Rise of the BRIC Nations1 November 2007 Mitch Beedie
As the economies of the BRIC nations boom, the insatiable need for power grows. When will the rest of the world have to make sacrifices to accommodate this?
In the next few years there will be a rise in the middle class of the nations classified as BRIC – Brazil, Russia, India and China. For years this has been a shift that aid workers, political analysts and anyone with a financial interest in these nations have been waiting for.
But now, at a time when climate change and emissions reduction are high on the world's list of priorities, the implications of these growing powers and populations are just starting to become clear.
Along with the consequent increasing demand for high-priced goods, residents of the BRIC nations are now starting to demand more transport and more expensive and comfortable homes. Residential accounts for over 90% of building consumption in developing countries, and the level of power needed to heat, cool and light offices and factories is growing significantly.
More power is also required to produce the new cars, electrical/white goods and other comforts most in the western world have already become fairly reliant on. Cheap production will likely lead to domestic booms that will spill over for export to the rest of the world.
GROWING BRIC BY BRIC
Within the next 40 years the BRIC nations are expected to dominate the world economy. China looks set to lead the world in manufactured goods, and India in services. Brazil and Russia look likely to supply many of the raw materials these two huge importing countries will need.
The effect on the market is prominent; the BRIC nations have already overtaken the US in the global energy industry. Over the last 15 years the dominance of energy supply by US and European companies has weakened markedly. Largely at the expense of the US, BRIC nation suppliers have taken a third of the energy supply market. The top companies now include PetroChina, Gazprom, Petroleo Brasileiro and India's Oil & Natural Gas Corp. Mining, manufacturing and other industries are likely to follow.
There is another undercurrent caused by the rise of BRIC that in some ways is a much larger concern than the changing of the energy markets. Even now, taking only around 20% of global oil, China and India's growth is increasing international oil prices. Supplies are working almost flat out already and, if world oil supply has indeed already peaked, future worldwide scrambling could send prices rocketing.
This will damage countries that are heavily dependent on imports, prompting them to turn to other fossil fuels where possible. China and India are already ramping up power plant construction using their huge coal reserves.
We all know that coal emits even more CO2 than oil. China – which already equals the US in carbon dioxide emissions – plans another 500+ new coal-fired plants by 2012. India plans over 200, with some 75 in the US. Many climatologists believe that such extra CO2 concentrations could tip many of the world's ecological systems, with catastrophic rises in sea level and abrupt changes in global climate.
LIMITS TO GROWTH
Things will be even worse if China and India do not turn to nuclear energy. But nuclear is not a cheap option. Uranium prices are rising and nuclear has many other hidden costs that are now just being disregarded.
The real focus needs to be on energy efficiency and developing alternative energy sources. Developing countries will not be able to afford to waste energy the way the West has done.
China is taking the lead by investing in photovoltaic, wind, biofuels, tidal, hydroelectric and other technologies to increase renewable energy capacity to 10% by 2020. It could well become the world leader in these industries. It is in the West's interest to help with these efforts as it is also a good place for Western cash to be invested. Sustainability actually makes good business sense: operations that are unsustainable are by their nature bad long-term investments.
In the past, rapid development in the BRIC nations has often come at the expense of environmental degradation. This is 'profitable' in the short term but creates much higher clean-up costs for the future. China's cities are now among the most polluted in the world, and acid rain damages huge areas of countryside. Apart from anything else, this causes huge losses in GDP.
Environmental degradation may indeed turn out to be the factor that ultimately limits economic progress. However, the rich nations are on shaky ground when they try to moralise about the importance of the environment to the BRIC nations. Per-capita CO2 emissions in the US are just over 20t – around double those of Brazil and China, and over 15 times higher than India. Developing nations are unlikely to listen to any argument from the rich along the lines of "I'm afraid we've pumped all the CO2 into the atmosphere that it can stand, there's no room left for yours now".