Solving 'the gravest natural resource shortage you've never heard of': applying transnational new governance to the phosphate industry.

Author:Johansen, Chelsae Rose
 
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ABSTRACT

Experts believe that global reserves of phosphates, an essential and irreplaceable ingredient in fertilizers, will only last another fifty to one hundred years. Although the consequences of a phosphate shortage include a global famine and decreased world population, the phosphate industry today operates with little concern for sustainable mining and use of the resource. Because the current system of international governance is neither raising awareness of the looming phosphate shortage nor incentivizing phosphate-industry members to act sustainably, the future of phosphates and of food security depend on a decentralized system of internal industry governance known as Transnational New Governance. This Note analyzes the current regulatory framework before walking through the barriers and steps in industry adoption and implementation of the Transnational New Governance scheme.

TABLE OF CONTENTS I. INTRODUCTION A. The Global Phosphate Trade B. An Impending Shortage III. TRANSNATIONAL NEW GOVERNANCE AS A REGULATORY FRAMEWORK FOR PHOSPHATES A. How Current Policies Are Failing 1. An Underlying Lack of Concern B. Transnational New Governance as a Solution 1. An Introduction to Transnational New Governance IV. CAN THE TRANSNATIONAL NEW GOVERNANCE FRAMEWORK APPLY TO THE PHOSPHATE INDUSTRY? A. Drawing upon Existing Applications of the Model B. Challenges Specific to the Phosphate Industry V. IMPLEMENTING THE TRANSNATIONAL NEW GOVERNANCE FRAMEWORK IN THE PHOSPHATE INDUSTRY A. Initiating Collective Standard Setting B. Hitting the Threshold Number of Private Actors C. Ensuring Proper Levels of Compliance VI. CONCLUSION I. INTRODUCTION

Environmental scientists believe that global production of phosphates, an essential nutrient for fertilizer and food production, will not meet demand within forty years, leading experts to call the future of phosphates "the gravest natural resource shortage you've never heard of." (1) Despite the threat of a phosphate shortage, which would lead to increased global hunger, (2) the countries and corporations involved in the phosphate industry operate under little concern for phosphate sustainability. (3) The global lack of concern for a phosphate shortage stems from the industry's shortsightedness, (4) scientific uncertainty and debate around the time frame of a phosphate shortage, (5) and existing industry arrangements, which are incompatible with the natural phosphorus cycle. (6)

Operating with little regard for the looming phosphate shortage, the countries and private firms that control the resource focus mostly on maximizing their short-term economic welfare. (7) This focus on the short-term incentivizes firms and governments on both the phosphate-importing and phosphate-exporting sides to resist regulations governing phosphate sustainability and to avoid adopting sustainability measures. (8) Although international organizations, including the United Nations and the World Trade Organization (WTO), have imposed orders to facilitate the phosphate trade, phosphate-controlling entities have challenged and ignored such nonbinding policies. (9)

Given the failure of the current governance system to adequately regulate sustainable phosphate supplies, this Note argues that the future of phosphate depends on a system of internal governance known as Transnational New Governance. Transnational New Governance is a decentralized form of regulation that replaces the traditional regulator, the state, with a variety of industry actors and nongovernmental organizations (NGOs) that adopt and enforce business norms throughout a supply chain. (10) The model's success in the phosphate industry depends on the participation of phosphate-mining firms, phosphate-fertilizer manufacturers, and farmers, as well as peripherally interested parties, such as banks, investors, and NGOs concerned with the social and environmental effects of the phosphate industry.

Under the Transnational New Governance model for the phosphate industry, the World Wildlife Fund (WWF), a strong advocate and past initiator of the Transnational New Governance model in other industries, (11) should invite phosphate-industry actors and interested NGOs to a roundtable meeting. At the roundtable, the parties collectively should set sustainability standards for phosphate-mining firms, phosphate-fertilizer manufacturers, and farmers. After the meeting, industry actors could adopt the agreed-upon sustainability standards and, later, ask an NGO to verify that the firms have met the standards and grant official "sustainable phosphate" certification. (12) The roundtable participants should then require that sustainable-phosphate-certified industry members only deal with other certified members across the supply chain. The requirement would create a demand for the certification in the industry and motivate other firms to seek sustainable phosphate certification. (13) The result should be a system of decentralized governance that harnesses sustainability and human rights concerns in the phosphate industry and creates strong incentives for sustainability throughout the phosphate-fertilizer supply chain.

