Impact of Ecosystem Services Loss to Macroeconomic Productivity

Abstract

Ecosystem service losses pose an enormous threat not only to the environment, but also to businesses and society. The Duke student team helped its client, Ortec Finance, assess frameworks around ecosystem service losses and risks to different business sectors by conducting a literature review, describing analysis methodologies, and providing recommendations. The literature review showed that quantifying the economic impacts of ecosystem services is effectively done through either partial-equilibrium or computable general-equilibrium models (CGE’s). The foremost publication regarding CGE models was found to be a report by the World Bank, which provides insights into how countries and economic sectors will differ between 2021 and 2030 due to BES losses. Additional literature showed consensus on three sectors: agriculture, raw material mining, and manufacturing are at the highest risk from ecosystem service losses. A flowchart was created to easily summarize how different ecosystem services link to various economic sectors. Geopolitically, developed countries in North America and Europe have low direct GDP dependency on BES. Other developing countries like China, India, and Brazil all have moderate to high GDP dependency. In comparing quantification methodologies used to analyze the economic impacts of ecosystem services, we recommended that Ortec Finance focuses on the Swiss Re BES Index as well as the ENCORE tool. The results from these two main approaches conducted by this report should feed into the expansion of Ortec Finance’s proprietary tool, Climate Maps, on ecosystem services.