A number of key sustainability policies, which were considered important for European sustainable development, could not be considered in the model simulations. These included issues such as trade policy, agricultural policy, fiscal policy and a reform of the subsidy system and land use management.

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mark-up is assumed to be 5% for all European countries in the LOW scenario and 10% in the HIGH scenario. To ensure budget neutrality, it was assumed that the government compensates the additional tax revenue by a reduction of other taxes in the transportation sector. Sub-scenario (3) assumed an increase of metal recycling and higher resource productivity in the use of industrial and construction minerals, as the result of the introduction of a material input tax and further upward trends of raw material prices on world markets. Based on empirical findings (see Fischer et al., 2004), the Aachen scenario (sub-scenario 4) assumed that governments support information and consulting programmes, which enable firms in the manufacturing sectors to exploit potentials for reducing material inputs (and related material costs) of production processes. We modelled a linear reduction of inputs of industrial sectors from the basic raw material supplying sectors (with exception of energy supplying sectors), starting from 1% in 2006 to 10% (LOW) and 20% (HIGH) in 2020. Corresponding costs were modelled as additional inputs from the service (consulting) sector to the manufacturing sector. Sub-scenario (5) on R&D and technical progress assumed that in the course of the so-called Lisbon process (see, for example, European Commission, 2005b), European governments subsidise R&D of firms with a total of 1% of public consumption, which is financed by a corresponding reduction of public consumption. It was also assumed that technological progress leads to an increase in total factor productivity (excluding labour productivity) in all sectors by 0.15% p.a. Finally, sub-scenario (6) was devoted to the issue of climate change, assuming the introduction of a high tax on CO2 emissions to be paid by producers and importers of fossil fuels, who react by increasing prices of their products. The government recycles the carbon tax revenues by means of reducing other taxes on enterprises. It thus has no effects on prices and allocation. Additionally, an increase in the use of biofuels is assumed as well as changes in consumption structures (for details see Kratena and Wger, 2005).

4 Scenario results and discussion

4.1 Driving forces of material extraction
As material extraction in the different categories is driven by economic developments and trends in energy use (see Table 1 above), a short summary of the results with regard to economic and energy variables shall be given, before we turn to the presentation of the material flow indicators. In the BASE scenario, real GDP per capita (in 1995 constant ) in the EU-25 rises from around 18 000 in 2005 to 24 000 in 2020. The impacts of the LOW and HIGH sustainability scenarios tella broadly positive story about the economic performance, exerting upward pressure on real GDP per capita in the EU-25 and reaching a maximum in the high scenario. By 2020, average GDP is around 4% higher in the HIGH scenario than in the baseline. With 2.8% (in HIGH), economic growth is strongest for the final simulation period between 2015 and 2020, having direct consequences for material extraction, in particular of construction minerals, which are directly linked to GDP (see Figure 2 below). It is mainly the sub-scenario 4 (the Aachen scenario) that drives this result, exerting a strong positive effect on growth through productivity gains that drive
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prices down and increase profit margins. Implementation of the set of policy measures also accelerates structural changes of the economy. Sectors associated with the domestic extraction and supply or production of materials and energy(i.e. mining and quarrying, electricity, gas and water supply, oil refining) or material- and energy-intensive production (e.g. iron and steel making) are loosing sectors in the LOW and HIGH sustainability scenarios, whereas manufacturing sectors increase their overall share in total gross value added, due to the rising productivity and competitiveness brought about by the Aachen scenario. With regard to trends in energy use, total primary energy supply (TPES) in the EU-25 is expected to increase by around 16% between 2005 and 2020 in the BASE scenario. The implementation of the policy measures in the two sustainability scenarios (in particular, the high CO2 tax) significantly reduce TPES by 5% and 10% compared to the baseline results. With around 39%, 26% and 15% respectively, the shares of oil, gas and nuclear power in TPES in the EU-25 remain almost similar in all three scenarios. However, the amount of coal decreases significantly in all three scenarios (to a total share of 9.8% in the HIGH scenario), which largely explains the significant reduction of unused domestic material extraction in the EU (see next section). At the same time, the share of renewable energies increases (to 11.2% in the HIGH scenario).

