Washington [US], June 27 : According to a new study, environmental degradation trends will result in large economic losses in the coming decades, disproportionately affecting the poorest countries. But there is some good news: investing in nature can turn those losses into profits.
The findings were published in the Proceedings of the National Academy of Sciences by researchers from the University of Minnesota and Purdue University.
To capture interactions between the economy and the environment, the team created a first-of-its-kind global earth-economy model. These interactions are critical because they include how nature benefits humans by pollinating crops, providing timber, storing carbon, and providing catch for marine fisheries, and how those benefits affect the economy.
"We have long thought of the economy and the environment as working against each other," said Justin Johnson, an assistant professor of Applied Economics at the University of Minnesota. "Investing in nature does not stifle the economy, it boosts the economy. But it has been difficult to model those interactions until recently."
The researchers found: Policy options for investing in nature resulted in annual gains of USD 100-350 billion (2014 USD), with the most significant percentage increases in GDP occurring in low-income countries. The policy options examined in this study include removing agricultural subsidies, financing research into improving crop yields and international payments from wealthy countries to poorer countries to support conservation.
Continued trends in environmental degradation, on the other hand, would result in USD 75 billion in losses annually, with the low-income countries suffering from 0.2 per cent losses in GDP year on year.
The researchers combined a global general equilibrium economic model, GTAP (developed at Purdue University's Center for Global Trade Analysis), with a suite of ecosystem service models, InVEST (developed at Stanford University's Natural Capital Project).
GTAP and InVEST are both widely used across the world by governments, non-governmental organizations and the private sector, but putting them together was a significant undertaking.
"Traditional economic models of this kind almost completely neglect the fact that the economy relies on nature," said Tom Hertel, a distinguished professor of Agricultural Economics at Purdue University.
"This new study required a detailed understanding of how and where land uses patterns change due to economic activity, with enough spatial detail to understand the environmental consequences of these changes. It is a huge achievement."
The results from this research highlight how public goods and services provided by the environment are often most important for the world's poorest, who have less access to alternative options when the environment is degraded. Consequently, investing in nature tends to make the world a more equitable place.
This research only looks at a small subset of the ways in which the economy and the environment interact, nevertheless finding strikingly large effects.
"Of course, nature provides much more than pollinators, timber, carbon and fish," said Johnson. "Our future work will incorporate many more ecosystem services, leading to much more informed decision-making. This is just the beginning: we hope to make this kind of analysis a standard tool in a policymaker's toolbox."
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