Continuing with a ‘business as usual’ approach to the climate crisis will cost the global economy trillions of euros, a new study estimates.
In a month of dire warnings about the future environmental consequences of our current economic course, the Global Futures Initiative (GFI) – a partnership between the Worldwide Fund for Nature (WWF), the Global Trade Analysis Project and the Natural Capital Project – joined the siren call.
The GFI estimated that the economic losses associated with the degradation of nature caused by a ‘business as usual’ scenario would amount to approximately €9 trillion by 2050, reaching some €440 billion a year by then.
Despite these warnings and despite the EU’s pledge to set in motion a European Green Deal, it appeared to be business as usual in Brussels when MEPs voted on Wednesday to approve 55 gas infrastructure projects proposed by the European Commission as eligible for funding from the European Investment Bank.
The disappointing vote came in spite of sustained campaigning by environmentalists and an impassioned plea from Mark Ruffalo who was at the European Parliament last week to talk about his new film Dark Waters and the problems associated with ‘forever chemicals’.
Out of the 140 countries surveyed, the 10 worst affected by nature loss would mostly be in the so-called Global South, with Madagascar topping the league. The European country that will experience the heaviest hit would be Portugal, while in monetary terms, the UK would carry the greatest burden in Europe.
In addition, this loss in nature’s bounty would lead to large price hikes in many key commodities, such as timber (+8%), cotton (+6%), oil seeds (+4%) and fruit and vegetables (+3%).
“This is a very interesting piece of research because it studies the effects of climate change on ecosystems in a very deep way and discovers that the economic impact is greater than most ‘business as usual’ thinking used to assume,” says Margarita Mediavilla, professor of system dynamics and senior scientist with LOCOMOTION, an EU-backed project which is modelling scenarios for the transition towards a carbon-neutral and sustainable future which take account of the profound two-way relationship between the environment and the economy.
In contrast, a ‘global conservation’ scenario, in which biodiversity and ecosystems are conserved, would deliver a net economic gain of €0.2, generating a net windfall of nearly €450 billion by 2050.
Could be worse
The authors of the GFI study are at pains to emphasise that their estimate is extremely conservative. This is because the model covers only six ecosystem services and, thus, does not estimate the economic cost associated with the loss of other vital functions served by nature.
As an illustration of this point, a study in Nature estimated that leaving the rainforest intact would deliver a profit of $8 billion a year to the Brazilian economy alone, not to mention the knock-on benefits to the global economy of the Amazon’s rain-generating and climate-stabilising effects. “The forest should unambiguously be saved when measured in a purely economic sense,” the study’s authors concluded, noting that the figure they arrived at only captures a fraction of “the immeasurable overall value of the Amazon forest”.
Another factor which could lead to the underestimation of future impacts is the nature of the GFI model itself. Although it is innovative in how it takes account of some of the feedback between ecosystems and the economy, it does not appear to factor in all of them and makes too many conventional assumptions about the economy, according to Mediavilla.
“It is based on a conventional economic model with a linear structure and no real energy-economy-environment feedbacks,” she explains. “This means that economic growth is assumed to be independent on the natural world, and they attribute the corresponding economic damage to the impact of climate change… This study assumes, as well, that there are no restrictions on the supply of fossil fuels and other non-renewable energy resources (we don’t think this is realistic).”
“All this makes the conclusions of this model biased towards optimistic results,” Mediavilla concludes. “This is OK as a first approach… but it is still not a model of ecological economics, a model that really introduces nature and ecosystems into the core of economic formulations, as the Locomotion model intends to do.”
Tip of the iceberg
Moreover, the GFI model does not factor in the possibility of ecosystems reaching or surpassing their ‘tipping points’. A prime example is rainforests. Some scientists fear that the Amazon may reach the point where it no longer produces enough rain to sustain itself as early as 2021, if current trends continue.
‘Our Future on Earth’ – a new report by Future Earth which surveyed 222 leading scientists from around the world – highlighted the interplay and feedback loops between five environmental crises. It warned that extreme weather, species loss, water scarcity and food production crises could intensify one another, potentially “cascade to create global systemic collapse”.
Even if we somehow manage to avoid these tipping points, the longer humanity continues to trash the environment, the costlier it will become to restore it to a healthy balance. For example, reforesting the Amazon, which is inferior to keeping the forest intact, costs at least $2,000 per acre, while cleared land sells for under $1,000 an acre, a losing economic proposition in the long term.
Just as there are negative tipping points, positive ones also exist. “While our problematic practices in one area can impact many other areas, the good news is that so can our restorative ones,” observe the authors of Our Future on Earth. ”Improving biodiversity in a wetland ecosystem can also reduce water pollution and soil erosion, and protect crops against storm damage, for instance,” they cite by way of example.
However, escaping the gravitational pull of this vicious cycle and entering a virtuous one requires decisive global action. “We need urgent, global leadership and immediate action to change the way we use land, to invest in the restoration of nature, to cut emissions and critically to stop destroying forests for food production,” said WWF’s Katie White.
Negotiating and renegotiating environmentally damaging trade deals is one effective solution, environmentalists urge. One major example is the recently negotiated EU-Mercosur trade deal, which currently awaits ratification.
“Rather than ratifying the EU-Mercosur trade deal that would fan the flames only further, erect new trade tariffs based on the carbon emissions associated with the import of products such as soy, leather or beef,” insists Nick Meynen, policy officer for environmental and economic justice at the EEB. To show that its intention is not to punish Brazil and other South American countries, the EU could use the revenues generated by these tariffs to fund rainforest restoration and stewardship initiatives.