4.2 Used (and unused) domestic extraction in Europe

The first material flow indicator we present is used domestic material extraction (DE) in the BASE scenario for the EU-25 (Figure 1). In the BASE scenario, total used DE in the EU-25 is expected to stay roughly constant at a level between 7.1 and 7.4 billion tonnes. The two biggest material categories (other mining and quarrying and biomass) make up 60% and 24% of total used DE. Coal takes a large albeit decreasing share which constitutes 10% of used DE in 1995 but only 6.3% in 2020. The share of metal ores is expected to increase slightly from 2.2% to 3.1%, while the shares of natural gas and crude oil are not expected to deviate by large amounts. The average citizen of the EU-25 accounts for about 16 tonnes of used DE in 2000, which is considerably above the world average of about 9 tonnes per year, but still below other world regions such as Oceania with more than 60 tonnes per capita and North America with 33 tonnes per capita (see Behrens et al., 2005 for details). The BASE scenario forecasts decreases in DE per capita of about 5% between 2000 and 2015, but increases thereafter to reach a level of 15.8 tonnes per capita in 2020. The increase in the last simulation period can mainly be explained by increasing extraction of construction minerals due to higher economic growth in combination with a stable population in the EU-25.

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Figure 1: Used DE in the EU-25, BASE scenario, 1995-2020, in billion tons

8 7 6
billion tonnes

5 4 3 2 1 0 1995 Biomass Coal 2000 Crude Oil 2005 Natural Gas 2010 Metal Ores 2015 2020

Other Mining and quarrying

Unused domestic extraction (UDE) in the EU experienced a sharp decline between 1990 and 1995. This was mainly due to the German reunification and related restructuring of the economy in the new Lnder in general and the closing down of large parts of former East German brown coal mining sites (with extremely large amounts of overburden) in particular. Due to expected further reductions of coal mining in the EU, UDE will decrease from around 4.1 billion tons in 2005 to around 3.8 billion tons in 2020 (representing 34% of total material extraction). The evaluation of the two sustainability scenarios reveal patterns of decreasing extraction of natural resources until 2015 and increases thereafter (Figure 2). The overall development of DE in the LOW and HIGH sustainability scenarios is comparable to results of the BASE scenario. However, as expected, DE decreases with rising levels of policy intervention. Hence, in comparison with the BASE scenario, DE in 2020 is 4% lower in the low sustainability scenario and 7.3% lower in the HIGH sustainability scenario.2

We have to highlight that 75% of the increase between 2015 and 2020 is accountable to the category of industrial and construction minerals. As stated above, the development of this category is driven by GPD, taking into account historical improvements in resource productivity (see above). Even though GDP growth is expected to increase between 2000 and 2015, it only reaches a level beyond the rate of decoupling after 2015, thus causing the extraction of industrial and construction minerals to increase thereafter.
2

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Figure 2: Used domestic extraction in the EU-25, three scenarios, 1995-2020

7,5 7,4 7,3 7,2

billion tons

0 -1 -2 -3 -4 -5 -6 -7 -8 -9
1995 2000 2005 2010 2015 2020 LOW HIGH reduction in %

7,1 7,0 6,9 6,8 6,7 6,6

Deviation from baseline scenario (in %)

