While listening to Singapore’s former cabinet minister Lim Chee Onn speak at a recent lecture, I was reminded of the Energy Climate Era that New York Times columnist and writer Thomas Friedman wrote about in his book ‘Hot Flat and Crowded’.
If you haven’t read the book, Mr Friedman argues that the convergence of climate change, globalisation (including the rise of the middle class in emerging countries) and rapid population growth is driving five trends that will define the 21st century.
These five trends – energy and resource supply and demand, petro-dictatorship, biodiversity loss, climate change, and energy poverty – have culminated to result in this energy climate era which demands that all businesses begin thinking about their operations in this new dimension.
This new era has led to some sectors presenting the best opportunities in the near future – a subject that Mr Lim, current chairman of Singbridge International Singapore, elaborated on during the lecture series organised by the St. Joseph’s Institute and Fullerton Hotel earlier this month.
Here were some interesting statistics from his lecture:
· By 2030, global demand for water will grow from 4,500 billion cubic metres (cu m) to 6,600 billion cu m – 40 per cent above the current supply.
· In some countries such as China, the situation is even more dismal. It has the world’s largest population, but less than one quarter of the world’s average per capita water capacity – 2,200 cu m per person compared to the United States’ 20,500 cu m per person.
· Severe drought in many areas of the globe such as in China and Africa also accentuate the problems which need serious solutions.
· By 2050, global food production needs to be doubled to meet the minimum demand from a 9.2 billion population. Climate change, shrinking arable land and competition for scarce resources like water will make this task even more daunting. This is compounded by poor logistics in the global food supply chain, land degradation due to over-farming
· As countries like India and China increase meat consumption, this will place a greater burden on water, energy and food resources such as grain (used to feed the animals that feed humans. The recent looming food crisis triggered by a hot, dry summer which has reduced food supplies such as wheat is a perfect example of how unexpected disruptions can adversely impact countries, especially those which are particularly vulnerable.)
On energy and commodities:
· Energy prices will only rise over the long term and apart from energy-related resources like coal, oil and gas ,the growth of global demand for natural occurring minerals has been phenomenal especially in the emerging economies. And in tandem, the pace of extraction, development of new mines, and search for new sources have grown considerably. China’s demand for copper, for example, tripled in the last 9 years and its demand accounts for almost half of the world’s current output.
· But similarly, there is also a global push towards sustainable forms of energy production. China’s target, for example, is for 15 per cent of energy consumed to be provided by sustainable supplies, including nuclear, by 2020. It has the following renewable energy targets by 2020: 27 GW biomass; 3 GW waste to energy; 100 GW wind; 20 GW solar.
Mr Lim, who is now over-seeing Singbridge’s drive to develop eco-cities across the globe, quoted research house Mckinsey’s projections that by 2020, Chinese cities will require 5 billion square meters of roads to be paved and 170 new train systems. Buildings providing 40 billion sq m of gross floor area will be required even as additional logistics will be required to support the quadrupling of land freight volume.
Similarly, by 2025, India will be the world’s largest consumer market where its urban population will increase from 318 million to 520 million – the current size of the European Union
His key message was that the global trends may present problems that seem daunting and challenging, but is also creating “opportunities galore… for the bold and adventurous”. These impending economic changes will require more than “just a larger number of scientist and technologists”. The world will need businesses, entrepreneurs, economists, logistics planners and operators, and a green-collared workforce to capitalize on those opportunities.
But beyond his message, this new era and its opportunities also requires businesses to re-evaluate what this means for their business models. Due to the increasing scarcity of energy resources, businesses and organisations must look into how to achieve the highest productivity with the least amount of energy consumed – or even better, how to develop their businesses in a way that contributes to solving the world’s problems.
Even businesses not directly involved in the highlighted industries above will experience higher business costs as food, commodity and energy prices rise. Where a business might locate a plant in China and India due to lower wage costs might change its decision after considering higher transportation costs due to energy price hikes and the impending price put on carbon pollution.
The challenge is to anticipate how rapidly these trends will emerge and how quickly energy prices will shift over the mid to longer- term. Not to mention that a growing concern on the sustainability of businesses will also determine the longevity of a company or demand for its products and services from consumers. As I contemplated the new environment that the world operates in today, it becomes clear that any business that does not think about its entire operations in the context of the energy climate era is one of yesterday, not the future.
This blog post first appeared on ESI’s Energy Vibes.