A stack of recycled paper ready to be bound into books at a workshop in Kolkata, India. Photo: Felix Preston.
Baseball and Linguistic Uncertainty
In my youth I played an inordinate amount of baseball, collected baseball cards, and idolized baseball players. I've outgrown all that but when I'm in the States during baseball season I do enjoy watching a few innings on the TV.
So I was watching a baseball game recently and the commentator was talking about the art of pitching. Throwing a baseball, he said, is like shooting a shotgun. You get a spray. As a pitcher, you have to know your spray. You learn to control it, but you know that it is there. The ball won't always go where you want it. And furthermore, where you want the ball depends on the batter's style and strategy, which vary from pitch to pitch for every batter.
That's baseball talk, but it stuck in my mind. Baseball pitchers must manage uncertainty! And it is not enough to reduce it and hope for the best. Suppose you want to throw a strike. It's not a good strategy to aim directly at, say, the lower outside corner of the strike zone, because of the spray of the ball's path and because the batter's stance can shift. Especially if the spray is skewed down and out, you'll want to move up and in a bit.
This is all very similar to the ambiguity of human speech when we pitch words at each other. Words don't have precise meanings; meanings spread out like the pitcher's spray. If we want to communicate precisely we need to be aware of this uncertainty, and manage it, taking account of the listener's propensities.
Take the word "liberal" as it is used in political discussion.
For many decades, "liberals" have tended to support high taxes to provide generous welfare, public medical insurance, and low-cost housing. They advocate liberal (meaning magnanimous or abundant) government involvement for the citizens' benefit.
A "liberal" might also be someone who is open-minded and tolerant, who is not strict in applying rules to other people, or even to him or herself. Such a person might be called "liberal" (meaning advocating individual rights) for opposing extensive government involvement in private decisions. For instance, liberals (in this second sense) might oppose high taxes since they reduce individuals' ability to make independent choices. As another example, John Stuart Mill opposed laws which restricted the rights of women to work (at night, for instance), even though these laws were intended to promote the welfare of women. Women, insisted Mill, are intelligent adults and can judge for themselves what is good for them.
Returning to the first meaning of "liberal" mentioned above, people of that strain may support restrictions of trade to countries which ignore the health and safety of workers. The other type of "liberal" might tend to support unrestricted trade.
Sending out words and pitching baseballs are both like shooting a shotgun: meanings (and baseballs) spray out. You must know what meaning you wish to convey, and what other meanings the word can have. The choice of the word, and the crafting of its context, must manage the uncertainty of where the word will land in the listener's mind.
Let's go back to baseball again.
If there were no uncertainty in the pitcher's pitch and the batter's swing, then baseball would be a dreadfully boring game. If the batter knows exactly where and when the ball will arrive, and can completely control the bat, then every swing will be a homer. Or conversely, if the pitcher always knows exactly how the batter will swing, and if each throw is perfectly controlled, then every batter will strike out. But which is it? Whose certainty dominates? The batter's or the pitcher's? It can't be both. There is some deep philosophical problem here. Clearly there cannot be complete certainty in a world which has some element of free will, or surprise, or discovery. This is not just a tautology, a necessary result of what we mean by "uncertainty" and "surprise". It is an implication of limited human knowledge. Uncertainty - which makes baseball and life interesting - is inevitable in the human world.
How does this carry over to human speech?
It is said of the Wright brothers that they thought so synergistically that one brother could finish an idea or sentence begun by the other. If there is no uncertainty in what I am going to say, then you will be bored with my conversation, or at least, you won't learn anything from me. It is because you don't know what I mean by, for instance, "robustness", that my speech on this topic is enlightening (and maybe interesting). And it is because you disagree with me about what robustness means (and you tell me so), that I can perhaps extend my own understanding.
So, uncertainty is inevitable in a world that is rich enough to have surprise or free will. Furthermore, this uncertainty leads to a process - through speech - of discovery and new understanding. Uncertainty, and the use of language, leads to discovery.
Isn't baseball an interesting game?
(Even) God is a Satisficer
To 'satisfice' means "To decide on and pursue a course of action that will satisfy the minimum requirements necessary to achieve a particular goal." (Oxford English Dictionary). Herbert Simon (1978 Nobel Prize in Economics) was the first to use the term in this technical sense, which is an old alteration of the ordinary English word "satisfy". Simon wrote (Psychological Review, 63(2), 129-138 (1956)) "Evidently, organisms adapt well enough to 'satisfice'; they do not, in general, 'optimize'." Agents satisfice, according to Simon, due to limitation of their information, understanding, and cognitive or computational ability. These limitations, which Simon called "bounded rationality", force agents to look for solutions which are good enough, though not necessarily optimal. The optimum may exist but it cannot be known by the resource- and information-limited agent.
There is a deep psychological motivation for satisficing, as Barry Schwartz discusses in Paradox of Choice: Why More Is Less. "When people have no choice, life is almost unbearable." But as the number and variety of choices grows, the challenge of deciding "no longer liberates, but debilitates. It might even be said to tyrannize." (p.2) "It is maximizers who suffer most in a culture that provides too many choices" (p.225) because their expectations cannot be met, they regret missed opportunities, worry about social comparison, and so on. Maximizers may acquire or achieve more than satisficers, but satisficers will tend to be happier.
Psychology is not the only realm in which satisficing finds its roots. Satisficing - as a decision strategy - has systemic or structural advantages that suggest its prevalence even in situations where the complexity of the human psyche is irrelevant. We will discuss an example from the behavior of animals.
