Published on 28 September 2020
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ALL natural capital matters

In their comments about a new study on climate-economy interactions, Professor Diane Coyle and Dr Matthew Agarwala note that by focussing solely on carbon, leading climate-economy models have often overlooked other elements of nature, like ecosystems and biodiversity.

Models typically used to analyse climate-economy interactions have paradoxically ignored much of nature’s value. A new study by Bastien-Olvera and Frances Moore explicitly addresses this issue and reveals feedback loops between nature and the climate system that make climate change more costly.

In their comments on the new research, Professor Diane Coyle and Dr Matthew Agarwala note that by focussing solely on carbon, leading climate-economy models have often overlooked other elements of nature, like ecosystems and biodiversity.

With new extensions to the DICE climate model, Bastien-Olvera and Frances Moore show that climate change undermines the ability of other elements of natural capital to support welfare. This makes climate change more costly and supports higher carbon prices and more aggressive emissions reduction.

The research also shows that investing in other elements of natural capital can actually reduce the optimal carbon price, precisely because these natural assets (e.g. forests, wetlands, healthy soils, etc) help to offset the damages of climate change.

This matters for the Wealth Economy because it shows that ALL natural capital matters, not just climate capital. It shows that the current stock of natural capital is well below the optimal level. And most of all, it shows that enhancing natural capital should be a much higher priority on the climate policy agenda.

Authors

Diane Coyle 2018

Professor Diane Coyle

Bennett Professor of Public Policy and Co-Director of the Bennett Institute for Public Policy

Professor Coyle co-directs the Institute with Professor Kenny. She is heading research under the progress and productivity themes. Biography Professor Diane Coyle is the Bennett Professor of Public Policy at...

Matthew Agarwala

Dr Matthew Agarwala

Project Leader: The Wealth Economy

Matthew Agarwala, Economist, Bennett Institute for Public Policy, Cambridge. Matthew Agarwala is an economist interested in wealth-based approaches to measuring and delivering sustainability, wellbeing, and productivity. His research is motivated...

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