The global phosphate industry shares many features with industries that have already adopted the Transnational New Governance model, including dependence on various actors across a supply chain, (14) opportunities to improve sustainability at each step in the production chain, (15) and industry actors' sensitivity to reputational threats. (16) These parallels suggest that the phosphate industry can conform to the model. However, the phosphate industry also comes with unique problems that are unparalleled in existing applications of the Transnational New Governance model. Most significantly, phosphate reserves and the demand for phosphate fertilizer are distributed in a way that may allow for three countries, China, the United States, and Morocco, to exclude themselves from the Transnational New Governance scheme. (17) However, the countries will likely not seize upon the possibility for self-exclusion because of their concern for their reputations, (18) a growing awareness of the impending phosphate shortage, (19) and pressure from the Transnational New Governance leaders in the global phosphate industry. (20)

Part II provides background information on phosphates' role in the global marketplace and describes the outlook on global supplies. Part III explains why the current system of phosphate regulation has failed to produce sustainability solutions and argues that Transnational New Governance can organize fears of the shortage into industry-wide sustainability regulations. Part IV draws parallels between the existing applications of the Transnational New Governance model and the global phosphate industry, explores the unique challenges the phosphate industry presents to the model, and concludes in an explanation of what the model would look like for the phosphate industry. Finally, Part V walks through each step in the Transnational New Governance model, tracing how it should be applied to the phosphate industry.

  1. PHOSPHATES AS A NECESSARY RESOURCE

    Phosphorus is one of the three nutrients required in large quantities for plant growth. (21) Low natural levels of phosphorus in soils historically limited global food production and, thus, global population. (22) However, during the Green Revolution in the 1950s, people began mining phosphate rock, a nonrenewable resource found in underground deposits, to create phosphate fertilizers. (23) When added to soils, the phosphate fertilizers increased soil yields. (24) Geologist Dale Allen Pfeiffer suggests that use of phosphate fertilizers during the Green Revolution directly allowed Earth to support five billion more people than its natural carrying capacity. (25)

    1. The Global Phosphate Trade

      Phosphate reserves are found in thirty-five countries, (26) including Algeria, Australia, Brazil, Canada, Egypt, Israel, Russia, Senegal, and Tunisia. (27) However, the vast majority of phosphate reserves are found in only a few countries: Morocco, the United States, Algeria, China, Russia, Syria, South Africa, and Jordan. (28) Morocco alone contains an estimated 85 percent of phosphate reserves, (29) making the country the "Saudi Arabia of phosphorus." (30)

      Since farmers around the world depend on phosphates, a global phosphate trade has developed around the redistribution of the resource, with about thirty million tons of phosphate moving across the world in 2010. (31) Chief exporters include Russia and Morocco, while chief phosphate importers include Latin American countries. (32)

    2. An Impending Shortage

      Since phosphate rock is a nonrenewable resource, (33) there is no known substitute that can replace phosphorus's key role in agriculture, (34) and "end of pipe" phosphate-recycling programs are economically unfeasible, (35) the world must rely only upon existing reserves. However, the limited size of existing reserves, combined with global phosphate demand, suggests that a phosphate shortage is on the way. (36)

      From the supply side, there is debate over how long remaining phosphate reserves will last. (37) Estimates generally range from fifty to one hundred years, (38) although, in an arguably flawed study, (39) the International Fertilizer Development Center predicts reserves will last much longer. (40) Furthermore, policy constraints limit how much phosphate may be mined from a given reserve and traded on the global market. In Florida, for example, a federal court enjoined operations at one of the United States' largest phosphate mines after the Sierra Club challenged its permit to mine near wetlands. (41) In China, the government levied high tariffs on its phosphate exports, effectively removing these phosphates from the global markets. (42) On a global scale, two UN orders deter corporations and countries from importing phosphates from the Western Sahara, where Morocco exploits resources. (43)

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