BASE

LOW

HIGH

Almost all policy measures introduced in the sustainability scenarios had a decreasing effect on material extraction with reductions in the HIGH scenario of up to 18% (used extraction) and 22% (used plus unused extraction) depending on the implemented measure and the country under consideration. In general, the largest reductions could be observed in response to the introduction of the carbon tax, with reductions of up to 10% of used extraction. This tax led to first order effects in term of significant price rises for fossil fuels and thus entailed significant second order effects in the whole economic system, as higher fuel prices impact on production costs in many industries, particularly in material and energy intensive sectors. These second order effects reduced fossil fuel consumption. However, they also had a negative effect on output growth and thus indirectly on material extraction. Downward effects were also noted due to higher recycling and material efficiency of non-metallic minerals (with reductions of up to 6%), and the introduction of higher transport costs, as well as from technological change and higher R&D investments (less than 2% reduction in all European countries). The only instrument that led to increases of used DE in most countries is the Aachen scenario. The reduction of material costs of industries due to information and consultation measures raises total material productivity by considerable amounts (in some countries, up to 20% compared to the baseline). Simultaneously, however, a rebound effect (see Binswanger, 2001) can be observed as reduced costs and increasing competitiveness have a stimulating effect on growth, thus dampening reductions of DE.

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4.3 Used material extraction worldwide

With its specific representation of 54 countries and two regions, the GINFORS model is closed on the global level and therefore enables a quantification of material extraction scenarios for the whole world economy. In Figure 3, worldwide extraction of the six material categories is presented for the BASE scenario.
Figure 3: Worldwide used material extraction, BASE scenario, 1980-2020

In the historical time series (1980-2002), global used resource extraction grew at around 1.5% p.a. from 40 billion tonnes in 1980 to 55 billion tonnes in 2002 (see Behrens et al., 2005). This trend of increased extraction is continued in the BASE scenario, with total used extraction rising to more than 80 billion tonnes in 2020. Accelerated growth can be observed for the outlook period up to 2020, with growth being highest for the last five years (2.6% p.a.). Furthermore, growth rates are unevenly distributed among the main material categories. Figure 3 illustrates that metal ores are the category with the highest growth rates. Metal extraction is expected to double from 5.5 billion tonnes in 2000 to more than 11 billion tonnes in 2020. This provides clear indication of the continuing importance of this category for industrial development, to a growing extent also in emerging economies (see below). With a growth rate of only 40%, extraction of biomass (agriculture, forestry, fishery, grazing) expands less than all the non-renewable resource categories, indicating a decreasing share of renewable natural resources on the global level. Until 2020, countries other than the traditional industrialised ones will gain increasing importance in the world economy and are expected to have significant economic growth rates. Particularly the newly industrialising countries in East and South-East Asia are developing at a rapid pace. For
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example, between 2000 and 2020, the GINFORS model predicts average economic growth rates of around 6.5% p.a. for China and more than 4% p.a. for India, Indonesia and Taiwan. This leads to a clearly visible shift of the shares of world regions in global material extraction until 2020 (see Figure 4).
Figure 4: Worldwide used material extraction, shares by country group, BASE scenario, 1995-2020

Note: Anchor Countries play a central role for regional economic development, are of great importance for regional political development and security, and, due their population size, have a central role to play with regard to the global protection of the environment and of natural resources (see Stamm, 2004 for a comprehensive discussion on the concept of Anchor Countries). Here, the group of Anchor Countries comprises China, India, Indonesia, Thailand, Turkey, Brazil, Argentina and Mexico.

