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The cost of failing to protect natural capital

'We have some major environmental challenges coming our way, and our economy needs to be future-proofed'
Katie Hill - Editor-in-Chief, My Green Pod
The cost of failing to protect natural capital

Extreme weather and other possible scenarios that lead to environmental decline could have a significant impact on UK jobs and the economy if left unchecked, and must be factored into governmental and business decisions. These are the findings of a new WWF report that uses new risk mapping techniques to look at the cost of inaction by 2050.

Without action to protect UK water supplies, a future drought could reduce UK GDP by around £35bn (1%) and 354,000 jobs may be lost, according to new research by ‌AECOM Infrastructure & Environment and Cambridge Econometrics, on behalf of WWF.

Risk to properties

The report, Developing and piloting a UK Natural Capital Stress Test, shows the potential impact on the UK economy in the year 2050 if actions aren’t taken to curb or adapt to environmental changes and water supplies aren’t managed sustainably.

It also found that, if the UK followed a business-as-usual scenario – paying little or no heed to population growth, climate change and continued housing development on flood plains – a repeat of the 2012/13 winter floods in 2050 would affect many more properties.

It would have an impact on 2.5m homes – more than double (+129%) the number affected in 2012/13; 770,000 non-residential properties (mostly businesses) – 45% more than in 2012/13; 783 care homes – 78% more than in 2012/13 and 1,652 schools – 48% more than in 2012/13.

This could lead to a 70% increase in damages to £2.2bn – up from the estimated £1.3bn cost of the 2013/14 flood.

Mitigating risks

The report shows the economic impact of environmental decline by assessing the costs of events that impact on land, rivers and Nature. The economic estimates were based on an adverse but plausible scenario of environmental decline that assumes an international failure to reduce greenhouse gas emissions sufficiently, keeping temperatures on course for 4°C of global warming.

The scenario also assumes a reduction in public subsidies for UK agriculture, growth in demand for water and a significant increase in the frequency and severity of pest and disease outbreaks in the UK.

The overall aim of the study was to develop and pilot an approach that would allow the UK government and business to identify the potential impacts of environmental changes on the economy in order to help prioritise and inform efforts to mitigate the most significant risks. At the moment, far too little is being done to prepare for these risks, despite warnings from WWF and others.

‘We have some major environmental challenges coming our way, and our economy needs to be future-proofed. From increased risks of flooding to soil erosion, drought and air pollution, our environment is changing quicker than people think. This is bad for business, bad for our national economy and bad for jobs. But businesses and governments across the UK are giving it too little consideration when making decisions.’

Chief adviser on economics and development at WWF

Impact on food

The report also found that increased extreme weather events such as floods, wildfires, poor weather and heatwaves and disease could have a major impact on food production, resulting in potential costs of over £33bn (a 0.9% reduction in GDP) and affecting 347,000 jobs.

The stress testing approach was adapted a widely used technique that considers the interdependencies between different sectors of the economy, quantifying for the first time how environmental changes would affect GDP, growth, jobs and other economic indicators in the future.

The work was undertaken by a highly respected team from AECOM and Cambridge Econometrics, with input from government, businesses and other experts. It was also peer reviewed by a team of academic advisers.

In a joint statement, Dr Steve Smith, Technical Director at AECOM, and Richard Lewney, Chairman of Cambridge Econometrics, said, ‘Our standard measures of prosperity take no account of the hidden costs of our impact on the natural environment. This report estimates the economic costs to the UK by 2050 of a failure to protect the natural capital on which all life depends. We hope these things do not happen, that we take a different path, but the fact is that it is clear how much worse things could get, unless we take action now to safeguard our natural environment.’

Click here to read or download the full WWF report.

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