While the creation of an indicator for the measurement of resource productivity is an important step into the right direction, several characteristics of the indicator and the resulting limitations need to be taken into account in order to facilitate a misinterpretation. The use of DMC/GDP as an indicator of resource productivity rests on the assumption that, under business-as-usual conditions, resource uses scales proportionally with economic growth. Deviations from such a proportionality can then be interpreted as indicators of either more environmentally detrimental (increase) or beneficial (decrease) economic development. A first caveat is, of course, that resource productivity does not measure the environmental impact but merely provides a proxy for measuring the environmental impact per unit of economic output. Secondly, DMC and RMC (see below) are composed of different resource uses. These resource uses scale differently with economic output as they show different empirical demand elasticities. On a global level, fossil fuel consumption is nearly proportional to income, with income elasticities above 0.8, whereas biomass consumption shows the opposite behaviour: it is totally inelastic (elasticities at or below 0.1).
Its variation can so far mostly be explained with resource endowments. Construction materials and ores/industrial minerals show intermediate elasticities. A large share of relative inelastic resource use in DMC or RMC means that it does not scale with rising income, therefore leading to higher resource ‘productivity’. Simply rising income without any superior efficiency improvements ‘at the ground level’ can thus result in overall improvements in the DMC/GDP or RMC/GDP relation. A first strategy for tackling this limitation consists in disaggregating resource use into its different components. Third, even when one disaggregates DMR/RMC into its different components, the economic components still limits the interpretability of ‘resource productivity’.
GDP can rise and fall due to aspects totally unrelated to the resource efficiency of production and consumption, such as changes in interest or exchange rates. Furthermore, the specific compositions of economic activity – e.g. differences between more service and industrially oriented economies – are not taken into account by looking at ‘productivity’ at an aggregate level. In order to remedy this situation, more thorough sector specific micro-macro environment-economy analyses are necessary.