Several years ago an ecological colleague of mine at the Technion, Prof. Yohay Carmel, posed the following question: Why do foraging animals move from one feeding site to another later than would seem to be suggested by strategies aimed at maximizing caloric intake? Of course, animals have many goals in addition to foraging. They must keep warm (or cool), evade predators, rest, reproduce, and so on. Many mathematical models of foraging by animals attempt to predict "patch residence times" (PRTs): how long the animal stays at one feeding patch before moving to the next one. A common conclusion is that patch residence times are under-predicted when the model assumes that the animal tries to maximize caloric intake. Models do exist which "patch up" the PRT paradox, but the quandary still exists.
Yohay and I wrote a paper in which we explored a satisficing - rather than maximizing - model for patch residence time. Here's the idea. The animal needs a critical amount of energy to survive until the next foraging session. More food might be nice, but it's not necessary for survival. The animal's foraging strategy must maximize the confidence in achieving the critical caloric intake. So maximization is taking place, but not maximization of the substantive "good" (calories) but rather maximization of the confidence (or reliability, or likelihood, but these are more technical terms) of meeting the survival requirement. We developed a very simple foraging model based on info-gap theory. The model predicts that PRTs for a large number of species - including invertebrates, birds and mammals - tended to be longer (and thus more realistic) than predicted by energy-maximizing models.
This conclusion - that satisficing predicts observed foraging times better than maximizing - is tentative and preliminary (like most scientific conclusions). Nonetheless, it seems to hold a grain of truth, and it suggests an interesting idea. Consider the following syllogism.
1. Evolution selects those traits that enhance the chance of survival.
2. Animals seem to have evolved strategies for foraging which satisfice (rather than maximize) the energy intake.
3. Hence satisficing seems to be competitively advantageous. Satisficing seems to be a better bet than maximizing.
Unlike my psychologist colleague Barry Schwartz, we are not talking about happiness or emotional satisfaction. We're talking about survival of dung flies or blue jays. It seems that aiming to do good enough, but not necessarily the best possible, is the way the world is made.
And this brings me to the suggestion that (even) God is a satisficer. The word "good" appears quite early in the Bible: in the 4th verse of the 1st chapter of Genesis, the very first book: "And God saw the light [that had just been created] that it was good...". At this point, when the world is just emerging out of tohu v'vohu (chaos), we should probably understand the word "good" as a binary category, as distinct from "bad" or "chaos". The meaning of "good" is subsequently refined through examples in the coming verses. God creates dry land and oceans and sees that it is good (1:10). Grass and fruit trees are seen to be good (1:12). The sun and moon are good (1:16-18). Swarming sea creatures, birds, and beasts are good (1:20-21, 25).
And now comes a real innovation. God reviews the entire creation and sees that it is very good (1:31). It turns out that goodness comes in degrees; it's not simply binary: good or bad. "Good" requires judgment; ethics is born. But what particularly interests me here is that God's handiwork isn't excellent. Shouldn't we expect the very best? I'll leave this question to the theologians, but it seems to me that God is a satisficer.
No-Failure Design and Disaster Recovery: Lessons from Fukushima
One of the striking aspects of the early stages of the nuclear accident at Fukushima-Daiichi last March was the nearly total absence of disaster recovery capability. For instance, while Japan is a super-power of robotic technology, the nuclear authorities had to import robots from France for probing the damaged nuclear plants. Fukushima can teach us an important lesson about technology.
The failure of critical technologies can be disastrous. The crash of a civilian airliner can cause hundreds of deaths. The meltdown of a nuclear reactor can release highly toxic isotopes. Failure of flood protection systems can result in vast death and damage. Society therefore insists that critical technologies be designed, operated and maintained to extremely high levels of reliability. We benefit from technology, but we also insist that the designers and operators "do their best" to protect us from their dangers.
Industries and government agencies who provide critical technologies almost invariably act in good faith for a range of reasons. Morality dictates responsible behavior, liability legislation establishes sanctions for irresponsible behavior, and economic or political self-interest makes continuous safe operation desirable.
The language of performance-optimization − not only doing our best, but also achieving the best − may tend to undermine the successful management of technological danger. A probability of severe failure of one in a million per device per year is exceedingly − and very reassuringly − small. When we honestly believe that we have designed and implemented a technology to have vanishingly small probability of catastrophe, we can honestly ignore the need for disaster recovery.
Or can we?
Let's contrast this with an ethos that is consistent with a thorough awareness of the potential for adverse surprise. We now acknowledge that our predictions are uncertain, perhaps highly uncertain on some specific points. We attempt to achieve very demanding outcomes − for instance vanishingly small probabilities of catastrophe − but we recognize that our ability to reliably calculate such small probabilities is compromised by the deficiency of our knowledge and understanding. We robustify ourselves against those deficiencies by choosing a design which would be acceptable over a wide range of deviations from our current best understanding. (This is called "robust-satisficing".) Not only does "vanishingly small probability of failure" still entail the possibility of failure, but our predictions of that probability may err.
Acknowledging the need for disaster recovery capability (DRC) is awkward and uncomfortable for designers and advocates of a technology. We would much rather believe that DRC is not needed, that we have in fact made catastrophe negligible. But let's not conflate good-faith attempts to deal with complex uncertainties, with guaranteed outcomes based on full knowledge. Our best models are in part wrong, so we robustify against the designer's bounded rationality. But robustness cannot guarantee success. The design and implementation of DRC is a necessary part of the design of any critical technology, and is consistent with the strategy of robust satisficing.
