European Environment Agency
Contract Number 3403/B2009/EEA.53788
GENERAL SUPPORT TO THE FORWARDLOOKING ASSESSMENT COMPONENT OF
THE EUROPEAN STATE OF THE
ENVIRONMENT AND OUTLOOK REPORT
(SOER 2010 PART A)
Background Paper on Urbanisation and
Consumption
Final Version
June 2010
Contact BIO Intelligence Service
Shailendra Mudgal
Leonardo Mazza
 + 33 1 53 90 11 80
shailendra.mudgal@biois.com
leonardo.mazza@biois.com
Project Team
BIO Intelligence Service
Mr. Shailendra Mudgal
Ms. Tanja Münchmeyer
Mr. Leonardo Mazza
Mr. Kurt Muehmel
Disclaimer
This report contains the research conducted by the authors and is not to be perceived
as the opinion of the European Environment Agency.
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Contents
0.
Summary: Mega-trends Urbanisation and changes in consumption patterns ................. 5
1.
Introduction .................................................................................................................... 7
1.1.
What is this report about? ................................................................................................................... 7
1.2.
Why is it important? ............................................................................................................................. 8
1.3.
What is the starting point of this report? ............................................................................................. 9
1.4.
How is this report structured? ........................................................................................................... 10
2.
Conceptual note on mega-trends and their analysis ..................................................... 11
3.
Trends drivers and uncertainties ................................................................................... 12
3.1.
Background ........................................................................................................................................ 12
3.2.
Mega-trend I: Urbanisation ................................................................................................................ 16
3.2.1.
Mega-trend summary .........................................................................................................................................16
3.2.2.
Key trends...........................................................................................................................................................17
3.2.3.
Key drivers ..........................................................................................................................................................27
3.2.4.
Key uncertainties ................................................................................................................................................35
3.3.
Mega-trend II: Changes in lifestyle and consumption patterns ......................................................... 39
3.3.1.
Mega-trend summary .........................................................................................................................................39
3.3.2.
Key trends...........................................................................................................................................................40
3.3.3.
Key drivers ..........................................................................................................................................................48
3.3.4.
Key uncertainties ................................................................................................................................................56
4.
4.1.
Impacts ......................................................................................................................... 59
Potential environmental impacts on Europe ...................................................................................... 59
4.1.1.
Indirect impacts on Europe ................................................................................................................................59
4.1.2.
Direct impacts on Europe ...................................................................................................................................63
4.2.
Potential economic and social impacts .............................................................................................. 65
4.2.1.
Global resource supply and prices ......................................................................................................................65
4.2.2.
Demand for fossil fuels .......................................................................................................................................66
4.2.3.
Increased and more visible inequality ................................................................................................................66
5.
5.1.
Policy Implications ........................................................................................................ 67
Possible implications for European environmental policy ................................................................. 67
5.1.1.
Compensating for policies elsewhere .................................................................................................................67
5.1.2.
Europe as an environmental trendsetter............................................................................................................67
5.1.3.
Influencing demand to promote sustainable consumption and production ......................................................68
5.2.
Possible implications for other European policy areas ....................................................................... 68
5.2.1.
Economic policy to influence production methods ............................................................................................68
5.2.2.
Ensuring European competitiveness ..................................................................................................................69
5.2.3.
Trendsetting in urban planning ..........................................................................................................................70
5.2.4.
Technological leapfrogging .................................................................................................................................71
6.
References .................................................................................................................... 72
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0. SUMMARY: MEGA-TRENDS URBANISATION AND
CHANGES IN CONSUMPTION PATTERNS
The European Environment Agency is conducting an analysis of long-term global megatrends and their environmental implications for Europe up to 2050 as part of the
forthcoming European State of the Environment and Outlook Report 2010. This analysis
focuses on a sample of xx mega-trends across the social, technological, economic,
environmental and political dimensions of global change.
This background report presents the analysis for two of the xx megatrends, namely rapid
global urbanisation and consumption changes. (note: we have not defined the final title for
the latter megatrend yet).
 Mega-trend “rapid global urbanisation”
Approximately 3.5 billion people presently live in urban settlements worldwide,
representing about half of the global population. By 2050, this figure is projected to
increase by nearly 3 billion, reaching 6.4 billion in 2050, accounting for close to 70% of the
world population. The urban areas of the world are expected to absorb literally all the
population growth over the next four decades while at the same time drawing in some of
the rural population. In general, this trend is strongest in emerging economies. China and
India are noteworthy in this regard. These two countries are projected to account
together for about a third of the increase in the urban population in the coming decades.1
By 2025, China will be more urbanised than the world average and by 2050, the urban
population of China is expected to exceed 1 billion.
 Megatrend “changes in lifestyle and consumption patterns”
China is expected to become the world’s largest economy between 2025 and 2035. China
and India belong to the fastest growing consumer markets and are on a path similar to
Western levels of energy and resource consumption. Total urban consumption in China is
expected to increase annually at a rate of 8.6% between 2005 and 2025. As the Chinese
and Indian economies are growing, there has been a striking increase in household
incomes, particularly in China. It has been estimated that, since 1985, extreme poverty in
China has been cut by half. That said, trends showing income growth based on aggregate
data often mask deep inequalities in the distribution of wealth among the urban and rural
populations.
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 Key drivers
Increasing incomes
The rapid increase in incomes worldwide, driven by continuing economic growth, is
associated with and related to both the process of urbanisation as well as changes in
lifestyle and consumption patterns. However, disagreement remains on the exact nature
of the relationship between increasing incomes, urbanisation, and changing consumption
patterns and if the changes in consumption are a result of urbanisation or simply increasing
incomes.
Population growth in urban and rural areas
Fundamentally, the most significant drivers for both urbanisation and the increase in the
aggregate level of consumption remains the exponential population growth in rural and
urban areas. While rural population growth leads to migratory pressure towards cities,
natural increase (the growth of already-urban populations) remains the principle driver of
urban population growth worldwide.
 Key uncertainties
Domestic and international policies
The nature and impacts of the trends towards urbanisation and changes in lifestyle and
consumption patterns will depend, to a large extent, on the choices of policy-makers in
developing countries, as well as the potential implementation of international policy
frameworks worldwide. Properly managed urbanisation can lead to considerable
efficiency gains in the provision of infrastructure and basic services, thereby lessening
environmental impact and increasing human well-being. International environmental and
climate policy frameworks could impact the rate of economic growth as well as the
technologies used in the continued development of these countries, both of which would
affect the environmental impact of these trends.
Population growth
While the rates of population growth are relatively steady and predictable, given the sizes
of the populations in question, even small deviations from projections would significantly
impact the absolute size of the population and, thus, the rate of urbanisation and the scale
of consumption and its ensuing environmental impact. The rate of population growth is, in
turn, influenced by policy decisions and other socio-cultural and economic factors in China
and India, introducing a layer of uncertainty.
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1. INTRODUCTION
1.1.
WHAT IS THIS REPORT ABOUT?
This report analyses two interrelated yet distinct global megatrends, namely rapid
urbanisation and changes in consumption patterns in emerging economies. Much of the
analysis is illustrated with concrete case study information from China and India. This
perspective has been chosen for two reasons: (i) India, and particularly China, are the
motive force behind much of the political and economic rise of Asia, which will be host to
the majority of future urbanisation and (ii) the sheer size of their populations amplifies the
impact of even small per capita changes, that boost changes in consumption patterns and
overall market and growth patterns.
Many changes have swept over the planet during the last 50 years and the stark increase in
global urban population is one of the most important.2 This process is in a complex
relationship with rising incomes, leading to significant changes in consumption patterns
worldwide.
Extremely rapid urbanisation within the last few decades can be observed in both China
and India: from 1978 to 2004, the Chinese rate of urbanisation went from about 18% with
an urban population of 170 million to about 40% with an urban population of 540 million
inhabitants.3 At present, approximately 307 million Indians live in nearly 3,700 towns and
cities spread across the country. This is about 30% of its population, in sharp contrast to
only 60 million (15%) who lived in urban areas in 1947 when the country became
independent4.
Importantly, rise in incomes has led to a strong expansion of a global middle-income class
with different consumption and spending habits. Globally, shifts in spending power
towards middle-income economies and middle-income people have been observed in the
past. They are assumed to continue over the coming decades, as the focus of spending in
many of the emerging economies continues to change from basic to more discretionary
goods.5 According to one estimate, Brazil, Russia, India and China together could match the
G7 share of global GDP by 2040-2050.6 But a number of critical uncertainties are
embedded in these outlooks, one of which is the degree to which Asia will integrate further
into the global economy.
Again China and India are of key influence. Although both countries have a population
exceeding one billion, they differ greatly with respect to their political organisation,
average income level, extent of urbanisation, and per capita consumption. Since the 1980s,
economic growth has been twice as rapid in China as in India. To a certain extent, India
may follow a development path similar to the one witnessed for China, with important
implications for the local and global environment, though India’s current emphasis on the
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service sector over heavy industry means that there are also limitations to the extent to
which parallels can be drawn.
1.2.
WHY IS IT IMPORTANT?
Global consumption of goods and services, as measured by the economic transfers
associated with the related transactions, has grown dramatically over the past five
decades, up 28% from the $23.9 trillion spent in 1996 and up sixfold from the $4.9 trillion
spent in 1960 (in 2008 US dollars). Some of this increase comes from the growth in
population, but human numbers only grew by a factor of 2.2 between 1960 and 2006. Thus
consumption expenditures per person still almost tripled.7
Because of the sheer scale of the urbanisation processes worldwide, and in China and India
in particular, urban centres more than ever have particular relevance to any discussion of
sustainable development: much of the world’s middle- and upper-income groups live and
work in urban centres, and it is their demand for goods and services that underpin most of
the rural and urban resource consumption and waste outputs from production worldwide.8
The scale of resource use and waste generation arising from production and consumption
located in urban centres has major implications for broad ecological sustainability.9
While shifting technologies and stabilising population are essential in creating future
sustainable societies, neither will succeed without considerable changes in consumption
patterns. A thorough analysis of the different drivers behind the mega-trends towards
increasing urbanisation and changing consumption patterns is necessary if a good
understanding of the policy implications of these trends from a European perspective is to
be developed. To better estimate how consumerism will evolve it is also necessary to
better grasp what part culture plays in it. This is particularly true since human behaviour is
guided primarily by the cultural systems people are born into. Again, a focus on India and
China will deliver valuable insights. The form consumerism takes in different cultures is not
without consequences for global sustainability and the more success and happiness will be
defined through how much a person consumes the further away societies will move away
from the overarching objective of sustainable development.10
Rising incomes in emerging economies is likely to result in more and more spending on
discretionary goods and less and less on basic goods. In today’s world of almost 7 billion
people, future increases of global resource demand increasingly meet environmental
constraints. Demand for energy, food and water is projected to grow rapidly, hand in hand
with rising incomes. By 2025, China will have overtaken the US to become the world’s
biggest consumer market, with India as the third-largest.11 If India’s overall economic
growth remains on a long-term path of 7 to 8%, as most economists expect, absolute levels
of consumption will reach very high levels in the near future.12 Beyond the immediate local
and global environmental impacts, the shifts in consumption patterns in China and India
will also have important economic implications such as on the prices of agricultural
commodities and increased competition for fossil fuels and shrinking reserves of mineral
resources. Moreover, they will significantly influence global social and cultural trends.
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The interrelated processes of globalisation, increasing incomes, urbanisation and changing
consumption patterns are making the world more connected and more vulnerable to new
threats. Take, for example, increasing air travel to and from Asia. Beyond the increasing
greenhouse gas emissions of the flights themselves, the increased contact between people
from different regions and continents can increase and accelerate the spread of infectious
diseases as was seen in the 2009 H1N1 influenza pandemic.
That said, it is important to recall that of the megatrends of urbanisation and changes in
consumption patterns need not necessarily result in a dire world and may indeed help in
avoiding that outcome. The nature of the impacts depends to a large extent on policy and
choices and decisions at the individual and corporate levels. While increased air travel may
spread diseases, it also facilitates cultural exchange, understanding and learning which can
contribute to the emergence of a more stable and peaceful world order. Increasing
incomes means lifting larger segments of population out of poverty, providing better
supply of basic needs such as adequate sources of nourishment, sanitation, housing or
health-care and better education and information. If adequately managed, urbanisation
has the potential to lead to efficiency gains in the provision of infrastructure and basic
services, leading to a reduction of overall environmental impacts.
Urbanisation and consumption patterns changes are key drivers of global resource demand
and environmental change. Europe is a resource scarce continent and it is highly
dependent on resource imports. Some of its neighbour regions, such as the Middle East
and North Africa, are very vulnerable to sources of instability global environmental change
and economic and/or political disruptions. The way urbanisation and in particular changes
in global consumption patterns develop has thus strong multiple knock-on effects, in terms
of increasing or decreasing global resource exploitation and competition or increasing
global environmental change.
1.3.
WHAT IS THE STARTING POINT OF THIS REPORT?
It is important to recall that the process of development and the associated economic and
demographic growth in developing countries does not occur in a vacuum. Indeed, it is
often demand for products in developed countries which is driving the economic growth in
these countries in general, and China in particular. For example, more than 50% of all
electronic products manufactured in China are shipped to the United States, Europe or
Japan. While these products leave the country, the emissions remain behind. About 50% of
the emission growth in China from 2002 to 2005 was triggered by export production and
60% of these commodities were exported to the West.13 (link to EEA Namea work
findings?)
Today, the daily average resource use of a European is 43 kilograms, compared to an
American average use of 65 kilograms, 14 rates which are considered to be well beyond the
carrying capacity of the Earth.15 The exploitation and conversion of sub-soil and natural
resources has put increasing pressure on Earth’s systems and in the process has
dramatically disrupted the ecological systems on which humanity and countless other
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species depend. The 2005 Millennium Ecosystem Assessment indicated that some 60% of
ecosystem services — climate regulation, the provision of fresh water, waste treatment,
food from fisheries, and many other services — were being degraded or used
unsustainably.16
China and India are the world’s fastest growing consumer markets.17 Yet the daily average
resource use of a Chinese is xx kg and of an Indian is xx kg. As the consumption patterns of
larger segments of population start to approximate the consumption patterns in the
developed world, one might expect a continuously increasing resource demand together
with rising environmental impacts. Yet there is also evidence that some of the trends
observed might be divergent.18
1.4.