On a global scale, the share of EU-25 countries in world-wide material extraction is reduced from around 13% in 1995 to around 8% in 2020, thus contributing a diminished share to overall resource extraction. The group of other industrialised countries follows the same trend. On the other hand, Anchor countries and the group of Rest of the World (including the majority of the least developed countries as well as developing countries with higher income but small populations) significantly increase their share. In 2020, the latter two groups make up more than 70% of global resource extraction. With regard to per capita extraction levels, the group of other industrialised countries has the highest extraction rate per inhabitant, which is a consequence of high extraction in Australia, Canada and the US. Increases can be observed for this country group (from around 28 tons per capita in 1995 to around 32 tons per capita in 2020), mainly caused by growing extraction of coal,
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metals and construction minerals. With a per capita extraction of around 16 tonnes, EU-25 countries rank second, with more or less stable figures over the time period under consideration (see above). Europe is followed by the group of Rest of the World, with around 10 tonnes per capita in the year 2020 (rising from around 8 tons in 1995). The group of the Anchor countries shows highest growth in per capita extraction (by 60% up to 9 tons in 2020), due to rapid economic development and less population growth than in many least developing countries. The effects of European policy measures (as implemented in the two sustainability scenarios) on worldwide material extraction are very moderate. In the low sustainability scenario, world-wide extraction is reduced by around 1%, in the high scenario by 2.1% compared to the baseline. This reduction is caused by a negative effect of the policy measures on trade volumes. Increasing transportation costs, the implementation of a carbon tax, higher recycling and technological change all reduce imports into Europe (particularly of fossil fuels, raw materials and semimanufactured products). Decreased demand for imports translates into lower economic production in economies involved in extraction and processing of natural resources, thereby reducing extraction levels. The limited effects on global unsustainable trends with regard to energy and natural resource use elucidate that all other OECD countries plus the big emerging economies have to agree on concerted actions to reduce global environmental pressures.

4.4 Intensity of domestic material extraction

An analysis of DE in relation to GDP in the EU-25 shows how efficient an economy transforms DE into wealth. Figure 5 shows the intensities of domestic material extraction (expressed as tonnes of used DE per 1000 constant 1995 ) for selected countries and country groups up to the year 2020. The figure shows that Western European countries have significantly increased their resource efficiency in the past decades (resulting in a downward trend for the intensity of DE) and that this trend is expected to continue until 2020. The main reasons for this trend are structural changes of these economies away from the primary and secondary sectors towards the service industries (structural effect) and an increased application of more material efficient technologies (technology effect). Furthermore, an increase of material intensive imports to the EU can be observed, indicating that material intensive production stages are outsourced to other world regions (trade effect, see also below). The forecast for the intensity of domestic material extraction of the EU-25 in the BASE scenario is 0.65 tonnes per 1000 of GDP in 2020, an improvement of almost 25% compared to 2005. While the old member states (EU-15) intensity of DE is forecast to reach 0.56 tonnes of used DE per 1000 of GDP in 2020, the new member states (EU-10) are expected to remain almost five times less efficient in transforming used DE into wealth. However, intensities in the EU-10 are expected to decrease more rapidly due to the alignment of economic structures and applied technologies. This will allow for a reduction of the material intensity gap between old and new members of the European Union.

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Figure 5: Intensities of DE in selected countries and country groups, BASE scenario, 1980-2020

Note: Data in for Eastern European countries were only available from 2005 onwards.

The trend of decreasing intensities of DE is even more pronounced in the two sustainability scenarios, with material intensity falling to 0.58 tonnes per 1000 of GDP in 2020 in the HIGH scenario (an improvement of 11% compared to the baseline).

4.5 A note on the role of international trade

Material flow-based indicators are important tools to illustrate environmental consequences of economic specialisation in the division of labour between different world regions (see Giljum and Eisenmenger, 2004; Muradian and Martinez-Alier, 2001). As production and consumption activities in industrialised countries have environmental impacts far beyond their borders, links between international trade and environmental problems related to material extraction and processing (such as high material, energy and land intensities and the accumulation of hazardous wastes and/or emissions) have to be taken into account, when European production and consumption patterns are evaluated from the viewpoint of global sustainable development. We explained above that the GINFORS model does not allow for a direct assessment of material intensities of specific trade flows. As a result we were not able to calculate embodied material requirements of traded products. However, to allow some conclusions on the future environmental consequences of Europe's trade relations, in particular with countries in the global South, we analysed European imports from the group of Anchor countries of the eight most material intensive
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product groups (in monetary units).3Figure 6 shows the results for the BASE scenario.