One final point: moral hazard and its dilemma. The design of any critical technology entails two distinct and essential elements: failure prevention and disaster recovery. What economists call a `moral hazard' exists since the failure prevention team might rely on the disaster-recovery team, and vice versa. Each team might, at least implicitly, depend on the capabilities of the other team, and thereby relinquish some of its own responsibility. Institutional provisions are needed to manage this conflict.
The alleviation of this moral hazard entails a dilemma. Considerations of failure prevention and disaster recovery must be combined in the design process. The design teams must be aware of each other, and even collaborate, because a single coherent system must emerge. But we don't want either team to relinquish any responsibility. On the one hand we want the failure prevention team to work as though there is no disaster recovery, and the disaster recovery team should presume that failures will occur. On the other hand, we want these teams to collaborate on the design.
This moral hazard and its dilemma do not obviate the need for both elements of the design. Fukushima has taught us an important lesson by highlighting the special challenge of high-risk critical technologies: design so failure cannot occur, and prepare to respond to the unanticipated.
The Innovation Dilemma
"If it ain't broken, don't fix it."Sound advice, but limited to situations where "fixing it" only entails restoring past performance. In contrast, innovations entail substantive improvements over the past. Innovations are not just corrections of past mistakes, but progress towards a better future.
However, innovations often present a challenging dilemma to decision makers. Many decisions require choosing between options, one of which is both potentially better in the outcome but markedly more uncertain. In these situations the decision maker faces an "innovation dilemma."
The innovation dilemma arises in many contexts. Here are a few examples.
Technology. New and innovative technologies are often advocated because of their purported improvements on existing products or methods. However, what is new is usually less well-known and less widely tested than what is old. The range of possible adverse (or favorable) surprises of an innovative technology may exceed the range of surprise for a tried-and-true technology. The analyst who must choose between innovation and convention faces an innovation dilemma.
Investment. The economic investor faces an innovation dilemma when choosing between investing in a promising but unknown new start-up and investing in a well-known existing firm.
Auction. "Nothing ventured, nothing gained" is the motto of the risk-taker, while the risk-avoider responds: "Nothing ventured, nothing lost". The innovation dilemma is embedded in the choice between these two strategies. Consider for example the "winner's curse" in auction theory. You can make a financial bid for a valuable piece of property, which will be sold to the highest bidder. You have limited information about the other bidders and about the true value of the property. If you bid high you might win the auction but you might also pay more than the property is worth. Not bidding is risk-free because it avoids the purchase. The choice between a high bid and no bid is an innovation dilemma.
Employer decision. An employer must decide whether or not to replace a current satisfactory employee with a new candidate whose score on a standardized test was high. A high score reflects great ability. However, the score also contains a random element, so a high score may result from chance, and not reflect true ability. The innovation dilemma is embedded in the employer's choice between the current adequate employee and a high-scoring new candidate.
Natural resource exploitation. Permitting the extraction of offshore petroleum resources may be productive in terms of petroleum yield but may also present officials with significant uncertainty about environmental consequences.
Public health. Implementation of a large-scale immunization program may present policy officials with worries about uncertain side effects.
Agricultural policy. New technologies promise improved production efficiency or new consumer choices, but with uncertain benefits and costs and potential unanticipated adverse effects resulting from use of manufactured inputs such as fertilizers, pesticides, and machinery, and, more recently, genetically engineered seed varieties and information technology. (I am indebted to L. Joe Moffitt and Craig Osteen for these examples in natural resources, public health and agriculture.)
An essay like this one should - according to custom - end with a practical prescription: What to do about the innovation dilemma? You need to make a decision - a choice between options - and you face an innovation dilemma. How to choose? All I'll say is that the first step is to identify what you need to achieve from this decision. Recognizing the vast uncertainties which accompany the decision, choose the option which achieves the required outcome over the largest range of uncertain contingencies.
If you want more of an answer than that, consult your favorite decision theory (like info-gap theory, for instance).
I will conclude by drawing a parallel between the innovation dilemma and one of the oldest quandaries in political philosophy. In The Evolution of Political Thought C. Northcote Parkinson explains the historically recurring tension between freedom and equality.
Freedom. People have widely varying interests and aptitudes. Hence a society that offers broad freedom for individuals to exploit their abilities, will also develop a wide spread of wealth, accomplishment, and status. Freedom enables individuals to explore, invent, discover, and create. Freedom is the recipe for innovation. Freedom induces both uncertainty and inequality.
Equality. People have widely varying interests and aptitudes. Hence a society that strives for equality among its members can achieve this by enforcing conformity and by transferring wealth from rich to poor. The promise of a measure of equality is a guarantee of a measure of security, a personal and social safety net. Equality reduces both uncertainty and freedom.
The dilemma is that a life without freedom is hardly human, but freedom without security is the jungle. And life in the jungle, as Hobbs explained, in "solitary, poor, nasty, brutish and short".
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A Wider Circle? The Circular Economy in Developing Countries
5 December 2017
Lower-income countries are in many ways more ‘circular’ than their developed-economy counterparts – the question is how to turn this into a development opportunity.
Summary
- There is growing optimism about the potential of the ‘circular economy’ (CE) as a new model for sustainable growth in developing countries. A CE is one in which products are recycled, repaired or reused rather than thrown away, and in which waste from one process becomes an input into other processes. In recent months there has been CE-related activity in countries as diverse as Laos, Rwanda and Colombia.