HOW IS THIS REPORT STRUCTURED?
The report is structured as follows: Chapter 2 provides a conceptual discussion about
mega-trends and their analysis. This is followed by a discussion about the global
megatrends in urbanisation and consumption, their drivers and key uncertainties in
Chapter 3. This discussion is introduced by an overview of each megatrend and its drivers
in form of a table structured according to the STEEP (Social, technological, environmental,
economic and political) framework. Chapter 4 then presents an overview of potential
impacts of urbanisation and consumption, with a primary focus on the environment.
Finally, questions surrounding potential implications for European environmental and
other policy-making are raised in Chapter 5.
An important caveat needs to be made: both mega-trends present complex phenomena, in
particular when viewed from a global perspective. The analysis presented in this report
does not aim to deliver a comprehensive and representative analysis but rather tries to
showcase some of the main developments and discuss their strategic implications.
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2. CONCEPTUAL NOTE ON MEGA-TRENDS AND THEIR
ANALYSIS
To be provided by EEA.
RE uncertainties:
Strategic Development Forum - Group ”Knowledge”
Knowledge”
Further clarification of Key Terms
Situation
State and dates of
knowledge
Examples of action
Risk
‘Known ’ impacts; ‘known ’
probabilities e.g. asbestos
Prevention: action taken to reduce
known hazards e.g. eliminate
exposure to asbestos dust
U ncertainty
‘Known ’ impacts; ‘unknown ’
probabilities e.g. antibiotics in
animal feed and associated
human resistance to those
antibiotics
‘Unknown’ impacts and
therefore ‘unknown’
probabilities eg the ‘surprises’
of chlorofluorocarbons
(CFCs), pre 1974.
Precautionary prevention: action
taken to reduce exposure to
potential hazards
Ignorance
Precaution: action taken to
anticipate, identify and reduce the
impact of ‘surprises’
Source: ‘Late Lessons’, page 192
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3. TRENDS DRIVERS AND UNCERTAINTIES
3.1.
BACKGROUND
The two mega-trends of rapid urbanisation and changing consumption patterns towards
discretionary goods are evident worldwide. Yet they are more pronounced in rapidly
developing countries which are undergoing a host of significant and rapid changes at a
much faster rate than did European and North American countries during their
development in the 18th and 19th centuries.19
Strong economic growth since the 1990s is a common trend in a number of developing
countries (Figure 1, page 13). The drivers of this increasing wealth are part of a complex
matrix of social, economic and political variables. While the complexity of the various
influences makes it difficult to determine clear lines of causation with currently available
data, urbanisation and changes in consumption patterns are both deeply associated with
and related to this global trend towards increasing wealth.
Due to this increasing wealth, many of the new city-dwellers are likely to enjoy a level of
material well-being considerably beyond that of their forbearers. In fact, despite remaining
urban and rural poverty in certain segments of the societies, the rise of a middle-class in
those countries means that we are currently observing a rapid rise of a global consumer
society, driven in particular by developments in the BRIC countries and most notably China
and India.20
As illustrated in Figure 2, most of the absolute growth in urban populations has taken place
in “less developed regions”, a set of countries which are often broadly described as
“emerging economies”, or those regions of the world that are experiencing a rapid
economic growth under conditions of limited or partial industrialisationi. The leading
emerging economies are an increasingly dominant force in global economic, social and
environmental affairs. Emerging economies represent the world’s largest potential markets
and are the source both of much of the world’s natural and human resources as well as
major sustainability challenges. While many sustainability issues are relevant in both
developed and emerging economies, the way they play out frequently differs. China and
India are currently the major players among emerging economies, e.g. China alone
contributed nearly 27% to global economic growth in 2007.21 That said, given the diversity
within the group labelled “emerging economies”, it is difficult to derive general
conclusions.
i
China, given its high rate of industrialisation, is an exception to this convention.
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Figure 1: GDP growth per capita (PPP) in selected developing countries, 1980-2013,
current international dollarsii (figures post-2008 based on IMF estimations)
Source: International Monetary Fund, World Economic Outlook Database, April 2009
ii
The international dollar is a hypothetical unit of currency that has the same purchasing power that the U.S.
dollar had in the United States at a given point in time. It shows how much a local currency unit is worth within
the country’s borders and is used to make comparisons both between countries and over time. It is used by the
IMF and the World Bank in certain studies.
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Figure 2: Urban population growth in more and less developed regions, 1950-2010
Source: United Nations: World Urbanization Prospects: The 2007 Revision Population Database
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Table 1: Main drivers influencing urbanisation and changing consumption patterns
Social
Rapid Urbanisation
Changes in Consumption Patterns
- High birth rates in rural and urban
areas
- Population growth
- Rebalancing of values
- Changing consumption preferences
- Shifts in demographic composition
- Longevity
Technological
- Mechanisation of agriculture
- Medical progress
- Innovation
- Spread of radios, televisions and the Internet in
rural areas (exposure to media stimulating
consumerism)
STEEP categories of drivers
- Population displacements due to
dam constructions
Economic
- Increasing incomes
- Increasing incomes
- Poverty induced rural-urban
migration
- Shift of industrial production from developed
countries to developing countries
- Market liberalisation and free trade - Multinational companies entering the Chinese
and Indian market
- Foreign Direct Investment
- Marketing and advertising
- Availability of new financing options
Environmental
- Changes in agricultural productivity
- Climate change
- Scarcity of agricultural land
Political
- Industrial policy
- Land-use policy
- Absence of well developed state
pension system
- Absence of well developed health
care system
- Pollution might increase demand for bottled
water and imported products more generally
- Loss of arable land to fossil fuel extraction
- Development of a state pension/health care
system and the resulting changes in household
savings rates
- State policy to develop the consumer market
- Economic policy choices
- Legacy of past policies
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3.2.
MEGA-TREND I: URBANISATION
3.2.1. MEGA-TREND SUMMARY
In many emerging economies, there are still large differences between the life-styles and
spending patterns of people in urban and rural areas. People in rural areas tend to have
lower average incomes and more conservative spending habits than those in urban areas.
At the individual level, urbanisation offers unique chances for improvement in the quality
of life and environmental protection if urban development is governed effectively. At the
macro-economic level, Cities are important for facilitating economic growth, increasing
productivity and rising incomes.22 However, rural-urban migrations often happen in an
unplanned and unregulated way. Informal settlements and slums which currently house
more than 1 billion urban dwellers are of particular environmental concern as they are
often not connected to even basic sanitation systems and other critical infrastructure.23
The increase in the world urban population is largely concentrated in less developed
countries; China and India alone are projected to account together for about a third of the
increase in the urban population in the coming decades. Higher fertility levels in these
countries relative to developed countries, both in urban and rural areas, and the limited
amount of arable land are likely to remain the main cause of rural-urban migration during
the next decades but the phenomenon could be exacerbated by several additional factors,
in particular: further mechanisation of agriculture, climate change induced migration,
increasing integration of China and India into the world economy with a widening gap in
average income between rural areas and urban areas, all making a move to urban centres
even more attractive to rural dwellers.
While the rate of growth in cities is expected to slow (but not stop) in the coming decades,
the rapid expansion of cities over the past half-century leaves a massive, newly-urban
population, fundamentally changing the makeup of countries worldwide. Furthermore, the
scale and rate of this transition will pose significant challenges to local and international
structures and institutions.
Finally, the transition towards a more urban global society is likely to be long-lasting and
difficult to reverse. In many cases, the built environment of these countries is being heavily
modified and the infrastructure that is being developed will influence the course of the
continued development for decades, if not centuries, to come.
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3.2.2. KEY TRENDS
Growing urban populations
In the 1950s, just over one-half of the population of the developed countries and just
under one-third of the population of the entire world lived in urban areas. At that time,
there were about 733 million people living in urban areas worldwide and eighty-three cities
in the world that could boast a million or more residents. Continued urbanisation over the
last 50 years has resulted in a situation where close to half of the world’s population now
lives in urban areas. In general, this trend towards greater urbanisation is occurring more
quickly and with the greatest absolute impact in less developed regions (Figure 2 [page 14]
and Figure 3)
Figure 3: Urban annual growth rate in regions grouped by their development status
Source: United Nations: World Urbanization Prospects: The 2007 Revision Population Database
Over the last 20 years many urban areas have experienced dramatic growth as a result of
rapid population growth while, at the same time, the world’s economy has been
transformed by a combination of rapid technological and political changes. Many cities,
particularly those in developing countries that have enjoyed robust economic growth, have
expanded significantly over the past 25 years, in some cases more than quadrupling in size.
Today, approximately 3.5 billion people now live in urban settlements. 24
That said, the annual rate of population growth in urban areas has been decreasing in less
developed regions (Figure 3) and are on track to converge with the lower rates currently
observed in more developed regions. While this slowing of the urbanisation process may
lessen some of the impacts of this urbanisation as the process occurs at a more
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manageable rate, the absolute number of urban inhabitants in less developed regions
(Figure 2, page 14) will remain significant.
Figure 4 shows the trend towards increasingly urban populations in several major
developing countries worldwide. The variability between the countries is substantial; for
example, Brazil has reached an urbanisation rate of nearly 90% while India has only
recently reached 30%. What is common between all of the countries, however, is the
upward trend towards increasingly urban populations. Whether the very large populations
of China and India will reach urbanisation rates similar to those of Brazil or Mexico is a
matter of considerable uncertainty with significant potential impacts for the local and
global environments. As shown in Figure 5, even at relatively low rates of urbanisation, the
absolute size of the urban populations in China and India are much larger than those in
other developing countries.
Figure 4: Urban population as a percentage of total population in selected developing
countries, 1950-2010
Source: United Nations: World Urbanization Prospects Database, 2007 Revision
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Figure 5: Urban population in selected developing countries, 1950-2010
Source: United Nations: World Urbanization Prospects Database, 2007 Revision
Regardless of future uncertainty, the changes in the relative and absolute sizes of the
Chinese and Indian urban populations which have taken place since 1950 have been
dramatic. Figure 6 shows this transformation in comparison to the global trend — a trend
of which India and China have been major drivers. This increase represents an increase in
the absolute population of Chinese cities by a factor of approximately 8.5. In India, the
absolute population of urban areas has increased by a factor of approximately 6 (Figure
7).25
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Figure 6: Share of China’s and India’s populations living in urban areas, 1950-2000
Source: United Nations: World Urbanization Prospects: The 2007 Revision Population Database
Figure 7: Growth of urban populations (1950-2010) in China and India
Source: United Nations: World Urbanization Prospects: The 2007 Revision Population Database
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Size of cities
While much of the current debate on sustainable cities focuses on the formidable
problems for the world’s largest urban agglomerations, the majority of all urban dwellers
globally continue to reside in far smaller urban settlements.26 Today’s mega-citiesiii account
for 4% of the world’s population and 9% of all urban inhabitants. That said, this trend is
more specific to developing countries: eight of the ten largest cities and urban
agglomerations worldwide are in developing countries. China is rather close to this world
average with 11% of its urban inhabitants residing in one of 7 mega-cities. India, on the
other hand, has far more of its urban populations concentrated in the largest cities with
23% of its urban population residing in one of 8 mega-cities.27
At the global level, urban populations may generally move away from the largest
settlements in the future, favouring small- to medium-sized cities instead28. Yet the UN
Population Division data shows that this trend is not expected to be borne out in China (
iii
“Megacities“ are defined as urban areas with more than 5 million inhabitants.
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Figure 8) and particularly not in India (Figure 9). Nearly one quarter of the urban
population in India presently resides in cities of 5 million or more, a figure which is
expected to remain steady through the projection period, until 2025 (Figure 11, page 24).
In China, this figure is expected to continue its slow increase, passing from the current 11%
of the population to 14% in 2025 (Figure 10, page 24).
The growth in the size of mega-cities in developing countries is particularly important given
that even a modest growth rate in a large city can mean a large absolute increase in
population. That is to say, a 2% annual increase in the population of Mumbai (with its
approximately 20 million inhabitants) will mean a much larger increase in the absolute
number of city-dwellers than a 10% annual increase in a smaller city.29
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Figure 8: Distribution of urban population in China by city size, 2010
Source: United Nations: World Urbanization Prospects: The 2007 Revision Population Database
Figure 9: Distribution of urban population in India by city size, 2010
Source: United Nations: World Urbanization Prospects: The 2007 Revision Population Database
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Figure 10: Chinese population living in cities of 5 million or more, 1950-2010
Source: United Nations: World Urbanization Prospects: The 2007 Revision Population Database
Figure 11: Indian population living in cities of 5 million or more, 1950-2010
Source: United Nations: World Urbanization Prospects: The 2007 Revision Population Database
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Future Outlook
World population has grown exponentially in the 20th century from around 1.6 billion in
1900 to around 6.7 billion in 2007, with each additional billion people being added more
rapidly than the last billion people. Between 2007 and 2050, the world population is
expected to increase significantly. As the future world population is subject to considerable
uncertainty, the United Nations Population Division publishes low-, medium-, and highgrowth scenarios. The global population in 2050 is predicted to be 8.4 billion, 9.1 billion
and 10.5 billion, according to the low-, medium- and high-growth scenarios respectively.
While the UN Population Division does not calculate multiple scenarios for its urbanisation
figures, they estimate that the population living in urban areas is projected to increase by
3.1 billion, passing from 3.3 billion in 2007 to 6.4 billion in 2050.iv Thus, the urban areas of
the world are expected to absorb virtually all the population growth expected over the
next four decades under all growth scenarios while at the same time drawing in some of
the rural population. 30
Figure 12: Estimated and projected size of the world’s urban and rural populations, 19502050
Source: United Nations: World Urbanization Prospects: The 2007 Revision Population Database
Looking forward to 2050, developing countries are expected to see their rate of
urbanisation converge at a very high level (Figure 13). While not all developing countries
iv
The UN Population Division does not publish multiple scenarios for its urbanisation figures.
