Does nature finance pose macroeconomic risks? Analysis using a stock-flow consistent model with land
Youngman, Tom
Authors
Tom Youngman
Contributors
Mario Pansera
Editor
Cristina Vázquez Santos
Editor
Abstract
States, international organisations, financial institutions and businesses are increasingly seeking to mobilise large financial flows to fund ecosystem restoration. This paper asks what these new financial flows mean for the macroeconomy, and how macroeconomic feedback effects should be taken into account when contemplating nature finance programmes. I augment a simplified version of ecological stock-flow-consistent model, DEFINE, with a simple land module. I simulate scenarios representing three different programmes of nature-based solution (NBS) spending through three implementation channels: public employment, public-private partnership and private enterprise.
I find spending on nature restoration significantly boosting output, particularly when land restoration costs are high and policy targets outcomes rather than spending levels. The extra economic activity from this feedback risks further primary habitat loss but is very unlikely to prevent nature finance programmes making net improvements to ‘sink’ land area except in very high growth scenarios. Better greenhouse gas emissions specification is required to assess whether benefits of the net gains in sink land outweigh the harm from further appropriation of undisturbed habitats.
Publicly funded increases to NBS spending increase the public debt to GDP ratio. The stimulus from privately funded increases to NBS spending causes a small decrease in the public debt to GDP ratio. Firm leverage declines however NBS is funded. NBS spending causes the wage share to decline slightly, but less so when nature restoration is delivered through public employment.
Presentation Conference Type
Conference Paper (published)
Conference Name
ESEE-Degrowth 2024: 15th Conference of the European Society for Ecological Economics and 10th International Degrowth Conference
Start Date
Jun 18, 2024
End Date
Jun 21, 2024
Online Publication Date
Jan 30, 2025
Publication Date
Jan 30, 2025
Deposit Date
Jan 30, 2025
Publicly Available Date
Mar 1, 2025
Peer Reviewed
Not Peer Reviewed
Pages
1045 - 1049
Book Title
Science, Technology, and Innovation beyond growth: Cultivating collective creativity for a sustainable future. Conference Proceedings and Abstracts
Take urgent action to combat climate change and its impacts
Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss
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Does nature finance pose macroeconomic risks? Analysis using a stock-flow consistent model with land
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