- A CE strategy could help lower-income countries ‘leapfrog’ to a more sustainable development pathway that avoids locking in resource-intensive practices and infrastructure. But a stronger evidence base is needed to show how the agenda can deliver opportunities for industrialization, as well as addressing environmental insecurity.
- Lower-income countries are in many ways more ‘circular’ than their developed-economy counterparts – the question is how to turn this into a development opportunity. Much economic activity in lower-income countries revolves around sorting and reusing waste. However, higher-value, employment-generating opportunities for reuse and remanufacturing are yet to be captured.
- The existence of circular activities in developing countries provides excellent political ‘entry points’, which could enable governments, the private sector, civil society and other actors to promote innovative economic models. The CE could provide a powerful narrative, helping to build momentum around a set of ideas that can be applied in and tailored to multiple sectors or cities.
- There is a window of opportunity in which to align the efforts of development organizations and partner countries. Donors are exploring how the agenda should be aligned with the Sustainable Development Goals (SDGs) and the Paris Climate Agreement. Wider international cooperation on the CE could involve trade partnerships, regional hubs or pilot zones.
Department/project
Chokepoints and Vulnerabilities in Global Food Trade
27 June 2017
Policymakers must take action immediately to mitigate the risk of severe disruption at certain ports, maritime straits, and inland transport routes, which could have devastating knock-on effects for global food security.
2017-06-27-chokepoints.jpg
Pedro Miguel locks, Panama Canal. Photo: Gonzalo Azumendi/Getty Images.
- Trade chokepoints – maritime, coastal and inland – pose an underexplored and growing risk to global food security.
- Maritime chokepoints will become increasingly integral to meeting global food supply as population growth, shifting dietary preferences, bioenergy expansion and slowing improvements in crop yields drive up demand for imported grain.
- Rising trade volumes, increasing dependence on imports among food-deficit countries, underinvestment, weak governance, climate change and emerging disruptive hazards together make chokepoint disruptions – both small-scale and large-scale – increasingly likely.
- Climate change will have a compounding effect on chokepoint risk, increasing the probability of both isolated and multiple concurrent weather-induced disturbances.
- Investment in infrastructure lags demand growth: critical networks in major crop-producing regions are weak and ageing, and extra capacity is urgently needed.
Recommendations
- Integrate chokepoint analysis into mainstream risk management and security planning - for example, government agencies should assess exposure and vulnerability to chokepoint risk at the national and subnational levels.
- Invest in infrastructure to ensure future food security – for example by agreeing on guidelines for climate-compatible infrastructure through an international taskforce established under the G20.
- Enhance confidence and predictability in global trade - for example, through a process under the World Trade Organization (WTO) to continually reduce the scope for export restrictions
- Develop emergency supply-sharing arrangements and smarter strategic storage, e.g. an emerging response mechanism among major players in the global food trade, modelled in part on that of the International Energy Agency in oil markets and led by the UN Food and Agriculture Organization (FAO), the UN World Food Programme (WFP) or the Agricultural Market Information System (AMIS).
- Build the evidence base around chokepoint risk - including through the collection of data on real-time food trade and infrastructural capacity to aid in assessing risks to food supply chains.
Further Reading
- Read more about chokepoints in global food trade at resourcetrade.earth
- Take a closer look at chokepoints and food security threats in an interview with a report author and experts in related fields
- Discover the 5 things you need to know about chokepoints
- Explore what the Qatar crisis tells us about food supply risk (in The New Arab)
Department/project
Dirty Gold
Research Event
9 May 2017 - 12:30pm to 2:00pm
Chatham House, London
Event participants
Michael John Bloomfield, Lecturer, Department of Social and Policy Sciences, University of Bath
Gold mining can be a dirty business. It creates immense amounts of toxic materials that are difficult to dispose of. Mines are often developed without community consent, and working conditions for miners can be poor. Income from gold has funded wars and consumers buy wedding rings and gold chains often unaware about this.
In Dirty Gold, Michael Bloomfield shows what happened when Earthworks, a small Washington-based NGO, launched a campaign for ethically-sourced gold in the consumer jewellery market, targeting Tiffany and other major firms. The unfolding of the campaign and its effect on the jewellery industry offers a lesson in the growing influence of business in global environmental politics.
Bloomfield will present his recently published book and will examine the responses of three companies to ‘No Dirty Gold’ activism: Tiffany, Wal-Mart and Brilliant Earth. He finds they offer a case study in how firms respond to activist pressure and what happens when businesses participate in private governance schemes such as the ‘Golden Rules’ and the ‘Conflict-Free Gold Standard’ schemes. He will present the different opportunities for, and constrains on, corporate political mobilization within the industry.
Department/project
Fossil Fuel Expert Roundtable: Forecasting Forum 2017
Invitation Only Research Event
31 January 2017 - 2:00pm to 5:30pm
Chatham House, London
Presenting latest thinking from our senior research fellows on the dynamics that will affect fossil fuels investment and markets in the year ahead and promoting high-level discussion amongst experts.
The first session examines the oil price market which faces great uncertainty in 2017 with the OPEC agreement in Algiers raising questions about compliance, supply and impact on the industry's future. It will also assess how US production may alter given the new administration; the state of the nuclear agreement with Iran; and future events in the Middle East.
The second session looks at what Brexit and the election of President Trump means for energy and climate policy in the UK and globally, investigating the major challenges, areas of contention, and areas of opportunity for the UK’s climate and energy policy in light of Brexit.
The second speaker in this session will outline what the appointment of President Trump will mean for global energy and climate policy.