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will have identical rates of urbanisation by this date, the UN projections suggest an upper
limit of urbanisation towards which these developing countries will continually progress.
Figure 13: Urban population as a percentage of total population in selected developing
countries, 2010-2050
Source: United Nations: World Urbanization Prospects: The 2007 Revision Population Database
Among the developing countries, India and China stand out as a result of their sheer size.
Between 2007 and 2025, the urban areas of China are expected to gain 261 million
inhabitants while the urban areas of India are expected to increase by 197 million,
accounting together for 35% of the global increase in urban population.31 By 2025, China
will be more urbanised than the world average (Figure 14) and by 2050, the urban
population of China is expected to exceed 1 billion (Figure 5, page 19).32
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Figure 14: Projected share of China’s and India’s populations living in urban areas, 20002050
Source: United Nations: World Urbanization Prospects: The 2007 Revision Population Database
3.2.3. KEY DRIVERS
High fertility levels, population growth, and demographic changes
One of the principal drivers behind the rising levels of urbanisation throughout the past
few decades has been population growth in rural and urban areas (see SOER Background
Paper I: Demographics and Migration for further discussion on this subject). A high fertility
rate in cities, primarily among the poorest populations, is the main driving factor for
growing urban populations in most countries worldwide. This trend is particularly reflected
in India where 51% to 65% of urban growth between 1961 and 2001 was a result of this
phenomenon.33
In rural areas of India and China, for example, high fertility levels combined with a limited
amount of land available for farming and the progressive mechanisation of agriculture has
led and will continue to lead to a population surplus in rural areas which will most likely
flow into urban areas, which are often seen by the rural poor as offering better
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employment opportunities. In recent years, however, the fertility rate in China and India
has fallen, as summarised in Table 2.
Table 2: Birth rates in China and India
1990-1995
2005-2010
China
2.0
1.8
India
3.9
2.8
Source: United Nations Development Programme: Human Development Report 2009
In India, this decrease in the birth rate has been a result of increasing income levels and
literacy rates among women.34 China, on the other hand, has enforced a more
interventionist child control policy. The most significant decrease in China’s fertility rate,
however, occurred immediately prior to 1990 when the one-child policy was introduced. At
present, China’s family planning policies are largely based on the use of economic
incentives instead of forced abortion/sterilisation, a model which is expected to continue
to be effective in maintaining the current fertility rate.35 The contribution of population
growth to urbanisation in China is projected to decrease over the next few decades,
especially since the average number of births per woman has now fallen below the
replacement level of about 2.1. children per woman. That said, even at low fertility rates,
the large cohort of the fertile population is reaching its peak around 2010 which will likely
lead to a large number of births in the coming decades before slowing definitively (Figure
15).
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Figure 15: Size of the Chinese population by age group, 1950-2050
Source: Hellig, G.K. 2004 IIASA36
In China, it is expected that rapid urban development coupled with surplus population in
rural areas generated by gradually increasing productivity in the countryside will act
together to boost the mobile population by approximately 240 million additional
inhabitants in the next 20 years.37 In addition, while older persons still live predominantly
in rural areas, it is expected that this situation will be reversed before 2020, further
contributing to a fall in the average household size and fuelling housing development as
the elderly move out of family homesteads into individual urban apartments.38 Ageing in
China is thus an increasingly urban phenomenon as the elderly follow their children to
urban centres, a trend which is representative of developments in other regions of the
world as well.
The tradition that children support their parents in old age survives, but many young
people have left the countryside for the city. A growing number of elderly people are
following them, in search of a way to live. They do not always find it: In China, the city of
Wei Hai is building homes for some 10,000 “abandoned elderly” who have no direct family
support.39 (see SOER Background Paper I: Demographics and Migration for further
discussion of the ageing process)
Other driving forces presented below, such as mechanisation of agriculture, however, will
ensure that rural-urban migration remains a significant driver of urbanisation in China. In
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comparison, urban and rural population growth in India is likely to remain a more
important driver of an increasingly urban population, most probably until they have
stabilised near the replacement level which, in that country, is presently estimated to be
2.34 children per mother as a result of a higher rate of infant and child mortality relative to
European countries.40
Poverty induced rural-urban migration
Poverty induced rural-urban migration has been an important global driver of urbanisation
and is likely to continue in the future, although with varying relevance. With a comparably
high fertility rate and lower level or urbanisation, India, for example, is likely to witness
increased migratory pressures in the years to come which, in combination with the other
drivers, can be expected to lead to a consistently high level of rural-urban migration. One
of the features of Indian urbanisation to date is that it is partly a product of demographic
explosion in urban and rural areas, combined with poverty induced rural-urban migration.
As urbanisation in India largely occurs more as a result of rural push rather than urban pull,
it leads to massive growth of slums which is often followed by misery, poverty,
unemployment, exploitation, inequalities, and degradation in the quality of urban life.41
Socio-economically disadvantaged populations within cities, often consigned to segregated
areas generically called “slums”, are not a uniquely modern phenomenon. The difference
today is one of scale. Slum dwellers of the new millennium are no longer a few thousand in
a few cities of a rapidly industrializing continent. They include one out of every three city
dwellers, a billion people, a sixth of the world’s population.42
Over 90% of slum dwellers today are in the developing world. South Asia has the largest
share, followed by Eastern Asia, sub-Saharan Africa and Latin America. China and India
together have 37% of the world’s slums. In sub-Saharan Africa, urbanization has become
virtually synonymous with slum growth; 72% of the region’s urban population lives under
slum conditions, compared to 56% in South Asia. The slum population of sub-Saharan
Africa almost doubled in 15 years, reaching nearly 200 million in 2005.43
Land-use policy
The competition for land and the disputes about land ownership and user rights is gaining
relevance across the globe. The acquisition of land adjacent to cities and the simultaneous
incorporation of populations living there is an important driver of urbanisation, particularly
in China, yet it is not often fully acknowledged. For example, in China, about 120 million
people have been added to the urban population between 1990 and 2005. This number is
higher than the estimated 103 million people who migrated from rural to urban areas
(accounting for 32% of the population increase). It is estimated to account for close to 40%
of the increase in urban population during that period. Over the past five years, however,
this pattern has been disrupted. As land values increase due to a variety of factorsv, a large
v
Some competing demands for land, all contributing towards the increase in land value, include the raising of
cash crops, growing biofuel feedstock, growing feed for livestock to satisfy increasing demand for meat,
conservation uses such as afforestation and biodiversity protection, and the growth of cities themselves.
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number of cities are running out of land to cheaply expand into and national government
policy has made land acquisitions more difficult.44
Concurrently, the Chinese government has recently expanded land-use rights of farmers,
allowing them to lease their land for the first time.45 While this may allow urban areas to
expand more easily, easing some of the difficulties mentioned in the previous paragraph,
this will also likely increase the wealth of those farmers who lease their land. It is possible
that this could further increase the rate of urbanisation as the former rural inhabitants
seek to spend their newfound wealth in cities on goods and services which are not
available in the countryside.
Economic liberalisation
Processes of economic liberalisation lead to industrial restructuring of the economies
which often decreases the relevance of the agricultural sector. As a consequence
developments of industries and services are fostering urban growth as they are
increasingly concentrated in urban areas. India’s development since 1991 is illustrative.
Some of the elements of this strategy for further integrating the country into the global
economy have accelerated rural to urban migration and boosted urban growth during the
1990s and the following decades. This policy was based on the assumption that there
would be a massive inflow of capital both from within and outside the country resulting in
rapid development of infrastructure and economic growth. This would likely give impetus
to the process of urbanisation in the country since much of the economic growth and
consequent growth in employment would be within or around the existing urban centres.46
Critics of this new development strategy have pointed out that the opening of the
economy might destabilise the agrarian economy, resulting in high unemployment and
massive exodus from rural areas which would lead to even more rapid growth of
population in urban centres.47 This would occur as a result of trade liberalisation measures
which tend to encourage the development of export-oriented cash crop agriculture while
inviting cheap imports of basic food products, thereby depressing prices for domestic
produce. This leads to marginalisation, displacement, loss of land and greater poverty
among small farmers who are thus led to seek wage-paying employment. 48
The role of demand originating in Europe and other developed countries cannot be ignored
in this process. As demand for cheaper manufactured goods in developed countries
increases, manufacturers seek low-cost production facilities in developing countries. The
process of economic liberalisation allows for the relocation of production facilities to
developing countries, which respond to the increased demand by increasing output and
drawing ever more rural inhabitants to these new economic opportunities in the cities.
While China has been the centre of much of this production in recent decades, there is no
reason that this will not shift to other regions — e.g. Latin America and/or Africa — should
the Chinese economy realign towards increased value-added production and services,
thereby increasing the cost of basic manufacturing.
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Changes in agricultural productivity
Agricultural productivity has seen continuous growth throughout the past decades.49 This is
due in part to an increased use in fertilisers and pesticides but also to further
mechanisation of agriculture more generally. These trends will likely result in smaller
workforces needed in the rural areas to achieve increasing levels of agricultural yields.50
While yields still increase in absolute terms, against a backdrop of global population
growth, arable land per person declined globally by roughly 40 %, from 0.43 ha in 1962 to
0.26 ha in 1998.51 Looking ahead, the rate of growth of agricultural production is expected
to fall to 1.5 % per year between now and 2030, compared with 2.3 % per year since
1961.52
For example, certain regions in India and China are expected to witness decreases in
productivity of agricultural land due to soil erosion and other, possible changes in climatic
conditions related to global climate change. While certain regions may see increased
agricultural production, the disruption caused by the changes are likely to further push
parts of the population in India and China living in rural areas into larger cities, thus
contributing to further urbanisation of these countries.
Climate change
Rural inhabitants are particularly vulnerable to the impacts of climate change as they tend
to depend heavily on activities and resources which are especially sensitive to such
changes, e.g. arable farming, animal husbandry and light industry reliant on local
resources.53 As temperatures increase and/or rainfall patterns change, regions which
currently offer favourable conditions for such climate-sensitive activities might see their
productivity decline, at least in specific areas.54 Migration pressure from regions affected
by such changes, leading to rural-urban migration, are likely to increase, possibly further
contributing to the growth of urban areas .
Infrastructure development
The displacement of rural residents by major infrastructure development projects will
continue to be a driver of migration towards cities. A prime example is hydroelectric dam
construction in China. During the period of the 1950s and 1960s more dams were built
than ever before in China’s history and about 7.8 million people were moved to make way
for these water control works.55 More recently, the Three Gorges Dam has been a major
driver for migration towards cities with Chinese officials stating that “at least 4 million
people from the Three Gorges Reservoir area are to be relocated to cities in the next 10 to
15 years”.56
Technological innovation
The growth of cities acts as a driver for innovation and economic growth if it is well
managed, education is promoted, and the economic activity generates revenues which can
be invested into R&D (thereby fuelling further growth) by both private and public entities.
In fact, as cities can more efficiently provide services such as education and health care,57
such positive urbanisation is in turn likely to drive further urbanisation: as cities benefit
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disproportionately from the fruits of innovation it generates, it will drive further rural
residents to search for a better life and higher income in urban areas.
Technological developments in the health sector will shape urbanisation and are projected
to increase life expectancy significantly, particularly in India, as the latest medical
developments become available and spending on health care increases.58 The increase in
the life span is likely to result in more single person households as the number of elderly
people increases, thus resulting in less dense settlements, further driving the expansion of
cities. In addition, as will be illustrated in Section 3.3.3, “Key drivers” of the consumption
trend, this population group is likely to consume differently.
The urbanisation trend is likely to be influenced by technological progress which will lead
to increased use of contraception as women’s access to education and the labour market
increases.59 Increased access to contraception both increases life expectancy of women
and should reduce the number of children per woman. This driver may be self-reinforcing
as living in cities will afford women greater access to these health services. Demographic
trends are subject to considerable uncertainty, however, as will be discussed in Section
3.2.4, “Key uncertainties”.
Changes in the way countries source their energy will impact the rate and scale of
urbanisation. While the ongoing extraction of coal and other fossil fuels has a distinct
impact on the rural environment, further driving urbanisation, the opportunity to leapfrog
polluting, fossil fuel-based electricity production technologies in favour of cleaner, and
often decentralised, renewable energy technologies could slow this trend if the impact on
the rural environment is reduced and if rural quality of life can be increased (e.g. through
the provision of electricity via decentralised renewable energy systems). If and when this
technological transition will take place, however, is dependent on many factors and is
further discussed in section 3.2.4, “Key uncertainties”.
Absence of state pension and health care
The absence of a well-developed state pension and health care systems in many
developing countries will continue to fuel both population increase and urbanisation, in
particular in India. Children will remain oftentimes essential to ensure secure their parents’
income and security in old age.60 In addition, rural families will often be encouraged to
send some of their children to work in urban centres, in the hope that they will be able to
secure higher incomes for the family so as to be able to save sufficient amounts of money
to hedge against unforeseen medical expenses and to secure a decent standard of living in
old age.
Other policies
A whole range of policies have direct and indirect impacts on urbanisation. For example,
protectionist policies, put in place to protect infant industries have been introduced both in
China and India and contributed to the development of certain industries, pulling
workforce out of rural areas and leading to the development of urban centres around
these industrial activities in the 1970s and 1980s. One policy, however, which has led to
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the rapid growth of several coastal cities in China is the exemption of duty in specific
coastal cities to attract foreign direct investment. These cities tend to grow very fast and to
absorb many of the urban poor leaving rural areas to earn their living in activities linked to
the development of industrial activity.
Interlinkages between driving forces
Strong interlinkages exist between many of the previously discussed driving forces which
influence the relative impact of each. These interlinkages are evidence of the complexity of
the causal relationships between the various drivers and contribute to the uncertainty of
future predictions on the rate and absolute size of urbanisation. Of particular note is the
influence of several drivers on increasing rural poverty and the associated rural-urban
migration.
