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Talking Point

TALKING POINT

This space is dedicated to expert comment and opinion on issues surrounding climate & environment, infrastructure and livelihoods. The page is updated regularly with contributions from top academics and people on the front line of development work, and we want to hear your thoughts on what they say, too. So if you'd like to contribute a Talking Point or comment on something you've read below then email enquiries@evidenceondemand.org and join the debate...

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Responding to Resource Insecurity

With Chatham House's comprehensive and persuasive report, Resources Futures, now in the Evidence on Demand library, its author Bernice Lee sums up its key findings and explains the need for a 'coalition of the committed' to ensure sustainable management of the world's natural resources...

Resource insecurity is back with a vengeance. It is time for world leaders to respond to burgeoning demand from emerging economies, which has driven up commodity prices and made them more volatile, and led to supply disruptions, environmental degradation and political tensions. Governments have mostly reacted with unilateral - and often myopic - policies, alongside vague attempts at collaborative initiatives. This is not enough. The world needs a 'coalition of the committed' among principal resource-producing and resource-consuming nations to cooperate in the management of global natural resources.

Resource price volatility should be at the top of the list. Volatility in commodities markets is now higher than it has been at any time in the past century. While brief periods of volatility are not uncommon, the sustained high levels since the early 2000s are unprecedented. Existing international institutions have proved incapable of addressing the problem. Price volatility increases risk, which can deter long-term investment, potentially leading to more limited supply down the road. More immediately, it can cause trade and investment disputes as well as diplomatic tensions. And, of course, volatility can cause significant damage at the household level as well. Poor populations - which spend most of their income on basic resources such as staple foods and fuel - are often particularly hard hit by strong price fluctuations.

Today, governments in producer and consumer countries alike are recognizing that they share a vital interest in open, transparent and robust global commodity markets, where local disruptions are tackled before they spin out of control. For this, cooperation among key governments is indispensable. In the report Resources Futures, Chatham House proposed the establishment of an R30 group to provide a much-needed forum to define shared interests and iron-out differences.

For food, for example, biofuel-producing R30 countries could collectively purchase options on key grains and oilseeds from their biofuel industries. These contracts would be triggered when prices spike beyond a certain level, allowing biofuel feedstock to be released back into food chains and averting another food price crisis. The group should also establish guidelines that limit or even forbid the use of export restrictions during crises in commodity prices, which have exacerbated the impact of supply disruptions in recent years. With the Doha Round in tatters, a first step could be a pledge by R30 governments to abstain from any further controls.

In the medium term, moderating the demand for resources, encouraging efficient use and investing in alternative solutions are the most sustainable remedies for volatile prices. But resource politics, not environmental preservation or sound economics, are set to dominate the global agenda in the years ahead. Indeed, resource politics are already playing out, whether through trade disputes, climate negotiations, market manipulation strategies, aggressive industrial policies, or the scramble to control frontier areas. It is time for collaborative governance to catch up with this new political economy of resources.

Read the full report here.