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The

Economic

CaseforNature

AglobalEarth-economymodel

toassessdevelopmentpolicypathways

?2021InternationalBankforReconstructionandDevelopment/TheWorldBank

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WashingtonDC20433

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v

Acknowledgments

“TheEconomicCaseforNature；ispartofaseriesofreportsthatlaysoutthe

economicrationaleforinvestinginnature.LedbytheEnvironmentNatural

ResourcesandBlueEconomy(ENB)GlobclPracticeattheWorldBank,theseries

aimstoprovideanalyticalinsightstoinformtheprocessleadinguptothe15th

ConferenceoftheParties(COP-15)oftheConventiononBiologicalDiversity,and

assistcountriesimplementthenewpost-2020globalbiodiversityframework.

TheworkhasbeenundertakenincollaborationwiththeUniversityofMinnesota

andPurdueUniversityandbuildsonpreviousanalysiscarriedoutwiththeWorld

WildlifeFundforNature(WWF)-UK.TheUniversityofMinnesotateamincluded

JustinJohnson,JomesGerber.StephenPolosky,ondChrisNootenboom.The

PurdueUniversityteamincludedUrisBaldos,ErwinCorong,ThomasHertel,and

AngelAguiar.

TheWorldBankteamwq$ledbyGiovqnn(Gianni)RutqandRqffqelloCervigniqnd

includedOlgaGavryliuk,ShunChonabayashi,andFnuHanny.Theteamworked

undertheguidanceofKarinKemper(GlobalDirectorfortheENBGlobalPractice),

ChristianPeter(PracticeManagerfortheENBGlobalPractice,GlobalEngagement

Unit),lainShuker(PracticeManager,ENBSlobalPractice,EastAfrica),andBenoit

Blarel(formerPracticeManager,ENBGlobalPractice).SuePlemingandSonuJain

fromtheWorldBank'sExternalandCorpcrateRelationsledtheoutreachand

disseminationefforts.

Theauthorsaredeeplygratefulfortheinsightfulcommentsandinputreceived

fromthepeerreviewersandcolleagues.Thepeerreviewersforthisreportwere

MassimilianoCali,RichardDamania,MadhurGautam,andSvetlanaEdmeades,

fromtheWorldBank,andTobyRoxbourg,HeadofSustainableEconomicPolicy,

WWF-UK.GrzegorzPeszko,GaroBatmanian,JulianaCastano,FionaStewart,

SamanthaPower,MarekHanush.fromtheWorldBank,FelixNugeeandEmily

McKenzie,fromtheUnitedKingdom(UK)HerMajesty'sTreasury,andAlistair

Rennie,fromtheUKDepartmentforEnvironment,FoodandRuralAffairs(DEFRA),

alsoprovidedvaluablefeedback.

ThereportreceivedfinancialsupportfromtheGlobalProgramonSustainability

andtheWealthAccountingandValuationofEcosystemServices(WAVESPlus)

trustfunds,generouslysupportedbytheUKDEFRAandtheDepartmentfor

Internationaldevelopment(DfID):theSwissStateSecretariatforEconomicAffairs;

theEuropeanCommission;theNetherlands'MinistryofForeignAffairs;andthe

GermanFederalMinistryforEconomicCooperationandDevelopment(BMZ).

viTheEconomicCaseforNature

ExecuEvesummary------------------

Keymessages

Theglobaldeclineofbiodiversityandecosystem

servicesisadevelopmentissue:Economies,

particularlyinlow-incomecountries,cannotafford

theriskofcollapseintheservicesprovidedby

nature.Theanalysisinthisreport,thefirst-of-

its-kind,showsthatbyaconservativeestimatea

collapseinselectservicessuchaswildpollination,

provisionoffoodfrommarinefisheriesandtimber

fromnativeforests,couldresultinasignificant

declineinglobalGDP:$2,7trillionin2030.Relative

impactsaremostpronouncedinlow-incomeand

lower-middle-incomecountries,wheredropsin2030

GDPmaybemorethan10percent.