High fertility rates in rural areas with lower income and education levels lead to growing
rural populations which, in turn, increases rural unemployment. This combination of
drivers is likely to result in a further increase of poverty induced rural-urban migration and
therefore further growth of cities in China and India. Rural unemployment has been a
particularly burning problem in India and its severity increased in the period following
economic reforms, which took place in the early 1990s.61
If continuing economic liberalisation contributes to the destabilisation of the rural agrarian
economy, as sometimes assumed62, this could further increase poverty induced rural-urban
migration as rural inhabitants can no longer rely on their traditional profession to ensure
the necessary quality of life. While these migrants may be able to find — and may even be
more likely to find — higher value employment in an urban area, their movement will
entail a disruptive transition at both the personal and societal levels. Indeed, the fact that
China has successfully pulled large portions of its society out of poverty while, at the same
time, sustaining rapid urbanisation, suggests that these trends are not only compatible but
also mutually reinforcing.
In contrast to the effects of persistently high fertility rates, especially in rural areas, it must
be noted that fertility rates tend to decrease with increasing levels of wealth. Population is
not simply controlled by a country’s economic development, however. Often the fertility
rate of a population is also decided by other factors such as tradition, religion, or other
cultural beliefs, and the population of a country greatly affects its economy in turn.63
Increasing incomes combined with changing lifestyles/patterns of consumption can
influence many of the previously discussed drivers. For example, the increased energy use
of urban inhabitants will increase the demand for greater domestic energy production,
which could have environmental, economic and social consequences as a result of the
damming of rivers, the extraction of fossil fuels, and the displacement of food crops by
biofuel feedstocks. As these impacts would essentially be felt in rural areas, further
increasing rural-urban migration, the process of urbanisation itself may lead to ever
greater urbanisation.
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Increased agricultural productivity as a result the increased use of fertilisers, pesticides,
machinery and/or improved techniques in general will demand a reduction of the
agricultural labour force from historic levels. This could contribute to increased rural
unemployment, thereby increasing rural poverty induced migratory pressure towards
urban areas.
3.2.4. KEY UNCERTAINTIES
General uncertainty is increased as a result of the constant possibility of low-probability,
high-impact events — e.g. major wars, natural disasters, and economic upheavals. These
events could influence the relative impact of the various drivers and could potentially alter,
or even reverse, these mega-trends. While the probability and potential impact of such
events is particularly difficult to predict, given that they may fundamentally change the
direction and degree of current mega-trends, they must not be entirely ignored.
High fertility rate and population growth
The development of demographic trends cannot be predicted. The experiences of
countries which have undergone a similar socio-economic transition cannot reliably be
used as an indicator for the transition of other countries as much depends on the specific
economic and political context in which the transition is occurring. Indeed, the experience
of China (which is further along in its demographic and economic transition) will likely not
be useful in predicting similar trends in India as particular Chinese policies (e.g. population
control) which have been fundamentally important in defining that country’s development
will most likely not be reflected in India. Introducing even further uncertainty, the possible
abandonment of China’s “one-child policy” pursued by the government could result in a
temporary surge of natality levels, both in rural and urban areas. As discussed earlier,
however, it appears unlikely that the abandonment of such coercive policies would have a
major impact on Chinese fertility rates as economic incentives seem sufficient to
discourage parents from having more than one to two children, especially in urban areas
(see SOER Background Paper I: Demographics and Migration for further discussion of the
uncertainty of future fertility rates).
The natural increase of urban populations will be influenced by the social development of
the urban poor and, in particular, the availability contraception and family planning
facilities which is, in turn, influenced by the rate of urbanisation, as discussed in the
previous section. These processes will largely be determined by social and political policy
which is dependent on the decisions of policy-makers. Furthermore, decisions on urban
land-use and the density of new cities may limit the space available to families, thereby
putting further downward pressure on urban fertility rates.
Of course, it cannot be forgotten that the sizes of future urban populations will be greatly
influenced by the total global population. This figure, however, is subject to considerable
uncertainty, as shown in Table 2 (page 28). As such, predictions of the size of future urban
populations must be understood to be subject to even greater levels of uncertainty.
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Land-use policy and urban planning
How cities will be governed is going to affect and shape urbanisation. Well-planned
urbanisation, where urban sprawl is avoided and the construction of dense cities and high
quality urban spaces is allowed, can result in important efficiency gains, for example with
regard to efficient waste collection, recycling and transport systems. A certain number of
gains from an environmental perspective could therefore offset a whole range of adverse
environmental impacts resulting from increased urban populations and increased per
capita consumption levels. The extent to which urbanisation will be managed centrally or
in a decentralised way, the inclusion of the larger public in the resolution of environmental
problems, the successful implementation of plans for urban development, and the
integration of urban design with local cultural traditions are aspects which may allow urban
growth to take place in a less environmentally harmful way than is currently projected.
Box 1: Masdar City: Urban planning for zero-impact
Masdar City is a planned, urban development being planned and built 17 km
outside of central Abu Dhabi in the United Arab Emirates. Aiming to become
a centre of “cleantech“ innovation, a primary objective of the development
is to achieve near-zero environmental impact through the use of intelligent
urban planning, bio-climatic architecture, and custom-designed
transportation, energy, water, and waste infrastructure.
Once completed in 2016, the city is expected to use 80% less water than a
convention city, achieve 0% landfill of waste, and zero net greenhouse gas
emissions. This advanced infrastructure comes at a cost, however, with the
current total estimated to be 16.4 billion Euros.
Sources:
Masdar City. “Our Aims“. http://www.masdarcity.ae/en/index.aspx
Deutsche Welle. “Built on sand: Masdar City to become eco-city of the future“. 21
April 2010. http://www.dw-world.de/dw/article/0,,5488979,00.html
Poverty induced rural-urban migration
The degree to which poverty induced rural-urban migration will play out is far from certain.
It depends to a large extent on policy decisions, but also contextual environmental factors
such as soil or water quality. Decreasing environmental quality can foster migration but
also policies to counteract the negative impacts and increase attractiveness of rural
regions.
The capacity of cities to absorb the influx of rural migrants and to allow these individuals to
achieve a better quality of life, which goes hand in hand with a level of consumption that
ensures that basic necessities are covered, will largely depend on the economic activity
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and, therefore, also the extent to which the economy will be integrated in the world
economy and attract foreign direct investment. In addition, redistribution of the wealth
generated through that economic activity and opportunities for education of children will
be important factors which are likely to influence the extent to which cities remain
attractive for rural migrants, thus influencing the rate at which urbanisation progresses in
developing countries.
At present, the incentive to relocate to an urban area is, in many cases, very strong. For
example, in China, cash transfer proportional to current income is given to all individuals
over 55 years old as a form of pension. This transfer currently reaches 90% of urban
inhabitants but only 20-25% of rural inhabitants and migrants.64 Whether these rapidly
cities will be able to sustain this higher level of wealth redistribution remains as a
significant uncertainty.
Climate change
Rural-urban migration flows will also depend on the extent to which urban and rural
regions in developing countries will be affected by climate change impacts, which is still
subject to a high level of uncertainty. For example, in China, the way in which the potential
for reduced agricultural outputs in rural areas will balance against the potential for
increased flooding in coastal cities within individual migrant choices is very difficult to
predict. More generally, the impact of climate change on human populations is difficult to
predict given the complexity of climate science and its relationship to individual migrant
decisions (see SOER Background Paper on Demographics and Migration).65
Economic liberalisation
Ongoing processes of economic liberalisation, whereby government regulations and
restrictions on the economy are systematically reduced or eliminated, may alter the value
of land and labour which could, in turn, change the migratory decisions of certain rural
populations. While, at present, it is often profitable to convert agricultural land into urban
land, an increased demand for cash crops could increase the value of the land and the
labour of the rural inhabitant.66 Furthermore, the loss of agricultural land, either as a result
land-use changes (urbanisation) or environmental degradation, would tend to increase the
value of the remaining land.
Country-specific uncertainties also need to be taken into account. China’s economic
growth over the previous decades, for example, has been largely based on the
development of the manufacturing sector and special economic areas. As such, the trend
in rural-urban migration has been typified by the growth of very large, coastal urban areas.
In contrast, economic growth in India in the coming decades will more likely be based on
the development of the service sector which does not require the concentration of labour
and facilities in a limited number of locations near shipping and transportation hubs, as
does manufacturing. As such, the future urbanisation of India may result in a more multipolar socio-economic landscape where economic and population centres are spread out
within the country, in contrast to the concentration of the Chinese urban population and
economic activity in relatively few major cities mainly in coastal areas. Finally, in Mexico,
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following the implementation of the North American Free Trade Agreement (NAFTA),
manufacturing centres and the corollary urban agglomerations were concentrated along
the border with the United States,67 a distribution similar to that seen in China.
Technological innovation
Technological progress, especially in the health sector, will not generally and automatically
perpetuate the positive trends with regard to falling infant mortality and higher life
expectancy in China and India. In fact, access to health care will be a determining factor as
certain groups will benefit from the technological improvements in the field of health,
while others may not. Whether or not broad access to good quality health care for the
general population will be provided will affect demographic trends in the long run.
Furthermore, the lack of access to quality health care in rural areas may be another driver
for rural-urban migration in the long-term for certain households.
One of the elements which makes basing forecasts even more imperfect is the rate at
which technological leapfrogging will take place, be it as a result of foreign direct
investment (FDI), within the context of a global climate scheme, or as a result of domestic
innovation. Any of these processes would create conditions for cleaner technologies to be
transferred to India and China, for example, allowing them to leapfrog a polluting
development path by making a facilitated transition to alternative sources of power
generation. Domestic innovation in response to global competition, and, to a lesser extent,
international policy instruments such as the Clean Development Mechanism (CDM) and
FDI, have already contributed to greening Indian energy policy by enhancing renewable
energy deployment through domestic development, technology transfer and by instilling a
political re-orientation through norms diffusion.68
Uncertain future energy mix of the countries, and the related technological development,
is a considerable source of uncertainty for urbanisation and is related to several of the
drivers. For example, the increasing mechanisation of agriculture will result in the reduced
use of human and animal labour as a primary source of energy. As a result, human food
and animal fodder will be displaced by liquid fuels for farm implements as the primary fuel
for these activities. The ultimate source of the liquid fuel remains uncertain. The mining of
fossil fuels could have significant environmental impacts in rural areas, further driving
urbanisation. Concurrently, the large-scale of production of biofuel feedstocks would upset
the current balance of agricultural production which could, in turn, alter the value of
agricultural land and labour, influencing the migratory decisions of rural farmers69.
The development of certain energy and transportation and communication technologies
could result in reduced migratory pressure towards urban areas as they could increase the
economic opportunities and standard of living in rural areas. For example, the further
development of decentralized energy production systems, such as the solar home systems
distributed in India by Grameen Shakti, could provide rural inhabitants with basic services
such as lighting and water pumping, as well as increased opportunities for incomegenerating activities, further decreasing migratory pressure towards urban areas. Similarly,
the development of high-speed rail networks in China and India could reduce migratory
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pressure towards urban areas as rural and near-urban residents would gain easier access to
the economic opportunities and activities of the urban centres.
3.3.
MEGA-TREND II: CHANGES IN LIFESTYLE AND CONSUMPTION
PATTERNS
3.3.1. MEGA-TREND SUMMARY
Consumerism is integrated into our economic system, as well as in our cultural and political
systems. The global economic system, and indirectly the political systems and societies
across the globe, are currently reliant on increasing consumption levels to fuel ever-greater
economic growth.
We are observing the rise of a global consumer society, particularly driven by developing
countries heading towards Western standards of energy and resource consumption —
despite remaining poverty in certain parts of the urban and rural populations.70 The most
direct and significant result of economic growth in emerging countries is an important
increase in spending power and a corollary increase in quality of life for an increasingly
larger share of the population.71 The mushrooming of the middle classes in emerging
economies is a critical factor: since 2000, 600 million people have reached middle class
status and an estimated 70 million further people will join their global ranks annually.72 By
2010, the middle class in China and India will outnumber the entire population of the US. 73
Table 3 summarizes the expected growth in the middle class in regions around the world
where the rise of Asia Pacific mirrors the decline in North America and Europe.
Table 3: Middle class growth (in millions and %) in different regions of the world
Source: Kharas, Homi. (2010) The emerging middle class in developing countries. OECD
Development Centre.
The strongest driving forces certainly are economic, with social, environmental, and
political drivers playing critical roles. Western companies have and will continue to
significantly increase their investments and business operations in emerging markets,
thereby increasing both incomes and demand for their products. In fact, as millions of
deprived households will move into the middle class, they will begin to be able to afford
products and services beyond their immediate needs for food and clothing. Shifts in
cultural values with regards to personal finances might underpin this process.74
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In China and India, the sheer size amplifies the impact of even small per capita changes. For
example, in the case of urban populations of these countries, when expressed as a
percentage of the total population (as in Figure 4, page 18), it would appear that China and
India are lagging behind the other countries, but when expressed in absolute terms (as in
Figure 5, page 19), the significance of the countries becomes immediately apparent (see
also Figure 16 for an illustration of these dynamics in the context of energy consumption).
3.3.2. KEY TRENDS
Rising incomes and changing life-styles directly impact the consumption of material and
energy resources. While direct data on total per capita consumption is difficult to obtain,
per capita GDP and per capita energy consumption can serve as rough proxies. Considering
these measures, GDP per capita in Mexico currently stands at $14,000 (current
international dollars), compared to $6,800 in China and $3,000 in India (Figure 1, page 13).
As for per capita energy consumption, the trends are similar. In South Africa, per capita
energy consumption stood at 2,722 kilograms of oil equivalent (kgoe) in 2005 whereas for
India, it was 491 kgoe (Figure 16). The trend in per capita energy consumption has been
increasing slowly in several developing countries since 1980, with China experiencing a
marked increase since 2002 (Figure 17).
