Raw materials critical to the Scottish economy
ER27
January 2011

Objectives of the project

The purpose of this project is to capitalise and build on the research of a Defra-led, UK-level project to look at the future risks to, and viability of, essential raw material resources, and to make the research relevant to Scotland. The key objectives are:

• Provide a brief review of Scottish industry. Identify and rate the relative importance of the key sectors and resources used within the Scottish economy.
• Identify the timescales (i.e. when the impact from a realised threat is likely to be felt) associated with threats to the availability of key raw material resources.
• Determine if there are viable alternative (current or future) resources that could be used as substitutes, and any implications of these substitutions.
• Analyse the potential economic and competition impacts of these resource risks on, and opportunities for, the Scottish economy.
• Analyse the business opportunities likely to be generated from a more sustainable approach to the use of resources in the short, medium and long term, along with the key sectors and potential benefits of these opportunities.
• Analyse the opportunities for developing material substitutes, recovering critical materials from associated waste streams, and supplying critical materials to others.

Background

Scotland’s economy relies on raw materials to function; however, very little is known about which materials are critical to Scotland’s economy and development. While very little is known about the security of supply of essential raw materials, Scotland meantime produces 20m tonnes of controlled waste annually, 36% of which goes to landfill.

The project builds on a Defra project which published the report “Review of the Future Resource Risks to Business and an Assessment of Future Viability” in December 2010. This project will publish an independent Scottish report drawing on the Defra findings at the UK level. This research aims to identify the raw materials critical to Scotland and opportunities for Scottish industry. This will provide the intelligence necessary to move Scotland towards a truly circular economy. The results will deliver outcomes important to the Scottish Government’s strategy for sustainable economic growth and to its Low Carbon Economic Strategy. The outcomes will also be useful to various organisations and industry operating in Scotland (e.g. Zero Waste Scotland).

Key Findings and Recommendations

Increasing scarcity of twelve resources has been identified as posing the most significant risk to Scottish industry:

The research highlights key considerations for industry:

• Domestic versus imported supply
• Importance of resource cost in the final product
• Cost and availability of substitute or recycled resources
• Ability to pass price increases through the supply chain
• Multinational nature of a sector

The study found little evidence that Scottish industry is planning for a resource-constrained future.

Key issues:

• Many resources are critical to the functioning of the Scottish economy. The key biological resources used throughout the supply chain of a number of Scottish industries (e.g. food and drink, construction) are domestic (i.e., “harvested” in Scotland or the UK).
• Scarcity of certain resources, particularly rare-earth and other metals, has the potential to reduce opportunities for low- and zero-carbon growth substantially.
• Phosphorous (which has to be imported) is of particular concern to the Scottish economy because of its importance to the agricultural sector.
• Many resources are globally traded commodities. Therefore, anything that affects these resources elsewhere in the world will have significant implications for Scotland.
• Many nations (e.g. China, Japan, and the US) are already taking action to secure their access to raw materials.
• Economic growth and growing wealth, particularly in Asia and India, will increase resource pressures in the coming years.
• Increasing demand in response to changing consumer tastes will impact on the availability of resources.
• Price volatility and generally increasing prices can be expected for most resources.
• Lead times for development and exploitation of new resources (e.g. new mining operations) may exacerbate short-term scarcity.

It is against this background that government and industry need to plan for the future and consider how to secure supplies, reduce use of or reliance on particular resources, or look at potential alternatives.

Next Steps

This report provides a critical first step for Scotland to understand the scope and likely impacts of this issue. It is hoped that it will be a catalyst for government and industry to start (1) preparing for the constraints that increased scarcity will likely impose and (2) developing a strategy to help industry position itself so that it can benefit from the opportunities that these constraints may create.

Copies of this report are available from the Foundation, in electronic format on CDRom at £20.00 + VAT or hard copy at £50.00, less 20% to FWR members.