Attendance at this event is by invitation only.
Department/project
Mining and National Development in the New Global Context
Research Event
1 December 2016 - 5:30pm to 7:00pm
Chatham House, London
Event participants
Tom Butler, Chief Executive Officer, International Council for Mining and Metals (ICMM)
Evelyn Dietsche, Associate Fellow, Energy, Environment and Resources, Chatham House
Chair: Bernice Lee, Executive Director, Hoffman Centre, Chatham House
During the resources boom of the last decade, countries, companies and communities alike were quick to highlight the transformative potential of the mining sector. With appropriate governance advice and capacity-building support, it seemed the ‘resource curse’ could be overcome. Yet as companies have adjusted their spending in response to declining global commodities prices and longer-term supply and demand projections, low- and middle-income resource-rich economies appear to have increased their dependence on the minerals sector. But how far has the potential of the mining sector been realised to date, and how different does this potential look today?
Taking ICMM’s third edition of the ‘Role of Mining in National Economies’ as the starting point, this meeting will critically assess the contribution that mining has made to development over the past decade, the prospects for ‘mining-led’ growth in the new global context, and the relevance of classic fiscal, employment and governance prescriptions.
Department/project
How the New Indonesia-EU FLEGT Licence Can Contribute to the Sustainable Development Agenda
15 November 2016
The FLEGT timber licence marks a breakthrough in the battle against illegal logging and has the potential to help towards achieving the SDGs in the forest sector and beyond.2016-11-15-Indonesia-logging.jpg
Collected logs along a river in West Kalimantan province, Indonesia. Photo by Getty Images.
Today Indonesia begins issuing the first ever FLEGT licenses for timber exports bound for the EU market. A major step in the battle against illegal logging and trade in illegal timber, these licenses are issued under a national system to verify the legality of all timber and timber products. A commitment to licensing its timber exports to Europe was made in the country’s Voluntary Partnership Agreement (VPA) with the EU, although the licensing system applies to all exports and to the domestic market. The scale of this achievement can not be underestimated given the size of the country and of its forest sector – there are hundreds of thousands of forest enterprises ranging from large-scale concession holders and processing industries, to smallholders and micro-scale loggers, saw-millers and manufacturers.
It is also remarkable given the state of Indonesia’s forest sector at the turn of the century. Looking back to 2000, rule of law was all but absent and corruption was rife - with the allocation of concessions and timber industries closely tied with the country’s ruling elite. Widespread logging contributed to the high rates of deforestation seen at the turn of the century, which stood at over one per cent per year.
In 2016, the forest sector is vastly different – there are much higher levels of accountability and legal compliance, the result of the considerable effort and resources that have been put into enforcement and anti-corruption efforts. The sector is also much more open, reflected both in the significant improvements in the availability of forest data and legislation as well as the increased space that has been made available to civil society to participate both in policy processes and in monitoring of the sector.
These improvements are the result in large part of the reform processes that have been enabled and supported by the VPA process, for which negotiations began in 2007. However, the process is far from complete and the issuance of FLEGT licences is best viewed as a marking point in an ongoing trajectory towards establishing a legal and sustainable sector.
If we take 2000 as the starting point of this trajectory, with FLEGT licensing as the midway point, this brings us to just beyond 2030, the target date for the UN’s global agenda for sustainable development of which the Sustainable Development Goals (SDG) are an integral part. The SDGs provide a broader framework for considering what further progress is needed in the coming years both to improve legality and to ensure that the forest sector makes a positive contribution towards achieving widespread sustainable development in Indonesia.
There are a number of factors that risk the achievement of these aims. Key challenges that remain in the country’s forest sector include the high levels of informality in the small-scale sector, corruption, limited transparency and pressure on forests from other sectors (as highlighted in the report 'Illegal Logging and Related Trade. The Response in Indonesia').
As noted, there are hundreds of thousands of forest enterprises in the country, many of which – particularly small-scale businesses – operate informally. Further concerted efforts are needed to ensure that these enterprises are not excluded from the formal market, but are able to contribute to a thriving economy – for example, through continued support for certification, as well as much greater investment in the provision of extension services and further reforms to establish a policy framework that facilitates the growth of small businesses (see 'Improving Legality Among Small-Scale Forest Enterprises'). This will make an important contribution to the achievement of SDG 8, to enable ‘decent work and economic growth’, this including the target [8.3] to encourage the growth of small enterprises.
Both corruption and limited transparency also need to be addressed if widespread legality and sustainability are to be achieved in the forest sector. Transparency has improved greatly in the forest sector, with significant improvements to the availability of information and the establishment of independent monitoring by civil society. However, further progress is needed to improve the accessibility of information, not least to ensure that NGOs are able to fulfil this monitoring role. In relation to corruption, the anti-corruption agency has made good progress, but it remains under threat and needs to be strengthened. Improving governance is a priority under the SDGs, Goal 16 (peace, justice and strong institutions) including targets to reduce corruption, develop transparent institutions and ensure public access to information.
The progress made in these areas also needs to be replicated outside the forest sector. A major threat to Indonesia’s forests comes from conversion to other land-uses, in particular agricultural plantations. Effective land-use planning, including transparent and participatory decision-making, is needed if the sustainable management and efficient use of natural resources is to be achieved and deforestation slowed – as set out under SDG 12 (responsible consumption and production) and SDG 15 (life on land).