Figure 16: Per capita and total energy consumption in selected developing countries
Source: World Resources Institute, EarthTrends, 2007
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Figure 17: Per capita energy consumption in selected developing countries, 1980-2006
Source: United States Energy Information Administration, International Energy Annual 2006
(Updated December 2008)
The terms “consumer class” and “middle class” can be defined in various ways, according
to both social and economic metrics. McKinsey defines the middle class as households with
annual income levels ranging from about US$23,500 to US$117,500 in purchasing power
parity (PPP) for the purposes of their study75; the OECD defines the middle class as
households with daily expenditures between US$10 and US$100 per person in purchasing
power parity terms (respectively, these figures become US$14,600 and US$146,000
annually for a household of four)76. This choice is explained as follows:
The lower bound is chosen with reference to the average poverty line in Portugal and Italy,
the two advanced European countries with the strictest definition of poverty. The poverty
line for a family of four in these countries is USD14 533 (USD9.95 per day per capita in 2005
purchasing power parity terms). The upper bound is chosen as twice the median income of
Luxemburg, the richest advanced country. Defined in this way, the global middle class
excludes those who are considered poor in the poorest advanced countries and those who
are considered rich in the richest advanced country. 77
These levels of income, however, are well beyond the point where households start to see
an uptick in consumption.78 Even at annual per capita income levels as low $2,500 (PPP),
many households have access to basic lighting and a fan. As incomes reach about $5,000
per year PPP, access to television becomes standard and access to hot water heaters
grows. By $8,000 a year PPP, most people have an array of consumer goods, from washing
machines and DVD players to kitchen appliances and computers. As incomes rise further,
air conditioning and air travel become common.79
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While China and India’s current per capita consumption and the accompanying emission
levels are very low relative to Europe (Figure 18) — and must, in many cases, be increased
to allow the populations to meet their basic needs — the rapid economic growth of these
countries and the spread of unsustainable consumption patterns will increasingly represent
a growing pressure on the environment. Indeed, the long-term policy objectives of
emerging countries — and the international community more generally80 — is to ensure
that all individuals are at least in a position to fulfil their basic needs. It can thus be
expected that in the long run, population growth will lead to higher levels of material
consumption and therefore an increase in environmental pressures.
Per capita Carbon Footprints
Figure 18: Per capita carbon footprints in tonnes CO2 equivalent
20
15
10
5
Source: Hubacek, 2010
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l
Ru
ra
Ch
ina
Ur
ba
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ia
Ind
Ch
ina
Br
az
il
Tu
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ey
e
Uk
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in
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(Various sources)
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Box 2: Vehicle ownership patterns in China and India
Vehicle ownership patterns also illustrate the impact of changing
consumption patterns in emerging countries such as China and India. In
India, passenger car ownership nearly tripled from 2.5 per 1000 people in
1987 to 7.2 per 1000 people in 2002. China had some 27.5 million
passenger vehicles and 79 million motorcycles in use by 2004. The growing
trend in vehicle ownership affects urban air quality, which has clear
consequences for human health. This growth, combined with the size of
the populations of the two countries, can lead to shocking statistics. For
example, if Chinese per capita levels of car ownership and fuel
consumption reached those of the United States, the production of 850
million new cars and twice the amount of world oil output would be
required. These newly-added cars would emit as much CO2 as the rest of
the world’s transportation systems combined.
Such estimates must be kept in perspective. While there is expected to be
a dramatic increase in vehicle ownership in developing countries, even
when projected to 2050, per capita rates of ownership in most developing
countries will remain well below present-day rates in developed countries
(Figure 19). Additionally, it is likely that the vehicles purchased in China
would be smaller and more fuel efficient than those in the United States as
fuel efficiency standards are already more strict in China than those in the
United States. Also, it is possible that the average distance travelled by car
in China would be shorter than in the United States as China is currently
expanding its extensive rail network — infrastructure which is largely
absent in the United States.
Sources:
UNSD (2005). UN Statistics Division Transport Statistics Database, UN Statistical
Yearbook. United Nations, New York, NY (in GEO Data Portal)
CSB (1987-2004). China Statistical Yearbook 1987-2004 (in Chinese). China
Statistical Bureau China Statistics Press, Beijing
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Figure 19: Projected growth in personal motorized vehicle growth
Source: World Business Council for Sustainable Development. (2004) Mobility 2030: Meeting the
challenges to sustainability. The Sustainable Mobility Project.
The social and economic diversity of developing countries also means that the effects of
the described economic, social and cultural changes are likely to play out quite differently
among them and that consumption patterns might vary.
China and India, like many developing countries, are on a path similar to Western levels of
energy and resource consumption, however the scale of these two countries put them in a
class of their own.81 For instance, the IEA expects 53% of the increased energy demand by
2030 to come from China and India. Both countries should witness important increases in
oil imports.82 As China’s and India’s economy have grown, there has been a striking
increase in household incomes, particularly in China. It has been estimated that, since
1985, extreme poverty in China has been cut by half. China’s investment- and exportdriven economy has been able to absorb these relatively low-skill migrants, shifting them
from the agricultural into the manufacturing economy, where both their wages and skill
levels have risen.
It is important to note, however, that trends showing income growth based on aggregate
data often mask deep inequalities in the distribution of wealth among the population. This
inequality is far from an exclusively rural problem, even in urban areas there is growing
evidence that large segments of the population are missing out on the economic advances
being made. Furthermore, the concentration of populations and the proximity of people
from very different income groups can make the inequality more palpable, promoting
inter-class tension and negatively impacting the well-being of the lower classes.83
The rapid growth will also have a major social impact, as traditional family and social
structures centred on a rural agrarian economy break down with the increased
urbanisation and population shifts to cities and towns. The economic growth and the
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spread of unsustainable consumption patterns in developing countries will increasingly
represent a growing pressure on the environment and the social fabric of these countries.
The diversity of these countries also means that the effects of the described economic,
social, and cultural changes are likely to play out quite differently among these countries
and that consumption patterns might vary.
A prime example of a significant change in consumption patterns can be seen in per capita
meat consumption (Figure 20). In China, in 25 years (between 1980 and 2005), meat
consumption has increased by 334%, approaching the absolute level seen in developed
countries. Over the same period, however, Indians have, on average, increased their meat
consumption by only 38%, a disparity which is certainly influenced by the significant
differences in socio-religious attitudes towards meat consumption. It must be noted,
however, that given the very low absolute level of meat consumption in India and the
country’s large population, there is a significant risk of a major increase in total meat
consumption if there is even a minor change in the availability of supporting infrastructure
(e.g. refrigeration) or socio-religious customs.
Figure 20: Meat consumption per capita in India and China, 1980-2005
Source: FAO, State of Food and Agriculture, 2009
Future Developments/Outlook
Large emerging economies have shown a steady growth in both population and economic
activity, resulting in changing consumption patterns. Among these countries, China
demands special attention: it is expected to become the world’s largest economy between
2025 and 2035.84 Its rapid economic development is influencing global patterns of resource
production and consumption, with both environmental and geopolitical consequences.85
In China, the near-term consumption growth will be driven by a combination of rising percapita incomes and population growth. Total urban consumption in China will increase
annually at a rate of 8.6% during the period from 2005 to 2025.86 Companies have shifted
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from seeing emerging markets as a cheap source of labour and production to a major
source of new consumers. By 2025, China will have overtaken the US to become the
world’s biggest consumer market.87 If India’s overall economic growth remains on a longterm path of 7 to 8%, as most economists expect, real consumption will grow fourfold
between 2007 and 2025. It is therefore currently attracting worldwide interest among
marketers. The attractiveness of India is based on its infrastructure, its well-developed
legal system, and its large number of well-educated doctors, engineers, and other skilled
professionals needed for growth of a thriving middle class. While in 2007, its consumer
market ranked 12th globally, by 2015 it will rank eighth and be almost as large as Italy’s
with an aggregate value of nearly $750 billion. By 2025, India’s market will be the fifth
largest in the world, surpassing Germany.88
In turn, local innovation in developing countries, partly driven by urbanisation, might lead
to the development of products which are more in line with the local consumer’s needs
and expectations, therefore leading to increase in consumption, in particular by the poor
who are less prone to spend their income on expensive imported goods.89
Changing lifestylesvi and consumption patterns have been a common feature of most
emerging economies. As incomes increase, the populations of emerging countries have
improved their standard of leaving, moving from poverty to the ability to meet their basic
needs. Today, many parts of these populations are approaching “well to do lifestyles” and
disposable income is spent, as in Western societies, on high nutrient food, comfortable
livings, health care and other quality services.90 Additionally, globalisation and economic
integration are giving more consumers access to more products and services. Ultimately, a
multitude of factors, ranging from international policy frameworks to local infrastructure,
will influence consumption choices which will, in turn, largely determine what impact
economic growth will have on the environment.91
Significant economic and lifestyle changes that have taken place in China have led the
Chinese to require more but also different types of energy. People directly consume energy
for lighting, cooking and other daily uses. But they also aspire to a “higher-quality life” by
purchasing fashionable goods and services, such as houses with air conditioning and other
modern electrical household appliances.92 All these products and services consume energy
during their production processes and use. China’s cities were estimated to represent 75%
of the country’s total primary energy demand in 2006. Given that Chinese cities are more
energy intensive per capita than rural areas, urban population growth in China will have
significant implications for the national energy system and global energy markets.
vi
Introducing the lifestyle concept into the debate allows one to (a) contextualise consumption processes in
socio-economic and cultural regards, and (b) to differentiate in modern consumption societies between
different social groups that allows (c) for differentiated accounting of the environmental impacts. This is much
in line with some sociological approaches to consumption and has been suggested by economists that try to
better understand modern consumption processes (Reussig et al.).
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Box 3: Changing households in China: Housing and appliances
Many rural households have rebuilt and extended their bungalows by using
building materials such as concrete, bricks, and tiles in place of marl and
wood. At the same time, average per capita living space expanded from 8.1
m2 to 24.2 m2. Before 1978, per capita net living space for urban residents
was only 3.6 m2 in urban China, mainly because of restriction on private
house ownership. A new Housing Reform Policy introduced in the early
1980s encouraged commercialisation of the housing sector and private
ownership allowing people to buy their own apartments. Meanwhile, the
government, state owned enterprises, domestic private companies, and
overseas developers invested significant funds into the urban housing
development. As a result, city dwellers started to move from previously
tiny bungalows or apartments to new multi-storey apartment blocks; thus
effectively increasing per capita net living space.
The more spacious living places allow and encourage consumers to buy and
store more household appliances and other durable goods. For example,
since the 1980s, urban residents spent increasing amounts on large durable
furniture (e.g. wardrobes, beds and sofas). Also, in the late 1980s and
1990s, the connection of a larger number of households to the electrical
grid helped increase the sales for household electrical appliances (e.g.
refrigerators and colour TVs). Another example is the penetration rate of
air conditioners, previously a sign of affluence, which increased
significantly to about 30 sets per 100 households. The popularisation of
household electronics enormously boosted the production of household
appliances.
Source: Hubacek K., D. Guan, J. Barrett and T. Wiedmann (2009) Environmental
implications of urbanisation and lifestyle change in China: Ecological and Water
Footprints Journal of Cleaner Production 17(14) 1241-1248
While cities are centres of consumption, marketers are already working on ways of
reaching rural consumers in developing countries.93 Furthermore, urban lifestyles tend to
spread to rural areas: in the West, most rural areas are already “urbanised” in terms of
lifestyle–though the rural inhabitants most often commute further in order to maintain this
lifestyle, leading to higher overall consumption.
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3.3.3. KEY DRIVERS
Population growth
One of the primary drivers for increases in aggregate consumption levels worldwide will be
the expected increase in the global population, largely as a result of the expected
population growth in developing countries. As the populations of these countries, and of
China and India in particular (Figure 21), continue to increase through at least 2030, the
greater number of people will consume greater quantities of goods and services. That said,
the relationship between increased population and increased consumption is not
necessarily linear and is dependent on the level of income and consumption of the
individual. This important interaction is further discussed in the section “Interlinkages of
driving forces”.
Figure 21: Projected total population, 2000-2050
Source: United Nations: World Urbanization Prospects: The 2007 Revision Population Database
Increasing incomes
Increasing incomes lift people out of poverty and enable them to spend on non-essential
items. This development should increase as employment rates and income potential
continues to increase in developing countries worldwide. Given their current absolute sizes
of their populations, combined with their expected growth in the coming decades, India
and China merit special mention. Indeed, by 2050, the middle classes of these two
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countries together are expected to account for approximately 50% of global middle class
consumption, up from approximately 5% today (Figure 22).
Figure 22: Shares of global middle class consumption, 2000-2050
Source: Kharas, Homi. (2010) The emerging middle class in developing countries. OECD
Development Centre.