Figure 6: European imports of eight most material intensive product groups, by Anchor country, BASE scenario, 1990-2020, in billion US $

The historical database from 1990 to 2002 shows increases of 77% for imports regarding all product groups taken into consideration. This supports the results of another recent study regarding Europes external trade, which revealed that physical imports and associated indirect material flows are growing and increasingly substituting domestic material extraction, in particular with regard to fossil fuels and metal ores (Schtz et al., 2004; see also Weisz et al., 2005). This growth of resource-intensive imports is expected to extend through 2020, with increases of almost 140% between 2002 and 2020 in the BASE scenario. Over the whole time period increases add up to 322%, from 43 billion US$ in 1990 to 180 billion US$ in 2020 (in constant 1995 US $).The main suppliers of material intensive goods in 2020 from the group of Anchor Countries will be China, followed by India, Brazil, Indonesia and Turkey, with the regional emphasis increasingly turning towards Asian countries. While selected South American countries are expected to further specialize in sectors such as agriculture, mining and quarrying, and food production, Asian countries are expected to continue their development path with a higher share of the production of textiles, pulp and paper (despite the large share of Brazil in this sector), chemicals, other nonmetallic mineral products, and on fabricated metal products.
3

These product groups comprise: Agriculture, hunting, forestry and fishing; Mining and quarrying; Food products, beverages and tabacco; Textiles, textile products, leather and footwear; Pulp, paper, paper products, printing and publishing; Chemicals and fuel products; Other non-metallic mineral products and Basic metals and fabricated metal products (except machinery).

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These results, taking into account Europes stable DE, give indirect indication of the fact that European demand for natural resources will continue to be met by increasing imports from emerging world regions in the future. However, we need to emphasise that we have only analysed eight important Anchor countries and a selection of product groups. In order to obtain a full picture of changing import and export relations of the EU with the rest of the world, we would need to include imports from all other countries (including other industrialised countries) as well as exports disaggregated by different product categories.

5 Policy conclusions
The most wide-ranging policy conclusion from the scenario simulations performed in the MOSUS project is that the implementation of a well-designed mix of (mostly) environmental policies can (at least to some extent) result in a win-win situation for the economy and the environment. Environmental policy measures primarily geared towards decoupling economic activity from material and energy throughput can be conducive to economic growth, contrary to the common assumption that such policies will mainly raise costs for enterprises, decrease competitiveness and thus have an opportunity cost in terms of reduced economic performance. MOSUS scenario results support the view that increasing resource and energy productivity can actually improve the position of European industries on world markets and thus also lead to the creation of new jobs. From this perspective, environmental policies can help achieving the goals of the renewed Lisbon Strategy of higher growth and job creation (see European Commission, 2005b). The results highlighted that the transformation towards a more resource efficient economy will produce clear winners and losers in terms of economic sectors. Sectors associated with domestic resource extraction or material- and energy-intensive production will face significant reductions in output and investment. Such policy measures should thus be implemented in a long-term framework with clear targets, allowing enterprises in these sectors to perform the necessary adjustments. It also became clear that the sole focus on strategies to increase material and energy efficiency in the production sphere does not guarantee absolute reductions of environmental pressures on the macro level, as savings in material productivity are overcompensated by growth in production volumes due to rebound effects. Balanced achievement of economic and environmental targets thus demand for an additional correction of resource prices, in the form of a carbon tax, a material input tax or other fiscal measures. Also, a critical review of the sustainability of current lifestyles and consumption patterns is required in order to arrive at more substantial reductions of environmental pressures (EEA, 2005b; Spangenberg and Lorek, 2002). Although the implementation of the basket of policy measures resulted in a significant improvement of the environmental performance of the European Union, results remained unsatisfactory with regard to absolute reductions in material (and energy) consumption. The transformation of the European economy towards real environmentally sustainable production and consumption patterns requires a much more pronounced dematerialisation of wealth creation (Giljum et al., 2005). This aspect receives particular urgency in light of the ascent of the newly industrialising economies in the global South (such as China, India and Brazil), characterised by rapidly increasing per capita levels of material and energy consumption associated with growing additional pressures on global
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Stefan Giljum, Arno Behrens, Friedrich Hinterberger, Christian Lutz, Bernd Meyer