An important means to drive progress is to ensure close monitoring of progress as well as the evaluation of the measures being adopted. A framework for monitoring the impact of FLEGT licences, as well as the related measures being implemented under the VPA, is under development. This will need to link up to national efforts to monitor progress towards the SDGs – both to contribute towards the monitoring of these goals and to facilitate communication of the progress and lessons being learnt in the forest sector.
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Resources, Sovereignty and Geopolitics
Invitation Only Research Event
26 May 2016 - 2:00pm to 27 May 2016 - 4:30pm
Harbour Grand Kowloon Hotel, Hong Kong
This workshop will bring together experts from across Asia to discuss the challenges around natural resources that cause them to become drivers of conflict in the region, particularly in the context of territorial disputes, geopolitical competition and concerns over national sovereignty.
Attendance at this event is by invitation only.
Event attributes
External eventDepartment/project
Guidelines for Good Governance in Emerging Oil and Gas Producers 2016
13 July 2016
The updated Guidelines focus on eight key objectives for the petroleum sector in emerging producing countries and include policy-oriented recommendations for each objective.
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An operating drill during oil and gas exploration. Photo: Getty Images.
Summary
The Guidelines for Good Governance in Emerging Oil and Gas Producers 2016, compiled under the auspices of the New Petroleum Producers Discussion Group, review common challenges facing emerging producer countries in the phases of exploration, recent discoveries and early production. The following are the Guidelines’ broad recommendations for addressing these challenges.
- International best practice may not be appropriate in the case of emerging producers in the oil and gas sector. Instead, the aim should be for more appropriate practice, taking account of the national context; more effective practice, in the interests of achieving rapid results; and better practice, allowing incremental improvements to governance.
- Government policy should be guided by a clear vision for the development of the country and a strategic view of how the petroleum sector will deliver that vision.
- In order to attract the most qualified oil company to a country with an unproven resource base, the host government can invest in geological data, strengthen its prequalification criteria and ensure transparency. It should also plan for success and anticipate the implications of hydrocarbon discoveries in its tax code, and be robust through declining oil and gas prices.
- Licensing is a key mechanism whereby government can reap early revenues and maximize long-term national benefits. Government must ensure that it simplifies both negotiations and tax structures to mitigate knowledge asymmetries with oil companies.
- Government and industry must engage and share information with affected communities to manage local expectations regarding the petroleum sector and build trust.
- In emerging producers, budgets for local content may be small and timelines for building capacity short. In this context, the focus should be on the potential for repeat use of any local capacity developed.
- Meaningful participation of national organizations in resource development is a central objective of many emerging producers. Capacity is needed to enable this, and the Guidelines examine where and how best to develop that capacity.
- Incremental improvements to the governance of the national petroleum sector will allow emerging producers to increase accountability. The focus in this regard should be on building up capacity in checks and balances as resources become proven.
Department/project
Nigeria’s Solid Minerals Sector: Alternative Investment Opportunities
Research Event
19 May 2016 - 2:00pm to 4:00pm
UK Houses of Parliament, Westminster, London
Event participants
HE Dr Kayode Fayemi, Minister of Solid Minerals Development, Nigeria
HE Aminu Bello Masari, Governor of Katsina State, Nigeria
Chair: Chi Onwurah MP, Vice Chair, All Party Parliamentary Group on Nigeria
As Nigeria seeks to diversify its economy, the federal government is prioritizing the development of the solid minerals sector, in order to enhance foreign investment, create local job opportunities and build technological capacity and expertise in mining.
At this event, Minister for Solid Minerals Development HE Dr Kayode Fayemi, will discuss plans and priorities for the solid minerals sector including the strengthening of regulatory frameworks and opportunities for investment. Following this, HE Aminu Bello Masari, governor of Katsina State, will discuss state initiatives for solid minerals sector development in northern Nigeria.
This event is now full and registration is closed.
Department/project
The Elements of Power: Gadgets, Guns and the Struggle for a Sustainable Future in the Rare Metal Age
Invitation Only Research Event
19 May 2016 - 5:00pm to 6:30pm
Chatham House, London, UK
At this session, the speaker will argue that our future hinges on a set of elements that receive scant attention even from those whose fortunes rely upon them. The speaker will outline why our electronic gadgets, the most powerful armies and indeed the fate of our planet depend on producing sustainable supplies of rare metals. He will outline some of the new environmental, economic, and geopolitical consequences of supply chains and discuss the dynamics of the rare metal markets which are vastly different than traditional commodities traded on open exchanges. The speaker will also address some of the security of supply issues arising from China's role as the dominant consumer and producer of most of the world’s minor metals. Finally, the discussion will also include what countries and companies can do to ensure resilient supply lines.
Attendance at this event is by invitation only.
Department/project
Illegal Logging Update and Stakeholder Consultation Meeting Number 26
Research Event
16 June 2016 - 8:30am to 17 June 2016 - 5:00pm
The Crystal, London
This event is part of a series of illegal logging update meetings that will bring together more than 250 participants from civil society, industry and governments from around the world.
Download the presentations from the event on the Illegal Logging Portal.
Department/project
Illegal Logging Project
Agricultural Commodity Supply Chains: Trade, Consumption and Deforestation
28 January 2016
Private-sector commitments and government policies, a loss of support for biofuels, and health concerns over the consumption of palm oil and beef, are factors that may help to restrict the further expansion of agricultural land into forest areas.
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An employee arranges packages of instant ramen noodles a store in Seoul, South Korea. Photo via Getty Images.
