The Economic Feedbacks of Loss of Biodiversity and Ecosystems Services

The topic of biodiversity loss has been the subject of a vast and growing scientific and economic literature. Species are estimated to be going extinct at rates 100 to 1000 times faster than in geological times. Globally, terrestrial biodiversity is projected to decrease by a further 10% by 2050. As with biodiversity, the planet has also experienced major losses in the services derived from ecosystems. During the last century, for example, the planet has lost 50% of its wetlands, 40% of its forests and 35% of its mangroves. Around 60% of global ecosystem services have been degraded in just 50 years. While there is a large and growing literature on the values associated with the services that ecosystems provide, much less has been done in analysing the causality in the other direction – i.e. in assessing the linkages from changes in ecosystem services to the functioning of the economy. This report contributes to an effort to identify environmental pressures under different structural and environmental policy assumptions and the associated damages that will result under different economic scenarios to 2050. Based on these it aims, inter alia, to examine how the environmental pressures may affect economic growth paths. This report contributes to that goal by looking at the consequences of the loss of biodiversity and ecosystem services. It does so by reviewing the main findings in the literature and key issues involved in the valuation of biodiversity and ecosystems services, as well as key issues involved in linking loss of biodiversity and ecosystems services to economic activity. The report finishes by identifying the main opportunities and obstacles in including biodiversity and eco-system services into a dynamic general equilibrium framework.