Nature-smartpoliciescanreducetheriskof

ecosystemcollapseandare"win-win“policiesin

termsofbiodiversityandeconomicoutcomes.A

combinationofcarefullycraftedandcoordinated

policies,particularlythosesupportinginnovation,can

simultaneouslybenefitbiodiversityanddevelopment.

Thepoliciesconsideredinthisreportreduce

Executivesummaryvii

conversionofnaturallandandresultinageneral

increaseinglobalrealGDPin2030thatisestimated

tobeintheorderof$50billionto$150billion.

Themorecountriescooperate；thebetterthe

outcomesare.Theglobalcommunityneedstoput

inplacemeasurestoincentivizesuchcooperation

andtosupportaninclusivetransitionforthose

stakeholderswhoareaffectedbytheeconomic

reformsandfaceopportunitycosts.

Thenatureandclimatechangeagendasare

complementaryandtherearesynergiestobe

exploitedtofostergreen,resilient,andinclusive

development.Thebenefitsofnature-smartpolicy

increasesubstantiallywhenthecarbonsequestration

servicesofnaturearefactoredin.Thisanalysis

highlightstheeconomicandenvironmentalbenefits

tobegainedbyaligningglobalregional,andnational

policiesthataddressbiodiversitylossaswellas

climatechangemitigationandadaptationand

improvelocallivelihoods.

Neglobaldeclineofbiodiversi$and

ecosys/Emservicesisadevelopmentissue

Economiesareembeddedinnatureanddependprofoundlyontheflowof

goodsandservicesitgenerates,suchasfoodandrawmaterials,pollination,

waterfiltration,andclimateregulation.Natureunderpinsall17Sustainable

DevelopmentGoalsandprovidescost-effectivemitigationoptionstotheclimate

crisis.Yet,mostindicatorsoftheextentandhealthofncturalecosystemsare

soundingthealarm.Seventy-fivepercentoftheEarth'sice-freelandsurfacehas

beensignificantlyalteredbyhumanactivity;theabundarceofvertebratespecies

ho$declinedoynearly70percentsincethe1970$(WWF2020);end14ofthe18

assessedcategoriesofecosystemserviceshavedeclinedoverthesameperiod

(IPBES2019)Jhesetrendsthreatenthewell-beinganddevelopmentprospectsof

entirecommunitiesandeconomies,includingthosethatleedthisnaturalcapital

themost—whethertogrowoutofpovertyorremainresiienttonaturaland

economicshocks.

Sinceeconomiesareembeddedinnature,policiestopromoteeconomic

developmentshouldalsobebeneficialtonature.Ourabilitytoproducevaluable

goodsandservicesforagrowingpopulationisboundedoythefactthatwecannot

liveandoperateoutsidenature(Dasgupta2021).Attheheartofthechallengeis

theneedtobringnatureintodecisionmakingatalllevels,toimproveourcollec-

tiveobilityfousethebiosphere'sgoodsondservicesefficientlywhileoilowing

ittoregeneratesothatsuchgoodsandservicesmaybesustainedorenhanced

overtime.

Thisreportpresentsafirst-of-itskindglobalintegratedmodelingexercise

thatdemonstratestheeconomicimportanceofnatureandhelpstheglobal

communitypaintalandscapeofpossiblescenariosoftheinteractionbetween

nature'sservicesandtheglobaleconomyto2030.Recognizingthateconomies

relyonecosystemservicesandthatlossofnature'sassetsstemsfromeconomic

decisions,thisreportpresentsanovelmodelingframeworkthatuseseconomic

datatoestimatehowaneconomymightreacttochangesinselectedecosystem

services.Themodelallowsthestudyoftheimpactofchangesintheseecosys-

temservices—pollination,provisionoftimberandfoodfrommarinefisheries,and

carbonsequestrationbyforests-ontheglobaleconomyondviceversabetween

2021and2030,toinformpolicymaking.

