Short-term political decision-making and market forces in the West may prevent needed action in the commodity and energy sectors to avoid shocks as 3 billion more people join the resource-hungry middle classes by 2030, authors of a report warned.

Rich countries may have to learn from centralised planning in China, which can take long-term decisions to boost supply and productivity in resources, said authors of the study from the McKinsey Global Institute, the research arm of the consultancy.

The report, Resource Revolution, outlines the need for trillions of dollars in new investment, tough political decisions and moves to boost efficiency to feed a huge demand for commodities while tackling climate change.

One of the big challenges in addressing this is a duration mis-match, said Richard Dobbs, director of the institute.

It's a 10-15 year problem, climate change is maybe a 20-year problem, but our political time horizons at the moment... are on two to three years duration.

In the long-run, Dobbs is confident the world will eventually meet soaring demand in emerging countries for everything from cars to urban homes, but the road may be rocky.

The real question is over the next 20 years whether we move fast enough to have a soft landing, where we have the resources, have the supply, have the productivity, he said.

Or whether we go through a pretty unpleasant period of quite spiky prices, urban unrest, social effects and slowdown in economic growth.


The report lists 130 ways to boost productivity in resources but urges governments to prioritise, since 15 of them account for 75 percent of the total potential results.

The top three, accounting for one-third of potential efficiency savings, are relatively prosaic: making buildings more energy efficient, boosting yields on large-scale farms and reducing waste after crops are harvested.

The 209-page report says that taking advantage of productivity opportunities would cost about $900 billion per year, but would help compensate for about 30 percent of the soaring demand for resources expected over the next two decades.

The scale of investment needed may force rethinks of old orthodoxies.

It's going to throw up some questions about the relationship between the state and markets, said another of the authors, Jeremy Oppenheim, a director at McKinsey & Company's sustainability and resource productivity practice.

Some of these issues are only addressed through planning, and planning went out of fashion big time, as you know, across market-driven economies.

While China and India are the main drivers for the massive rise in demand for resources, including a projected 80 percent jump in steel consumption, China's political system is already helping to come to the rescue.

The China story is an interesting one, by the nature of their political system, the duration of their decision making is very matched to the duration of the problem, so it's in China's interests to flood the world with capital, Dobbs said.

Anyone who wants to open a mine, China will provide the funding for it. It's very logical for China even if the returns are relatively low, because it helps bring down prices over time.

China has its own challenges, one of which relates to its unsustainable energy subsidies, Oppenheim said.

The report urged nations to scrap $1 trillion (639 billion pounds) of subsidies on resources to encourage more efficient use and create a more predictable long-term framework for private sector investment.

(Reporting by Eric Onstad; Editing by Anthony Barker)