Natural capital is lacking in climate policy

Clean air, clean water and a functioning ecosystem are considered invaluable. Nevertheless, the economic value of nature remains elusive in the cost-benefit analysis of climate policy regulations and efforts to reduce greenhouse gases.

A study published today in the journal Nature Sustainability incorporates these insights from sustainability science into a classic climate change cost model. Led by the University of California, Davis, the study shows that accounting for the economic value of nature has major implications for climate policy and that the costs of climate change could be partially mitigated by investing in natural capital.

“It may seem abstract, with terms like‘ natural capital, ’but those are real things,” said senior author Frances Moore, a professor in the Department of Environmental Science and Policy at UC Davis. “What we are talking about are the thousands of species that are at high risk of extinction and major changes in the ecosystem services on which we depend for our lives and our economy. At the end of the day, this article addresses some fundamental questions of how humans depend on nature for their own good. . “


Climate economic models typically represent an economy made up of two building blocks: human capital (labor) and produced capital, such as buildings and machinery. This study includes a third building block – natural capital – that includes natural systems and healthy species habitats. Natural capital is transformed into tangible benefits for humans, such as erosion control, and intangible benefits, such as preserving forests for future generations.

“If they are lost, such natural processes cannot be easily replaced or replaced,” said lead author Bernardo Bastien-Olvera, Ph.D. candidate for UC Davis Geography Graduate Group. “The associated economic costs of that damage loss are in a way that is not currently represented in climate economic models or policies.”

The authors found that under plausible assumptions about how natural capital supports economic production and human well-being, climate damage to natural systems requires rapid mitigation. Most previous analyzes have ignored the pathways by which natural systems support well-being and their unique vulnerability to climate change – potentially missing out on a critical piece of climate damage.


Federal agencies use the “social price of carbon” to represent the long-term damage caused by a tonne of CO2 emissions in a given year. The metric is widely used in cost-benefit analyzes and climate and energy policy. However, standard estimates only roughly take into account environmental damage and do not fully take into account the unique and long-term costs of climate impacts on natural systems. Therefore, the study reveals that the federal social cost of carbon could be too low.

“With this new framework, we are more aware of the need to limit emissions,” Bastien-Olvera said. “We calculate the emission path that maximizes social welfare in the model. This path limits warming to 1.5 degrees Celsius by 2100, in line with the Paris Agreement targets. The clues lead us to the same conclusion – the need for urgent emission reductions to limit warming “.


This study was supported by the National Science Foundation, the Hellman Fellowship, the UC Davis John Muir Institute for the Environment, and the Fulbright-García Robles Fellowship

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