Increasing incomes should continue to affect consumption in China as overall growth and
the restructuring of the Chinese economy is expected to lead to continued rapid income
growth and the rise of a large middle class as millions of people move from the country to
the city and begin earning middle-class wages.94
Following a series of reforms beginning in the early 1990s, India has enjoyed over a decade
of strong and accelerating growth (Figure 23). As India’s economy has grown, so too has
the spending power of its citizens. Real average household income has roughly doubled
over the past two decades. As individuals have elected to translate their rising wealth into
increased incomes rather than greater leisure time, greater consumption and the
emergence of India’s middle class have followed.95 Increasing incomes — and to a lesser
degree, greater choice available to consumers in urban markets — have impacted the
composition of nutritional intake in India and China as demand for non-grain food products
and animal products (such as dairy and poultry) are increasing their share in the daily
consumption. This has important future implications for land use and land value, as well as
the demand for food and water (see Section 4.1.1.4).96
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Figure 23: Trend in per capita GDP growth, 1980-2013, in current international dollars,
PPP (logarithmic scale)
Source: International Monetary Fund: World Economic Outlook Database: April 2009 Edition
How the increasing incomes of the citizens of developing countries worldwide will be
translated into changes in consumption can be inferred, to a certain degree, by observing
this evolution which has already taken place in other countries. The historical pattern in
India shows that, as income rise, consumers tend to spend proportionally less on basic
necessities and more on discretionary items. As millions of deprived households will move
into the middle class, they will begin to be able to afford products and services beyond
their immediate needs for food and clothing. For families already in the middle class and
further consolidating their status, aspirations might include a cell phone, a television or
private schooling for children. Discretionary spending has increased from 25% of total
spending in 1985 to 52% in 2005 and is expected to reach 70% by 2025.97 In absolute
terms, aggregated consumption is expected to quadruple over this time frame (Figure
24).98
In India, it is estimated that income growth will be the most significant driver of increasing
consumption, far outweighing population growth or any change in savings behaviour. 80%
of consumption growth is expected to come from rising income, while 16% of the increase
will be due to growth in the number of households. Only 4% will come from changes in the
savings rates of Indians. As incomes grow, the class structure of consumption will change
significantly as well. Consumption today is still dominated by the poor, which control about
75% of spending. By 2025, however, the rich and the middle class will come to dominate,
controlling 59% of India’s consumption power. As a result, Indian spending patterns are
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forecasted to evolve, with basic necessities such as food and apparel declining in relative
importance, and categories such as communications and health care growing rapidly.99
Figure 24: Evolution of Household Expenditure in India 1985-2025 (Trillion Indian rupees)
Source: McKinsey Global Institute
Rebalancing of cultural values
The move from rural areas to urban areas tends to speed up the process of lifestyle
changes of the newly urban population as the migration presents individuals to a greater
economic choice, especially when the migrants dispose of higher incomes. The integrated
cultural, economic and political system of consumerism encourages individuals to establish
their place in society through the purchase of material possessions and the lifestyle choice
they make. This consumerism can be inconspicuous or conspicuous. In the case of the
former, the goal of consumption is to satisfy one’s internal needs and desires. In contrast,
the objective of conspicuous consumption is to cultivate an identity, an image and prestige
vis-à-vis other individuals and groups. As social, cultural, and familial norms and values
have a significant impact on consumer choices and the level of sustainability of the
consumption, making a sustainable lifestyle prestigious and the object of conspicuous
consumption will allow followers to be solicited into it more easily.100
Conflicting motivations and desires exist within the attitudes of citizens of developing
countries towards consumption and savings, as in many cultures. Taking the example of
China, it is recognised as a nation of savers with recent savings rates in large cities often as
high as 50%. Historically low and variable incomes, combined with the absence of
government-supported health and retirement insurance, have resulted in most household
funds being devoted to basic necessities and savings. In contrast, mianzi, or “face”, is a
concept of central importance in China. Mianzi is a sort of prestige and reputation which is
developed over the course of a lifetime. As mianzi is influenced by the individual’s level of
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wealth, position and power, conspicuous consumption holds a key place in traditional
Chinese culture as a means to develop mianzi. In fact, this conspicuous consumption is not
limited to the leisure class but can be found in all groups, throughout the Chinese socioeconomic spectrum.101
The future balance of these competing cultural values for frugality and conspicuous
consumption will certainly be influenced by the ongoing trends of urbanisation and
globalisation. The combination of expanding populations and a fixed land resources mean
that the young person’s traditional opportunities for social advancement — inheriting the
family plot or apprenticing in a father’s trade — can no longer be taken for granted. As
such, in the search for self-fulfilment and identity development, preference may be given
to conspicuous consumption over frugality.102 Furthermore, domestic and international
media play a driving role in stimulating consumerism. As Western social values reach
Eastern populations and urban social values reach rural populations, further emphasis is
likely to be given to conspicuous consumption over frugality. 103
China has already experienced major changes in its cultural and social value systems. While
the country is still primarily regarded as a collectivist society, in which people maintain
strong ties to their family, group, or country, and stress harmonious and cohesive
relationships,104 recent research has revealed that young generations living in coastal areas
are pursuing individualistic values of ambition, success, pleasure, and wealth as well as
traditional collectivistic values of humility, harmony, and tradition.105
Today, it appears that no significant cultural barrier to the uptake of the western consumer
culture should be expected in China. China’s emerging middle class will aspire to driving a
car, consuming branded goods, and enjoying the other privileges of higher income. The
transformation of urban China from necessary to discretionary consumption is already
happening at a much faster pace than it did in other countries as South Korea. For several
years, urban Chinese consumers have spent less of their total income on basics necessities
than did South Koreans at similar point in their country’s economic development. One
explanation for the accelerated pace of change in China is that the country experienced
decades of being a planned economy with limited choice, and this has left Chinese
consumers eager to consume in a manner that had been restricted in the past.106
Changing preferences
Significant shifts in consumer spending will be seen in many consumption categories as the
values and preferences of consumers change. For example, in India, food, beverages and
tobacco will witness the most significant drop in its relative share of household spending.
The average Indian household currently spends 42% of its consumption budget on this
category, but this is set to decline to 25% by 2025. This decline will be largely driven by a
dramatic growth in overall consumption rather than a slowdown in food demand (in fact,
consumption of food per capita is expected to grow almost three times as fast as it has in
the past). High priorities are the “economically enabling” categories that either boost
current productivity or facilitate future participation in economic activity — namely health,
education, transportation, and communication.107 While the share of household spending
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on housing and household products will remain low relative to countries such as Germany
and Brazil at about 3% of annual spending (due to the availability of low-cost labour and
repairs), the absolute amount of this spending is expected to grow, though at a lower rate
than aggregate consumption growth across the country. This is due to the lack of the
infrastructure in India (e.g., water, electricity) required by the various appliances and
products. 108
Demographic changes
Many developing countries have experienced large shifts in demographic composition over
the past century and are expected to continue changing in the future. In general,
households are likely to become older and smaller as populations age and preferences shift
away from living with the extended family. In China, accompanying the demographic shifts
that have resulted from the one-child policy will be a further fall in urban household sizes
from 2.96 people today to 2.35 by 2025. This will be driven by various factors. First, as
incomes rise, it makes it possible for children to move away from their families, which they
might not have been able to afford in the past. Second, the skewed male-female
distribution in China’s demographics (China has 114 males to 100 females) will mean more
households of single men over time.109 As the buying habits of single-person households
tend to differ from those of families, this will likely be a cause for further changes in
consumption patterns.
Life expectancy at birth is likely to further increase in developing countries as a result of
the spread of better technologies and medicine as better health care progressively
becomes affordable to a growing middle class. This increasing life expectancy will result in
a larger overall population in both countries, and as a more generous pension system
progressively develops, in a non-negligible increase in the demand for goods and services
targeted at the elderly. It is forecasted that the share of household spending on health care
in India will nearly double from 7% in 2005 to 13% in 2025.110 China is expected to exhibit a
similar trend with household spending on health care growing from 7.4% in 2004 to 14% in
2025. For reference, the 2005 figures for Germany, South Korea, and the United States are
4%, 9% and 19%, respectively. 111
The phenomenon of youth bulges (see SOER Background Paper I: Demographics and
Migration for further discussion on this subject), i.e. a disproportionate concentration of
people in the 15-to-29 year-old age group, suggests that the consumption patterns of
these younger groups may become the dominant patterns of consumption in developing
countries in the coming decades as this cohort ages and becomes the main consumers in
each country. As the consumption of this age group tends to be very different from that of
other age groups, it is likely that this phenomenon will lead to significant changes in overall
consumption patterns.
Marketing and advertising
Marketing and advertising help create demand and are a necessary part of the growth
paradigm; they are meant to ensure that individuals remain “dissatisfied consumers”, and
thus continue to add to their material consumption. As such, marketing will clearly be an
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important business tool to drive consumption. Global advertising expenditures reached
$643 billion in 2008, and in developing countries they are growing at 10% or more per
year.112
Multinational companies have identified the 4 billion people earning less than US$1,500
(purchasing power parity) annually as the “bottom of the pyramid”; a vast source of
untapped potential for profits. Strategies have been developed to best encourage
consumption within this demographic, focusing on low-margin, high-volume products. In
certain cases, the products developed for these populations may be compatible with
sustainable development goals. For example, to limit the total cost of ice cream, a
multinational corporation in India developed a technology to safely transport ice cream in
unrefrigerated trucks, reducing the overall energy footprint of the final product.113 This,
however, is simply evidence of a momentary alignment between the distinct goals of profit
maximisation and sustainable development and does not represent a shift in the primary
goals of the corporations.
International economic policy
Developing countries worldwide have generally been undergoing a process of economic
liberalisation since the 1980s, with an intensification of the process occurring in the 1990s.
The nature of this process of liberalisation is typified by what has come to be known as the
“Washington Consensus” which included an emphasis on universal and uniform trade
liberalisation. In this context, “universal” implies that all developing countries are to follow
the same trade policy regime irrespective of their levels of development and trade
capacities. “Uniform” implies that all sectors and industries are to be subject to the same
tariff rates-preferably zero rate, or low rate.114 These changes in the economic orientation
of developing countries towards the global marketplace have had direct and indirect
impacts on the socio-economic landscapes of the countries.
In developing countries, lifestyle changes have been driven by the liberalisation of
economies which are progressively opening up to the world and are being increasingly
seen by companies as potentially lucrative markets. Companies from both developed and
developing countries are planning to significantly increase their business operations in
emerging markets in the next few years. Asia is said to be an important emerging market
for European producers to continue on a growth path: businesses are promoting increased
material consumption in the new markets and companies are actively developing
consumer markets in developing countries as Western markets are becoming saturated.
In addition, foreign direct investment can be seen as an indirect source for the spread of
both Western values and the Western lifestyle and consumption patterns, not the least
because the goods which are produced in the factories in these areas, although mostly
destined at markets in the developed world, will often find their way into local markets.
National economic policy
The economic policy that developing countries choose to promote within their borders can
have a significant impact on consumption patterns as well. China, like a number of other
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Asian economies, has aggressively pursued a policy of investment-led growth. It has
mobilised the savings of its population to build its industrial base, particularly in the export
sector, and develop its infrastructure. This investment led approach, however, has created
imbalances in both the Chinese and the world economy, ranging from the current low
levels of per capita consumption, to a heavy reliance on exports for growth, to an
diminution of the foreign direct investment available for other countries. Since December
2004, China’s top political leadership has made it an express policy to encourage increased
levels of per capita consumption over time. The government has taken action, such as
raising the minimum wage, de-regulating the retail market, and creating the “Golden
Week” holidays, to encourage consumption growth. This can be expected to result in a
faster increase of aggregate consumption with in the upcoming decades. In addition, this
consumption is likely to be more evenly spread as a larger share of the population will have
discretionary income at its disposal as over the next 20 years. By 2025, China’s urban
households will be spread widely across the income spectrum, with greatly reduced
number of poor households.
The development of financing options and increased access to credit such as instalment
payments might also drive consumption.115 This could also apply to a limited extent to
microcredit, although in this context loans are meant to be used for investment rather than
for consumption.
 Interlinkages between driving forces
The multiple driving forces are in many cases deeply integrated and mutually reinforcing,
often leading to positive feedback cycles which lead to ever greater changes in lifestyles
and consumption patterns.
Of central importance is the interplay between growing populations and rising average
incomes. While a growing population could simply consume more of the same products
and services as it had previously, a population wherein the average per capita income rises
will not only increase its overall consumption but will change the types of products and
services as well. Furthermore, given the sizes of the populations of India and China, even
small increases in per capita income and consumption levels can have significant impact on
the total level of consumption. Thus, while the current per capita levels of income and
consumption in India and China remain small relative to Europe and the United States
(Figure 23, page 50), the growth of the Chinese and Indian middle classes could have
considerable impact on the global environment (see Section 4.1.2.).
The recent increases in per capita income in India and China are linked to the economic
liberalisation policies of the respective governments. As the Chinese government has
pursued an open-door policy of trade development, it has witnessed the rapid
development of its manufacturing sector. This increased economic activity has been the
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primary driver of the increase in per capita GDP from $252vii in 1980, to an estimated
$9,710 by 2013.116
Policies encouraging economic liberalisation have opened the Chinese and Indian markets
to the influences of global brands and advertising. These newly available products and
services help fuel the changing preferences of the Chinese and Indian consumers and may
accelerate an ongoing rebalancing of traditional values. While the competing values of
frugality and mianzi-driven conspicuous consumption have traditionally co-existed within
Chinese culture, the appearance of global luxury brands and the related marketing will
continue to drive a transition towards increased consumption. Social values are thus linked
to and influenced by the economic policy decisions of the central government.
While the government may not always intend to change social values through its policy
decisions, in some cases this goal is explicit. The expressed objective of China’s current
political leadership to encourage increased levels of per capita consumption,
demonstrating that domestic economic policy can be used as a tool to drive changes in
social values.
While the exact nature of the interlinkages between increasing incomes, urbanisation, and
changing consumption patterns remain unclear (see Section 3.3.4 for discussion of this
uncertainty), these processes are typically observed to occur concurrently and there is
evidence that they are deeply inter-related. More data is required, however, to more
completely understand the influences at work.
3.3.4. KEY UNCERTAINTIES
Population growth and demographic changes
The continued population growth in developing countries has a major impact on aggregate
consumption levels. As mentioned before, in relation with urbanisation, though they may
remain quite steady, demographic trends cannot be predicted, especially since the
specificities of certain policies — for example, Chinese population control policy — do not
for easy comparison between countries. Introducing even further uncertainty in the case of
China, the possible abandonment of China’s “one-child policy” pursued by the government
could result in a temporary surge of natality levels, both in rural and urban areas.
What the environmental impacts of a growing consumer class will be will largely depend on
the size of the consumer class and its consumption patterns. The larger the consumer class
and the more this consumption will rest on a material base, the higher adverse
environmental impacts are expected to be. Given the primacy of population size in
determining the absolute level of consumption, even small changes in what is otherwise a
rather steady trend can have major impacts on absolute consumption levels.
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Technological progress, especially in the health sector, will not automatically perpetuate
the positive trends with regard to falling infant mortality and higher life expectancy in
developing countries. In fact, access to health care will be a determining factor as certain
groups will benefit from the technological improvements in the field of health, while others
may not. Whether or not broad access to good quality health care for the larger masses
will increasingly be provided in developing countries will affect demographic trends in the
long run.