ecosystems. The achievement of more ambitious environmental targets could go beyond the exploitation of win-win strategies. Real trade-offs between further reductions of environmental pressures on the one hand and prospects for competitiveness and economic growth on the other hand could pose the challenges of the future. Results from the scenario simulations additionally revealed that measures to improve resource and energy productivity are also urgently needed in all other world regions, particularly in the OECD countries and the big emerging economies. Japan can be regarded as leading the way in terms of setting quantitative targets for resource productivity increases. In 2003, the government of Japan passed a strategy for establishing a material-cycle society (Government of Japan, 2003), setting targets to improve resource productivity (measured as GDP/direct material inputs) by 40% from the 2000 values until 2010 and to increase recycled materials also by 40% to an absolute 14% of overall material use. So far, such quantitative targets are missing for the EU or opposed in other non-OECD countries with significantly higher shares of material extraction and basic industry activities, notably the USA, Canada and Australia. With the passing of a Cleaner Production Promotion Law in 2003 and the goal to make progress towards the realisation of a circular (recycling) economy, especially for industrial sectors, China has set first steps towards the inclusion of environmental standards in future development. An important initiative to increase resource productivity in developing countries has recently been launched by the OECD Development Assistant Council (OECD, 2005). The initiative aims at supporting the implementation of environmental fiscal reforms (EFR) in developing countries, which could contribute to the achievement of fiscal, environmental and social policy objectives at the same time. The EU and other industrialised countries should support this initiative through funding of capacity building activities, supporting public awareness campaigns, and financing technical co-operation to help industries adjust to change (e.g. by switching to cleaner production technologies).

6 Future research need

This paper presented the results of the scenarios developed and simulated in the MOSUS project with a focus on the issue of material extraction and resource productivity. The extended GINFORS model developed and applied in the MOSUS project is one of the most comprehensive simulation tools for European and global integrated sustainability assessments currently available. It is also the first to allow detailed forecasts on material extraction in all European countries and on the global level. Nevertheless, a number of improvements and model extensions remain as future tasks. These include: Including natural resource stocks and prices: So far, the extended GINFORS model does not contain information on natural resource stocks in terms of fossil fuels, metals or construction minerals available for future extraction in different countries. Therefore, in the current scenarios, growing global demand for natural resources in the future is always met by growing extraction without accounting for limitations of extraction. Considering the rapidly growing demand for raw materials of industrialising countries such as China and India, the perception that resource scarcities are no major problem in the short run (European Commission, 2003) could change. Future extensions of the model should
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therefore add information on available resource stocks and likely costs of their exploitation. This would allow for the proper inclusion of feedbacks of rising prices for energy and raw materials to the economy in the scenarios. Development of a model component to calculate indirect environmental effects: One of the original objectives of the MOSUS project was to assess the total amount of natural resources necessary to support the European economic system, considering indirect resource requirements embodied in internationally traded products. As explained above, this objective could not be met with the current dynamic simulation tool. A precise allocation of these environmental effects to specific goods or services requires a static global accounting tool, which takes into account the production structures in different countries as well as the trade relations between different sectors along international production chains. Such an allocation technique could best be performed with a static multi-country inputoutput model system, which allows assessing direct and indirect material inputs necessary for satisfying domestic consumption and exports in each country (Giljum, 2005; Wiedmann et al., 2006). Expanding the number of represented countries: So far, only a limited number of developing countries are specifically represented in the GINFORS model. Inclusion of a larger number of Southern countries could make GINFORS capable for analysing economic and environmental implications of European development assistance and trade policies in developing countries. This would allow for an assessment of European sustainability policies and could provide an insight as to whether their effects on sustainable development efforts in other world regions are in line with the EUs vision for creating a global partnership for sustainable development.

Acknowledgments
We would like to thank Ines Omann for valuable comments on an earlier version of this paper.

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Stefan Giljum, Arno Behrens, Friedrich Hinterberger, Christian Lutz, Bernd Meyer

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