- Clearance of forests for agriculture is a major cause of deforestation worldwide; the three most significant commodities in this regard are palm oil, soy and beef, which between them accounted for an estimated 76 per cent of the deforestation associated with agriculture in 1990–2008. International markets are an important driver of demand, particularly for palm oil and soy.
- Global production of palm oil has grown strongly for several decades, more than doubling over the period 2000–13. Indonesia and Malaysia between them account for more than 80 per cent of palm oil production, and are likely to continue to dominate world exports. The European Union (EU), India and China are the main consumers, importing almost 60 per cent of the market; EU demand is driven significantly by biofuel policy, while India and China use palm oil mainly as a cooking oil and in processed foods.
- Global production of soybeans has roughly doubled since 2000, and the expansion of output has been particularly rapid in South America; Brazil and Argentina accounted for almost 50 per cent of global production in 2013. Overwhelmingly the main importer is China (which took 43 per cent of all soy imports in 2014), mainly for animal feed for its growing meat industry. The EU is the second largest importer, using soy for animal feed and biofuel.
- In contrast, consumption and production of beef has grown only slowly. Major producers are the US, Brazil, the EU and China; principal exporters are Brazil, India, Australia and the US. The US and the EU are still major consumers, although – as in most developed countries – consumption is falling slightly; other significant consumers include Brazil, India, Pakistan and China. Russia and Japan are also significant importers.
- Three main factors underlie the growth in both consumption and production of palm oil and soy: population growth; changing dietary preferences; and policy support for biofuels. The first two are just as relevant to beef. Continued growth in world population and the expansion of the global middle class, with accompanying higher consumption levels of processed food and meat, will continue to drive demand upwards – strongly for palm oil and soy, more weakly for beef. Given the difficulty of increasing yields, particularly in developing countries, the further expansion of agricultural land into forest areas is inevitable. None the less, three other factors may restrict this growth: the private-sector commitments and government policies that are being developed with the aim of decoupling agricultural production from deforestation; a loss of support for biofuels, most notably in the EU; and health concerns, particularly over the consumption of palm oil and beef.
Department/project
Navigating the New Normal: China and Global Resource Governance
28 January 2016
How China responds to the challenges of resource security and sustainability, working with others, will help define its reputation as a responsible actor on the world stage in the next decade, according to a new paper.
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Qingdao, China. Photo: Getty Images.
- It is time to upgrade global resource governance
- Meaningful progress cannot be achieved without China
- China will need to be both innovative and pragmatic in its approach
- New modes of cooperation are needed
- Changes in China’s economy present opportunities and risks
Executive summary
China’s new role in the global governance of natural resources is coming to the fore against a backdrop of profound uncertainty, driven by the convergence of three interlinked trends. At home, China’s leaders are navigating the structural shift to slower but higher-quality growth, a phase of development referred to as the ‘new normal’, while facing considerable environmental and resource security challenges. Globally, the slowdown in China’s economy has sent reverberations through commodity markets, pulling the plug on the decade-long commodities ‘super cycle’. Meanwhile, China is taking on a growing role in global governance, from the G20 and multilateral development banks, to its regional partnerships in Latin America and Africa.
During the resources boom of the last decade, policy-makers and businesses in consumer countries were focused on high and volatile resource prices. The risks posed by resource nationalism in producer countries were seen in the proliferation of export restrictions and the increase in investment disputes. Today, the tables have turned, leaving producer countries facing economic pressure from falling revenues and investments. Many organizations have called on governments to phase out subsidies for fossil fuels and other natural resources while prices are low. The international policy debate is shifting to the immediate challenges presented by a massive oversupply of many energy and mineral commodities, and the longer-term risk of ‘stranded assets’.
These new resource realities will provide the context for China’s growing global role, as well as setting the tenor of its relations with producer countries. Over the past decade, narratives around China often focused on its real or perceived impacts from resource production overseas and consumption at home. In the next, China’s approach to resource security and sustainability will help define its reputation, and whether it is perceived as a responsible actor on the world stage and as a development partner. The collection of international narratives, norms, rules and organizations that currently guides resource production, trade and consumption – what we call ‘global resource governance' in this report – will provide the framework.
Much political leadership will be required to overcome the barriers to China assuming a more active role in global resource governance. On the one hand, there has been slow progress in expanding China’s role in organizations from the World Bank to the International Energy Agency (IEA). On the other, new instruments or processes initiated by China can be seen as a challenge to the existing rules-based order, as the US reaction to the establishment of the Asian Infrastructure Investment Bank (AIIB) demonstrated. Yet developments such as the US–China Joint Presidential Statement on Climate Change in September 2015, ahead of the Paris Climate Conference, show that it is possible to forge cooperation and boost the prospects for progress on public goods at the multilateral level, even in politically fraught areas.
China’s international role on natural resources is also closely tied to ongoing reforms at home. The introduction of ‘ecological civilization’ as a guiding principle for China’s development at the Communist Party’s 17th Congress in 2007 marked a recognition of the need not only to address China’s domestic challenges such as air quality and water scarcity but also shift to an environmentally sustainable model of economic development. In 2015 China’s leaders set out the key incentives, accountability and mechanisms to deliver the ecological civilization in China’s 13th Five-Year Plan. Central elements of this vision, such as building sustainable cities, pursuing environmentally-friendly economic growth and developing the circular economy will have major impacts on China’s future resource consumption and import needs.