Urbanisation
The degree to which urbanisation influences changes in consumption patterns remains the
subject of debate among scholars. When attempting to understand the drivers of
consumption change, the key challenge is separating the effect of increasing incomes —
which is a significant driver for both urbanisation and changing consumption patterns —
from the process of urbanisation itself. Furthermore, in certain cases, urbanisation may
lead to a reduction in consumption of certain resources as well-planned cities can provide
services more efficiently than rural settlements.117
The influence of these factors on increasing per capita meat consumption illustrates the
disagreement. The UN’s Food and Agriculture Organization argues that, in addition to
independent of increasing incomes, urbanisation is an important factor in changing
consumption habits, as urban inhabitants typically consume more food outside the home
and larger amounts of pre-cooked, fast and convenience foods than do people in rural
areas. The overall effect is an increase in meat consumption, independent of the effect of
increasing incomes.118 This change in consumption could also result from and/or be
reinforced by easier access to supermarkets and other convenient shopping options in
urban areas. In contrast, the complexity and contingency of the interrelations between
income growth, urbanisation and changing consumption cannot be ignored. For example,
studies have concluded that household expenditure on meat depends more on income
than it does on whether the household lives in a city or not.119
Rebalancing of cultural values
Although Western lifestyle patterns have so far proved to be very attractive to the
emerging middle classes in developing countries simply assuming that the spread of
Western lifestyle patterns will continue to spread in a linear way, not encountering cultural
obstacles or institutional barriers would overly simplify the picture. The strength of the
Western lifestyle as a model primarily lied in its claim for uncontested supremacy and
absence of moral connotations. Increasingly, the consensus around the Western lifestyle
and consumption patterns has eroded and these are contested both in Western countries
themselves and increasingly in developing countries which are affected by the
environmental consequences of past and present unsustainable consumption patterns of
the industrialised world. The economic system which is constructed around this lifestyle is
also increasingly contested and has proved very vulnerable in the global economic and
financial crises which hit the world in 2008/2009. An economic paradigm shift organising
the most important world economies around stability and sustainability rather than profit
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maximisation and consumption could, through changes of fundamental parameters, have
important implications on the kind of goods produced and the way in which they are
produced.
Economic policy
The extent to which the consumer class will grow will depend both on the evolution of the
global economy and in particular the progress of the trade liberalisation agenda and the
economic and political choices that governments in developing countries will make,
especially with regard to redistribution of wealth and investment in education for the
larger masses.
Environmental degradation and environmental policy
The extent to which environmental and natural resource constraints limit might be a factor
in potentially impacting the growth of the global consumer class and slow urbanisation
should not be underestimated. Rising prices for certain commodities as certain resources
become increasingly scarce may actually offset gains made through economies of scale and
result in a more limited rise in purchasing power of consumers in developing countries.
In addition, as adverse environmental impacts become monetised and the use of market
based instruments raises the price of the products with the most harmful environmental
impacts, affordable substitutes, generating less adverse environmental impacts over their
life-cycle, might emerge on the market. As these substitutes are not available yet it is
difficult to factor these into an equation to predict how future consumption patterns in
China and India will play out in the decades to come.
An internationally binding agreement on GHG emissions and allowing for technology
transfers might also have important implications for the way developing countries will
develop but when and if such an agreement will enter into force and what the terms will
be is an aspect which can only be predicted to a limited extent. Even once such an
agreement is in place issues such as commitment to achieving targets and monitoring
would further maintain an important level of uncertainty.
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4. IMPACTS
As demonstrated in the previous section, the inter-related processes of globalisation, rising
incomes and urbanisation, together with a range of other drivers, will have a significant
impact in terms of lifestyle changes and consumption patterns in emerging countries. In
addition, the process of urbanisation itself will have a direct impact on the production and
consumption of commodities destined for this newly built environment (e.g. concrete and
steel). Hand in hand with expanding cities and rising incomes, demand for energy, services,
goods and the associated production of waste and pollution are projected to grow rapidly.
These trends are projected to have important environmental implications both locally and
globally. Moderate UN scenarios suggest that if current population and consumption
trends continue, by the middle of the next decade we will need the equivalent of two
Earths to support mankind.120 It is important to note, however, that consumption patterns
in industrialised countries would however be largely responsible for this as average per
capita consumption levels are currently much higher in industrialised countries than in
emerging countries such as India or China.121
4.1.
POTENTIAL ENVIRONMENTAL IMPACTS ON EUROPE
In this section, the potential direct and indirect impacts on Europe resulting from the two
interrelated trends of urbanisation and changing consumption patterns in developing
countries are explored.
4.1.1. INDIRECT IMPACTS ON EUROPE
While increased consumption is certainly a cause for local environmental impact, these
impacts are not necessarily a result of urbanisation per se, but rather a result of increasing
economic activity (which is concentrated in cities) and high levels of poverty (which persist
in cities, despite higher aggregate wealth). Indeed, urbanisation can lead to reduced
environmental impacts as certain services (e.g. energy, water and transportation) can be
provided more efficiently in well-planned cities.122 While these impacts may be felt most
acutely in the developing countries where the transitions in urbanisation and changing
consumption patterns are underway, as a result of the interconnectedness of ecosystems,
economies, and political systems, they will also likely have indirect impacts on Europe as
well.
A particular challenge for urban planners in developing countries is the fact that multiple
environmental issues tend to arrive earlier in the development process (i.e., at lower
income levels) and more simultaneously relative to the processes observed during the
development of European and North American countries. This phenomenon, referred to as
“time-space telescoping” has the effect of forcing policy-makers in developing countries to
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face more issues at the same time with fewer resources than did their American and
European counterparts at the equivalent point in their development.123
4.1.1.1
Waste generation
In many developing countries, sewage systems are far better at meeting the needs of
upper- and middle-class neighbourhoods than they are of servicing poorer
neighbourhoods, particularly unregulated neighbourhoods on the urban periphery. These
are, however, the neighbourhoods which grow most rapidly, especially in India, where
rural urban migration of poor rural dwellers is still a stronger driver of urbanisation than in
China, for example. In India, per capita waste generation increases by 1.3% per year
directly as a result of increasing consumption. With an urban population increasing
between 3 to 3.5% per year, waste generation is expected to increase by approximately 5%
annually.124
Hence, improving public sanitation is a major urban environmental challenge that needs to
be addressed in many large and middle-sized cities in developing countries. Currently, all
too often, failure to collect garbage as well as inadequate waste management and
recycling policies and practices results in many cities being inundated in their own waste.125
Major cities in India such as New Delhi have been reported to run out of landfill sites to
dump the city’s garbage.126
While the consequences of ill-managed waste generation and treatment are felt most
severely in the developing countries themselves, there is a risk to the European
environment in that the increase in the quantity of landfilled waste in developing countries
must be seen as being a additional source contributing to greenhouse gas emissions, thus
offsetting efforts to reduce the generation of such gases to mitigate global warming.
4.1.1.2
Water pollution and coastal degradation
Demographic processes such as population growth, age distribution, urbanisation and
migration create some of the greatest pressures on water resources quantity and quality.
These demographic processes directly affect water availability and quality through
increased water demands and consumption and through pollution resulting from water
use.127 The water quality both in rivers and coastal areas is likely to fall steadily as the fast
growing cities in India and China discharge ever increasing amounts of untreated water and
waste into water bodies, threatening water quality and aquatic ecosystems. 128 A direct,
local environmental impact of coastal urban areas and increased aquaculture is offshore
water pollution. In these areas, large-scale development results in excessive nutrient inputs
from municipal and industrial waste. Eutrophication contributes to the creation of dead
zones, areas of water with low or no dissolved oxygen. Fish cannot survive, and aquatic
ecosystems are destroyed.129 At the same time, in other areas, intensive aquaculture to
meet both the local demand in seafood of the growing urban population and supply the
global markets is degrading coastal regions and harming fragile mangrove ecosystems. This
increased pressure on the fisheries of developed countries may result in additional
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pressure on already-stressed European fisheries as global demand for seafood continues to
increase.
Water pollution and use is likely to become a severe challenge, in particular in proximity of
megacities. In the North of China, large urban areas will need national water-transfer
projects to meet their increasing needs and will increasingly be competing with the rising
water consumption in agriculture. Local governments already relentlessly search for new
water sources and massively build up infrastructure to deliver them, particularly in
midsized cities.130 In the northern part of China, where there is a huge demand for water
for agriculture and industry, the once-mighty Yellow River has, in the past, ceased to flow.
To address this problem, many northern cities have started to charge substantial prices for
water and for releasing polluted wastewater into the environment.131 Nevertheless,
pollution currently remains severe. Today, 59% of China’s river water is already below
international portable standards, and if the amount of wastewater generated relative to
GDP stays at today’s level in midsized and smaller cities, urban water pollution could
increase by a factor of almost five.132 The deterioration of the quality of inland waters
contributes to a further deterioration of the water quality in coastal areas, with the
consequences on the global environment highlighted in above.
4.1.1.3
Air pollution
A growing trend in vehicle ownership combined with severe congestion in many large cities
in China and India will also continue to adversely affect urban air quality, which has clear
consequences for human health. China, for instance, which has witnessed a 15% annual
increase in the number of cars in several cities, has reported 3 million deaths from urban
air pollution over two years.133
Concentrations of carbon monoxide, lead, and suspended particulate matter in many large
cities in India and China greatly exceed World Health Organization guidelines. Air pollution,
in particular NOX, could reach critical levels in larger cities. Among the greatest
environmental health concerns are exposure to fine particulate matter and to lead which
contributes to learning disability in young children.134
Beyond these severe local impacts, evidence is beginning to be collected that shows that
non-GHG air pollution which originates in Asia can have an impact on the global
atmosphere, potentially affecting both climate and agriculture in Europe and worldwide.135
4.1.1.4
Rising demand for land / land-use changes
Land-use changes in China and India will often be an indirect impact of the urbanisation
and changing consumption mega-trends. The increasing car ownership will not only result
in an increase in GHG emissions and deterioration of air quality in large urban centres, it
will also increase the demand for associated infrastructure such as roads, parking lots and
motorways; it has been estimated that, in some Chinese regions, more than 10% of the
surface could be built over by housing and infrastructure by 2025.136 In China and India,
private ownership of cars has not only become more affordable, town planning and
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infrastructure development has, in some cases, changed to incorporate expectations of
individual car ownership. The development of associated infrastructure is likely to have
important environmental impacts with regard to habitats and ecosystems in particular
through the fragmentation of ecosystems. In addition, urban sprawl increases the pressure
on the habitats and ecosystems in the periphery of the cities. The pressures of rapid
urbanisation in China will intensify and the estimated addition of more than 350 million
urban residents over the next 20 years will require unprecedented construction. This will
result in extensive urban sprawl, further intensive land development, and extreme
congestion. Pressure will continue to bear down on the availability of arable land, which
could decline by as much as 20% in the worst-case scenario. At the same time larger cities
will face crippling congestion pressures (Shanghai’s traffic could outstrip its projected road
capacity threefold by 2025). There will be intense tension between the loss of arable land
on one hand and cities’ dependency on land sales for revenues to finance urban
development on the other hand.137
In addition, changing diets increase the demand for crops and meat,138 thus leading to an
increased pressure to convert forests into agricultural land.139 This could affect the
provision of the diversity of services which such natural and semi-natural ecosystems
presently provide to rural inhabitants, thus covering a number of their subsistence needs.
As livestock is already the world’s greatest user of land resources, further demand for meat
and other animal products will have a major impact on land use in China and India. Indeed,
much of the land required for animal production is not directly used for the animals
themselves, but for growing the crops to feed the animals. At present, most of the world’s
feed-crop production occurs in OECD countries, but some developing countries are rapidly
expanding their production of feed crops, some of which is exported to the OECD countries
to serve as animal feed. Intensive feed-crop production can lead to severe land
degradation, water pollution and biodiversity losses, while expanding arable land into
natural ecosystems often has serious ecological consequences, including the loss of
biodiversity and of ecosystem services such as water regulation and erosion control. While
increases in grain production have been mostly achieved through intensification on existing
areas, much of the rapid increase in soybean production has been achieved through
expansion of cropping into natural habitats. Meeting future demand for livestock products
will, however, require further improvements in livestock and land productivity as well as
expanding feed production area, at the expense of pastureland and natural habitats.140
This increased competition for land and agricultural resources in developing countries risks
impacts in Europe and around the world. The stability of global production systems may be
threatened, potentially increasing demand in European agricultural resources, thus making
a decrease in the intensity of European agriculture difficult.
4.1.1.5
Reduced environmental impact in developed countries
The increasing environmental impacts felt locally in developing countries discussed above
are largely mirrored by reduced environmental impact in developed countries which have
seen much of their manufacturing and other heavily polluting industries relocated to
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developing countries.141 While this will have a positive impact on the environment in
developed countries, the effects of the concentration of highly polluting industries in
developing countries can have devastating consequences for the local environment and
human health. Furthermore, the net environmental effect at the global level may be quite
negative as relatively efficient production technologies used in developed countries are
supplanted by less efficient and more polluting technologies in developing countries.
4.1.2. DIRECT IMPACTS ON EUROPE
4.1.2.1
Rising greenhouse gas emissions
Urban centres in developing countries, where often the middle- and upper-income groups
are concentrated, are inevitably also the sites for the generation of a high proportion of
greenhouse gases. In addition, many of the greenhouse gases generated outside urban
centres are linked to urban-based demands — such as the greenhouse gases generated by
fossil-fuel power stations, oil wells, and farms that are outside urban boundaries but where
the electricity, oil, and farm products are destined for urban producers or consumers. The
cases of India and China are illustrative in this regard. Results show that urbanisation leads
to a substantial increase in projected emissions, while ageing leads to a decrease. The net
effect of demographic change is nevertheless to increase projected emissions from China
by 45% by the end of the century, and from India, by 25-55%.142 One major factor also
contributing to this is a trend towards greater mobility e.g. increasing levels of flying,
driving and train travel among a growing part of the population. The richest 1% of Indians
(10 million people), who earn more than US$24,500 (purchasing power parity) per year,
are now each responsible for more than 5 tonnes of CO2 emissions annually — still just a
fifth of American per capita emissions (Figure 18, page 42) but twice the average level of
2.5 tons per person needed to keep temperatures under 2° Celsius. Even the 151 million
Indians earning more than $6,500 per person PPP are living above the threshold of 2.5
tonnes per person, while the 156 million Indians earning $5,000 are nearing it, producing
2.2 tonnes per person.143 In addition, continuing trends towards increased meat
consumption will further increase the emission of greenhouse gases, in particular through
the methane emissions of cattle and the deforestation cattle rearing might require.