Thisworkrepresentsanimportantsteppingstonetoward“nature-smart1'

economicdecisionmaking.Theprimaryaudienceispolicymakers,notablyminis-

triesoffinance,economicplanning,environment,andagriculture,whofacethe

complextrade-offsinvolvedinmanagementofnaturalcapitalatthecountrylevel

andmustweighthecostsandbenefitsofalternativepolcyresponsestotheglobal

biodiversitycrisis.Asnationsformulateanewsetofglobalbiodiversitytargets

atalandmarkConferenceoftheParties(COP-15)oftheConventiononBiological

Diversity(CBD),thisreportshowsthatnature-smartpolicies,particularlythosesup-

portinginnovation,areawinforbiodiversityandeconomicoutcomes.Theanalysis

alsocontributestotheonalyticolunderpinningsofgreenresilient,andinclusive

development,includingforthepost-COVID-19recovery.

NotacEngisnotanopEon:Nereare

nowinnersunderbusiness-as-usual

Conventionaleconomicmodelsdonotaccountforthedecliningtrendsin

nature'sservicesandthusprovideanoverlyoptimisticscenarioofeconomic

growth.Whenthelossofthoseservicesisincluded,growthinglobalGDPby

2030slowsconsiderably.Thedeclineintheecosystemservicesanalyzed,caused

bytheconversionofnaturallandtocropland,pasturelandandforestplantations,

resultsinalossofglobalrealGDPin2030of$90-225billion[dependingon

whethertheassociatedvalueofnature-basedcarbonsequestrationserviceslost

oreconsidered),whencomparedtoascenariowithnochangeinnature'sservices,

Underthebusiness-as-usualscenario,theworldisprojectedtoloseabout46

millionhectaresofnaturallandandfaceocontinuousdeclineinfishstocks.This

translatesintoadeclineintheecosystemservicesanalyzedinthisreport—pollina-

tion,provisionoftimberandmarinefishstocks—withimplicationsforagricultural

yields,thefisheriessector,andtheoutputofindustriesdependentontimber,

amongothersectors.WhileGDPgrowsinallthescenariosanalyzed,ifincorpo-

ratedintotheeconomicmodel,thedeclineinecosystemservicesresultsinslower

growthandhencealossofglobalrealGDPin2030of$90billion,comparedtothe

baselinescenariowhereecosystemservicesarenotaccountedfor.Iftheimpact

oncarbonsequestrationservicesisalsoconsidered,theprojectedeconomiccost

increasesto$225billion.

Theeconomicdamagesaregreateriftheglobaleconomyisunabletoquickly

adjusttothelossofecosystemservices.Followingashock,economiesadjusfto

anewequilibriumthroughchangestomaiketpricesforgoodsandservicesandthe

quantitiesofsuchgoodsandservicesexchanged,re-orientingdemandondsupply

towardsinputsandoutputslessaffectedbyshocks,bothwithinandacross

countries(throughtrade),However,theimpactofshocksmaybegreaterifmarkets

arelessflexibleinadapting,andeconomicmodelsmightoverestimatehowadap-

tablemarketsare,especiallywithnaturalcapitalthathasfewsubstitutes.Tosee

howtheinabilityofmorketstoadjustcouldoffecltheoutcomesonalyzedinthis

report,moreconservativeassumptionsarealsotested.Underthebusiness-as-

usualscenario,aless-flexibleglobaleconomyloses$152billioncomparedtothe

baselinewithoutecosystemservices(notaccountingforthecarbonsequestration

servicesofnature).Thisrepresentsalossthatis72percenthigherthaninthecase

whereeconomiesmorereadilyadjusttoanewequilibrium.