Globally, the speed and scale of the economic realignments have taken most experts and policy-makers by surprise – in many respects, China’s new normal is the world’s new normal. The greatest challenge that China’s government faces is managing a shift to slower but higher-quality growth. It is clear that the ramifications of this reach far beyond the confines of the Chinese economy or global commodity markets; yet the situation remains fluid and the nature of a new equilibrium is difficult to predict. This only makes it more urgent to consider the strategic and practical options available to policy-makers, both in China and around the world.
This report is the result of two years of joint research between Chatham House and the Development Research Center of the State Council (DRC), including six expert workshops in China and conversations with international organizations. It discusses key policy areas in global resource governance as they relate to China – in light of recent falls in commodity prices, China’s shifting economic situation, and its growing global role in the ‘new normal’. The scope of the research is limited to non-renewable energy, metals and mineral resources; throughout this report, the term ‘resources’ refers to these commodities. Other traded commodities such as agricultural goods are not included, and land, water and air are discussed only in the context of their important linkages with energy and metals.
The report considers the costs and benefits of a more active role for China in global resources governance. It recognizes that different commodities face different challenges and require different governance frameworks, and that different regions require context-specific responses. The report also considers the risks of more limited engagement of China and other new actors, which could mean declining relevance for existing processes and institutions that govern resource production, trade and consumption, and a diminished capacity to tackle longer-term challenges like climate change.
Department/project
Estimating Levels of Illegal Logging and the Related Trade: Lessons from the Indicators Project
Invitation Only Research Event
9 November 2015 - 9:00am to 5:00pm
Chatham House, London
The aim of the meeting is to identify ways to improve monitoring of illegal logging and the trade in illegal timber. Building on the experiences of Chatham House’s project Indicators of Illegal Logging, the discussions will focus on the data needs of particular end users and methodological challenges for estimating levels of illegality. The potential for improved coordination and collaboration between global efforts to monitor trade flows will also be considered.
Attendance at this event is by invitation only.
Department/project
Reducing Deforestation in Agricultural Commodity Supply Chains: Using Public Procurement Policy
2 September 2015
This paper explores the potential of using public procurement policy to promote the uptake of sustainable food products in order to reduce imports of agricultural products associated with deforestation.
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Workers sort cocoa fruits near the Mendoa Chocolates plant in the state of Bahia near Ilheus, Brazil. Photo: Getty Images.
Summary
- Procurement policy has been used effectively to exclude illegal and unsustainable timber from consumer-country markets.
- As the public sector is a major purchaser of food and catering services for schools, nurseries, hospitals, care homes, canteens, prisons and the military, public procurement policies in this area clearly have the potential to promote the uptake of sustainable products not associated with deforestation.
- Many public authorities, particularly at local and regional level, already have a procurement policy for food; in principle, criteria for sustainable production could be incorporated relatively easily.
- Some products – particularly palm oil, cocoa, coffee and tea – are better suited than others to this approach; for all these products, voluntary certification initiatives currently under way could provide identification mechanisms on which procurement policies could rest.
- Other commodities may not be as suited to procurement policy, and it may be more effective to use other regulations; this applies particularly to soy, for which biofuel regulations are likely to have a bigger impact.
- In cases in which private-sector initiatives are under way to achieve 100 per cent sustainable imports (such a target has been set for palm oil in several countries), procurement policy may be unnecessary. In other cases, the adoption of a new procurement policy could serve as the spur to a private-sector initiative.
Department/project
The Resource Curse Revisited
4 August 2015
A new paper finds that while natural resources may provide low-income countries with a significant development opportunity, the prevailing extractives-led growth agenda is in urgent need of re-evaluation.
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Hoping to make a little money from Sudan's ocean of black gold, a woman sells tea to roughnecks at an oil rig near Bentiu, Sudan. Photo by Getty Images.
Summary
- This paper challenges the view that the ‘resource curse’ – for which so many academics found evidence in previous decades – has now been laid to rest.
- During the commodities boom of the past decade, a number of influential policy and corporate institutions have encouraged poor countries to capitalize on below-ground resources for economic growth and development. The key assumption is that improved management of the extractives sector will enable it to spearhead positive national development and avoid resource curse effects such as declining global competitiveness in the rest of the economy and a widening wealth gap. This assumption continues to influence governance advice and country investment choices.
- The extractives-led growth agenda promoted by donors and international advisers in multilateral banks, consultancies and some development agencies has tended to reinforce domestic, government and investor pressures to pursue a ‘fast-track’ approach to extractives projects. This appears logical, given the obvious benefits of foreign-investment inflows and export revenues for countries suffering from poverty, lack of infrastructure and high levels of indebtedness.
- However, there is an urgent need to re-evaluate whether the policy advice stemming from this agenda can serve as an antidote to the negative effects identified in the resource-curse literature. First, there is often a mismatch between governance advice given and the capacity of countries to follow it. Second, the global context has changed: exporters are suffering as a result of the current downturn in commodity prices, while reliance on the sale of high-carbon fuels is challenged by the global shift to lower-carbon technologies and energy efficiency.
- Extractive revenues should not be viewed as income to be consumed, but as representing a reshuffling of the national portfolio of assets. Converting extractive resources below ground into cash above ground raises key questions about how this cash can be deployed to create productive assets for the future which do not rely on depletable resources.
- Diversification of the economy away from the resource sector over an appropriate timeframe remains a key priority. In many cases, this will require slower development of projects to allow time for institutional capacity in government and the private sector to develop.
- More economic and governance capacity needs to be in place before investment begins in a project, to enable investment and eventual revenues to generate real benefits to the rest of the economy, as well as appropriate, sustainable diversification.