4.1.2.2
Rising demand for biofuels and pressure on forest and water resources
Comment: Cross check environmental & economic mega-trends assessment
The emerging biofuels market in globally and, in particular, India and China, is a new and
significant source of demand for some agricultural commodities such as sugar, maize,
cassava, oilseeds and palm oil. These commodities, which have predominantly been used
as food, are now being grown as feedstock for producing biofuels. Significant increases in
the price of crude oil allow them to become viable substitutes in certain important
countries that have the capacity to use them. This possibility is increasingly leading to the
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implementation of public policies to support the biofuels sector, which further encourages
the demand for such feedstock.144
This rise in demand for biofuels is also likely to lead to more pressure on forested areas in
Europe and throughout the world, which could face the threat to be replaced by
agricultural land to grow biofuels. In addition, the cultivation of biofuels in China and India
could trigger water crises in both countries.145
4.1.2.3
Rising demand for energy: coal extraction and nuclear power plants
Comment: Cross check environmental & economic mega-trends assessment
Developing countries, like developed countries, will witness a steady increase in fossil fuel
consumption and in China, coal extraction is projected to remain important to cover
energy needs.146 World carbon dioxide emissions are projected to rise from 29.0 billion
metric tons in 2006 to 33.1 billion metric tonnes in 2015 and 40.4 billion metric tonnes in
2030 — an increase of 39% over the projection period. With strong economic growth and
continued heavy reliance on fossil fuels expected for most of the non-OECD economies,
much of the increase in carbon dioxide emissions is projected to occur among the
developing, non-OECD nations. 147
Nuclear generation is projected to increase by 8.9% per year in China and by 9.9% per year
in India from 2006 to 2030.148 This will raise the problem of secure storage of nuclear
waste.
4.1.2.4
Increasing pressure on renewable resources
Comment: Cross check environmental & economic mega-trends assessment
India and China are partly responsible for increasing demands on the forests, fisheries and
farmland of many developing countries as an indirect result of India and China’s changing
consumption patterns and increasing populations.149 To take one example, Chinese rubber
imports shot up to consume 23% of world supply in 2003, overtaking the US as the biggest
consumer of natural rubber in the world. This has resulted in acquisition of land for rubber
production in countries neighbouring China, for example Laos and Myanmar.150 Since 2004
in Ethiopia, Ghana, Madagascar, Mali and Sudan, 2.5 million hectares of land have been
acquired by foreign governments and corporations for the purpose of agricultural
exploitation. China and India have been major players in this process and the FAO argues
that population growth, increasing urbanisation rates (which expand the share of the
world’s population that depends on food purchases) and changing diets (particularly
growth in meat consumption by middle classes in large industrialising countries) appear
among the factors pushing up global demand for food and resources, driving these
countries to seek available resources elsewhere.151 These trends together will increase
pressure on renewable resources in Europe, risking further environmental degradation.
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4.1.2.5
Rising demand for mineral resources
Comment: Cross check environmental & economic mega-trends assessment
Adverse environmental impacts of mineral resource extraction are likely to increase across
the globe. As a number of these resources, in particular rare metals, become more scarce,
more irreversible changes to the earth’s surface and its landscape can be expected as
increasing amounts of land need to be displaced to retrieve metals and minerals from the
ground. Beyond the increased profitability of the exploitation of lower-grade ores resulting
from the declining availability of certain raw materials, technological progress will facilitate
access and exploitation of lower-grade ores. This will imply that larger areas will have to be
cleared of natural vegetation and higher amounts of mining waste will be generated in the
course of progressing mineral resource use, thus increasing the risk of interference with
natural systems.152
This increasing demand for mineral resources will likely have similar effects on the
European environment as increasing competition for land and renewable resources. That is
to say, as demand for these resources increases, pressure on these resources in Europe will
increase as well.
4.2.
POTENTIAL ECONOMIC AND SOCIAL IMPACTS
4.2.1. GLOBAL RESOURCE SUPPLY AND PRICES
(this needs to be cross/checked with the economics and environmental mega-trend
assessments)
As demand for resources increases in China and India, it is likely that prices for various
commodities will generally increase as a direct result. Indeed, rising incomes in India and
China and the resulting increase in demand for meat (see Section 3.2.2.1) was one of the
causes of the price spike for foodstuffs in 2007-2008.153
As a result of increased demand for various resources such as biofuels, grains, and animal
products, competition for various potential land uses is increasing in China and India. As
developed countries begin to import more of these basic resources from China and India,
their vulnerability to price variation in the Chinese, Indian and global markets will increase.
Agricultural commodity prices rose sharply in 2006 and continued to rise even more
sharply in 2007. According to the FAO, one of the main reasons is the economic
development and income growth in important emerging countries which has been
gradually changing the structure of demand for food commodities (especially in China and
India). Diversifying diets are moving away from starchy foods towards more meat and dairy
products, which is intensifying demand for feed grains and strengthening the linkages
between different food commodities.154
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4.2.2. DEMAND FOR FOSSIL FUELS
Increased demand for fossil fuels might result in rising prices for fossil fuels and the
exploitation of oil fields whose exploitation was previously unprofitable. India’s oil
requirement has doubled since 1992. China, which was oil-sufficient in the mid-1990s, was
the second largest oil importer in 2004. Meanwhile, India and China have purchased large
quantities of shares in oil companies around the world.155
4.2.3. INCREASED AND MORE VISIBLE INEQUALITY
As cities are drivers for economic activity, they provide fertile ground for wealth creation.
As certain segments of the society succeed in generating wealth, other groups do not,
setting the stage for significant economic inequality. The proximity between social classes
in cities aggravates this process as the inequality becomes more visible, especially to those
lacking the luxuries that their neighbours enjoy. The daily living conditions of the urban
poor have been strongly correlated with social exclusion and inequality. This inequality can
heighten the potential for the emergence of conflict, crime or violence.156
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5. POLICY IMPLICATIONS
The trends, drivers and impacts discussed above raise some key questions about the
appropriate European policy response. This section will present some of those key
questions and will reflect on the most likely responses to them.
5.1.
POSSIBLE IMPLICATIONS FOR EUROPEAN ENVIRONMENTAL
POLICY
5.1.1. COMPENSATING FOR POLICIES ELSEWHERE
Given the current positions of the Chinese and Indian government towards global policy
frameworks to mitigate greenhouse gas emissions, Europe may choose to enact policies to
compensate for other countries’ lack of action on climate change and other issues. This
raises several significant questions:
 Should European environmental policy that targets the protection of the global
commons be stricter to compensate for more lax policies in China, India, and
elsewhere in the developing world?
 Would the real impact of such policies be sufficient to offset the emissions from
China, India and other developing countries?
 Should such policies be enacted, what would the costs to Europe be?
Should European policy-makers choose this path, then community strategies aiming to
reduce the emissions of greenhouse gases and other pollutants would need to be made
significantly stricter and be accompanied by the necessary monitoring and verification
mechanisms.
5.1.2. EUROPE AS AN ENVIRONMENTAL TRENDSETTER
Rather than attempting to compensate for the lax environmental policies found elsewhere,
European policy-makers could attempt to influence policy-making in China, India, and
other developing countries by demonstrating that the sustainable and profitable use of
natural resources is possible. Key questions regarding this approach include:
 Would the European experience with such policies be sufficiently successful to
incite policy-makers in China, India, and other developing countries to follow suit
and enact similar policies?
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 Could the European policies be convincingly and effectively translated into similar
policies in China, India, and other developing countries?
To successfully realise this approach, European policy-makers would need to adapt existing
and/or enact new policies promoting sustainable resource use and ensuring that sufficient
data is collected to be able to later demonstrate that such policies are compatible with
economic growth.
5.1.3. INFLUENCING
DEMAND TO PROMOTE SUSTAINABLE CONSUMPTION AND
PRODUCTION
While Europe cannot directly regulate production practices in China, India, and other
developing countries, as one of the main demand centres for goods produced in these
countries, Europe can potentially influence the types of products and production processes
demanded by European consumers. Key questions regarding this approach include:
 Can European policy instruments be used to influence consumer demand at levels
sufficient to influence production practices in China, India and elsewhere?
 Which policy instruments would be most effective in influencing consumer choice?
 Would certain policy instruments, such as labels concerning a product’s process
and production methods, be permitted under current WTO regulations?viii
The appropriate policy instrument(s) for such an approach would necessarily require
evaluation to ensure their efficacy and legality, in line with the questions outlined above.
5.2.
POSSIBLE IMPLICATIONS FOR OTHER EUROPEAN POLICY
AREAS
5.2.1. ECONOMIC POLICY TO INFLUENCE PRODUCTION METHODS
Rather than attempting to influence production methods in China, India, and other
developing countries by modifying consumer demand as discussed in Section 5.1.3,
European policy-makers could attempt to influence such production methods through
economic policies such as import duties levied on products originating from polluting
processes and production methods. Many of the same questions raised in Section 5.1.3 are
relevant to this approach as well, namely:
 Could such policies be effective at influencing production methods?
viii
For more discussion on this topic, see Vranes, Erich, Climate Labelling and the WTO: The 2010 EU
Ecolabelling Programme as a Test Case Under WTO Law (March 9, 2010). Available at SSRN:
http://ssrn.com/abstract=1567432
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 Would such policies adversely affect the strategic relationship with the concerned
countries?
 Would such policies conform to WTO regulations?
 Would introducing a carbon tax at the EU border, beyond protecting European
industries from lower production costs in countries with lower environmental
standards, provide an incentive to emerging countries to upscale their efforts to
reduce their greenhouse gas emissions?
While the policy instruments for such an approach (tariffs, taxes, and duties) are well
known, they would likely need to be carefully adapted to ensure that they are both
effective and acceptable to both intergovernmental organisations as well as developing
and developed trade partners.
5.2.2. ENSURING EUROPEAN COMPETITIVENESS
China and India are building new infrastructure based on advanced, efficient technologies
which may put Europe and its dated infrastructure at a competitive disadvantage (Box 4)
While the usefulness of competitiveness as a concept in a non-zero sum international
environment has been questioned,157 European policy-makers would be mistaken not to
question the state of their economic and social infrastructure relative to what is emerging
in Asia. Key questions in this regard include:
 Is “competitiveness” the correct concept to use in this analysis?
 Does the infrastructure being built in China and India pose a threat to the
competitiveness of European economies?
 Would upgrading European infrastructure bring sufficient benefits to justify the
cost?
 Does advanced and efficient infrastructure in China and India bring any benefits to
Europe, for example, in terms of lower-cost goods and services and/or more
efficient and less environmentally harmful means of production? If so, should the
development of advanced infrastructure be pursued jointly?
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Box 4: Advanced infrastructure and competitiveness
The development of cities in China and India is taking place within the context
of advanced technologies in various fields which were not available at the
time when European and North American countries were undergoing their
development processes. As such, China and India are in the process of
constructing much of their infrastructure on more efficient technologies,
particularly in the areas of transportation and communications. This may give
these countries a comparative advantage in the coming years as they reap the
benefits of this advanced infrastructure while developed countries will be
forced to cope with outdated and expensive-to-change technologies.
Source: Friedman, Thomas. 2006. The World is Flat: Expanded and Updated Edition.
Farrar, Straus and Giroux; New York.
Should policy-makers decide that the disparity between the infrastructure of China and
India and that of Europe constitute a real threat to Europe’s economy, then investment in
and upgrading Europe’s key economic infrastructure would likely be the most appropriate
solution. Where to target the investment, how to raise the funds, and which technologies
to use would remain as key considerations.
5.2.3. TRENDSETTING IN URBAN PLANNING
The Johannesburg Plan of Implementation of Agenda 21 clearly defines the role of
developed countries as trend-setters, urging them to take the lead in accelerating the shift
towards sustainable systems of production and consumption.158 Though it has not yet been
a perfect model of sustainable urban development, Europe could lead by example in urban
planning and land management as well. Questions regarding this response include:
 Could — and should — successful European urban planning and land-use policies
be reproduced in China and India given the different socio-economic contexts?
 How would effective policies be highlighted and communicated to Chinese and
Indian policy-makers?
 Would it be beneficial to include Chinese and Indian urban planners and policymakers in the policy development process to facilitate the building of their
capacities?
 At what level of policy would this sort of trendsetting be most effective; regional,
national, local? Could “town-twinning” be a useful approach?
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The success of this approach would require successful European policies which could be
reproduced in China and India; clear communication between European, Chinese and
Indian policy makers to ensure that the goals and methods of the approach are met; and
capacity building where necessary to ensure that Chinese and Indian policy-makers are
able to successfully implement the model policies.
5.2.4. TECHNOLOGICAL LEAPFROGGING
It is of common interest to see that China and India avoid the “dirty” development process
which presently developed countries underwent in the 19th and 20th centuries. A global
governance framework accompanying leapfrogging of emerging countries in key sectors
could contribute to the slowdown of the trends of adverse impacts on the environment of
the increased affluence in emerging economies. This would require broad international
support which Europe could help to establish. Some key questions regarding this approach
include:
 What would the structure of such a framework be? Would it be organised under
the auspices of an existing organisation or elsewhere?
 How would such a framework be integrated into existing efforts to promote clean
development, such as the CDM?
 How would concerns over intellectual property rights be addressed to encourage
the cooperation of technology developers?
Determining the appropriate policy instrument to accomplish such technological
leapfrogging would require careful evaluation of the existing structures and international
agreements to identify the most effective approach. Given Europe’s advanced R&D
capacities, it could take a leading role in such a framework
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