Neworldcannotafiordthecollapseof

ecosys/Emservices,assuchacollapse

wouldcost2.3percentofglobalGDP

(-$2.7Nillion)annuallyby2030andsome

ofthepoorercounNieswouldbehithardest

Environmentaldegradationcanpushanecosystemtoa“tippingpoint“beyond

whichitwillshifttoanewstateorcollapseentirely.Suchacollapsewouldlead

toalarge-scale,abruptdeclineinecosystemservices.Evenifthelikelihoodofglobal

ecosystemcollapsetodayissmall,thecatastrophiclossesitwouldentailjustify

actiontomitigatesuchrisks.Toassessthebenefitsofconservingnaturalcapitalthe

integratedmodelanalyzesthepotentialeconomicimpactofthecollapseofwild

pollination,marinefisheries,andtimberprovisioninnativeforests(thelatterduetoa

widespreaddiebackoftropicolforestsanditsconversionintosavannah].Theresults

showthatinthescenariowheretippingpointsareexceededforthesethreeservices,

FigureES.l.

Low-incomeandlower-middle-incomecountriesstandtolose

themostinrelativetermsifecosystemservicescollapse

Changein2030realGDPunderthepartialecosystemcollapse

scenariocomparedwiththeno-tipping-pointscenario

A)Byincomegroup(theborsareproportionaltothepopulationin2030)

globalrealGDPin2030contractsby$2.7trillion(-2.3percentannuallyby2030.

mostlyinlow-incomecountries),comparedwiththebaselinescenario(FigureES.ll.

Lowandlower-middleincomecountriesstandtolosethemostinrelative

termsifecosystemservicescollapse,puttingatrisktheirprospectstogrow

outofpoverty.Sub-SaharanAfricaandSouthAsiawouldbehitparticularlyhard

byacollapseinecosystemservices.Thetworegionswouldexperiencethe

greatestrelativecontractionofrealGDP;?.7percentannuallyby2030(-$358

billion)forSub-SaharanAfricaand6.5percent(-$320billion)forSouthAsia.Thisis

duetorelianceonpollinatedcropsand,inthecaseofSub-SaharanAfrica,reliance

onforestproductsalongwithlimitedabilitytoswitchtootherproductionand

consumptionoptionsthatarelessaffectedbythecollapseofselectecosystem

services.Impactsarealsodistributedunevenlyacrossincomegroups:low-and

lower-middle-incomecountriesarethehardesthit,witho10percent(-181billion)

anda7.3percent(-$734billion)dropinrealGDPin2030,respectively.Low-income

andlower-middleincomecountriesalsosufferfromimportantsetbacksintheir

2021-2030growthrates,seriouslyjeopardizingtheirprospectstogrowoutof

poverty.Thefindingsshouldbeseenasafirststeptoastress-testoftheglobal

economyagainsttherisksoflossofbiodiversityandecosystemservices.

Changein2030realGDPunderthepartialecosystemcollapse

scenariocomparedwiththeno-tipping-pointscenario

B)Bygeographicregion(theborsareproportionaltothepopulationin2030)

%chanq?in2030realGDFGlobalchanq?toGDP:-2.35U

-97%popitlBSub-SaharanAfrica

-6.5%1.9BSouthAsa

?3.4%24BEastAsia&Pacific

-3.3%0.7BLatinAmerica/Caribbean

-2.2aMiddleEast/NorthAfrict

-0.7%Europe/CentralAsia

ShareofGDPchangeattributabletc-0.5%ElaNorthAmerica

eachecosystemservice

Forestry卜PollinationFisheriesOthe-drivers

Agloballycoordina/Edpolicyresponse

enablesdevelopment-environmentwin-wins

Nature-smartpoliciesmakeeconomicandenvironmentalsense.Thisanalysis

identifiesosetofpolicypathways(FigureES.2)thatmokeeconomicandenviron-

mentalsense,andthemodeldemonstratesthatthebestoutcomesareachievedif

acombinationofpoliciesisimplemented.Thepoliciesconsideredhavealready

beenimplementedwithsomesuccessandcouldhaveanimportantimpactifthey

aremorewidelyadopted.

FigureES.2.------------------

Schematicoverviewofthepolicyscenarios

Researchef-

Developmento0

Combined

P4P5

policyoptions

Basic

policyoptionso

DomesticforestDecoupledsupportGlobalforest

carbonpaymenttofarmerscarbonpayment

Note:Pl:DecoupledSupporttoFarmers;

P2:DorYiesficForestCdrbOfi(FC)pCvft&At;

P3:GlobalFCpayment;

P4:DecoupledSupporttoFormers+DomesticFCpayment;

P5:DecouptedSupporttoFarmers+GlobalFCpayment:P6:

DecoupledSupporttoFarmers+AgrculturalR&D:

P7;DecoupledSupporttoFarmers?AgriculturalR&D+GlobalFCpayment

PlP2&P3P6&P7

ThefirstpolicytypeistoThesecondpolicytypeistoThethirdpolicytype,whichin

repurposepublicsectorsupportcreateincentivesforconser-theanalysisisusedincombi-

toeconomicactivitiessuchosvation,forexamplebypayingnationwiththeothertwo,isto

agriculture,sothatsuchsupportIcndownersinexchangeforincreasepublicinvestmentin

isnotlinkedtocurrentorfuturetheprotectionofforestcarbonagriculturalresearchanddeve-

productionvolumeorvalue,thussinks.Thiscanbedonethroughlopment(R&D)asanincentive

removingincentivestomaintaindomesticorglobalforesttoincrsaseoutputonexisting

marginallandinproduction.Thiscorbonpoyrrientschemes.agriculturalareas,ratherthan

isanimmediateopportunityThereportlooksateachofexpandingcultivatedareas.

forcountrieslookingtorealignthesemodalitiesinseparate

supporttoagriculturewithsus-policyscenarios.

tainablemanagementofbiodi-

versityandecosystemservices.

Thesethreepolicytypesaretestedindividuallyandincombinationtoassesstheir

impactsonecosystemsandtheeconomy.

Allsevenpolicyscenariosanalyzedreducetheriskofecosystemservices

collapse,deliveringeconomicgains(globalGDPincreasesofupto$150billion

(FigureES?3,verticalaxes),withmostcountriespoisedtogain)andavoiding

upto50percentofbusiness-as-usualconversionofnaturalland(FigureES.3,

horizontalaxes).Agriculturalsubsidiesoftenencouragedegradationbecause

theyarestructuredsothatproductionincreasesassubsidiesincrease.Anature-

smartapproach-decouples"thesubsidysothatfarmersreceivetheincomeeven

whentheyconservetheforestratherthanconvertingittogrowcrops.Reforming

farmersubsidiesbyprovidingsupportbasedonlandholdings(thusdecoupled

fromoutputproducedorinputsused)decreasesnaturallandlossby8percent

between2021and2030,preventingtheconversionofnearly4millionhectares.

Otherpoliciesaresubstantiallymoreimpactfulintermsofavoidinglandconver-

sion.Domesticondglobalforestcarbonpaymentsreducenaturallandlossby26

percent(12millionhectares)and35percent(16millionhectares),respectively.In

thescenariothatcombinesaglobalforestcarbonpaymentschemewithdomestic

subsidyreform,38percentofnaturallandlossisavoided(18millionhectares).

Inadditiontoavoidinglandconversion,decoupledsupporttofarmersand

paymentsforforestcarbonservicesincreaserealGDPby$50billionto$56

billion,withtheformerhavingthelargesteconomicimpact(+$56billion).

Results-basedforestcarbonpaymentsaremuchmoreeffectiveinprotectingland

butprovideslightlylowerreolGDPbenefits(+$50billionto$53billion).Combining

decoupledsupporttofarmerswithcarbonpaymentschemesenhancesoutcomes,in

termsofconservationandrealGDPgrowth(+$53billionto$58billion).

AddinginvestmentinR&Dtothepolicymixresultsinsubstantialeconomic

benefits(+$142billionto$148billion)andconservationbenefits,particularlyin

developingcountries.Low-income,lower-fniddle-income,andupper-mid