Biosphere economics

The Beijer Institute is constantly seeking to promote a deeper understanding of the interplay between ecological systems and social and economic development, a question which is permeating all our research programmes. Grasping how the economy interplays with nature’s complexity is essential to this understanding. Recently we have focused on investigating how economic interests interact with potential ecosystem regime shifts, the water cycle and intertwined global environmental problems. Understanding economic dynamics is key in designing public policies that are successful in actually achieving their goals and in gaining social acceptance and respect.

Photo: IStock/nazar_ab

Economic dimensions of regime shifts

The policy implications of ecosystem regime shifts, a core topic of Beijer research for many years, have been difficult to determine to date, because many (but not all) economic policies need to be substantially adapted for resources or ecosystems that can undergo a regime shift, compared with policies designed for systems that do not shift. Beijer Institute researchers are helping to generate a more synthesised understanding of this evolving topic.

In a recent book chapter, Anne-Sophie Crépin considers the role of economics in approaching seven resilience principles (from Biggs et al. 2015) and suggests adding two more principles related to managing strategic decisions and property rights, which are likely to influence social-ecological system resilience, due to their key role in economic dynamics.

Given the large uncertainties surrounding future developments of these ecosystems, a recurring question is whether or not policies should be more precautionary. The answer depends on many different aspects: whether people can influence the risk of a regime shift occurring, the impact of the shift, the possibility of slowly changing dynamics and more. We have now shown that the outcome also depends on how resource users value what they have today, compared with what they may have in the future. And our analysis suggests that appropriately dealing with resource users’ time preferences will be important in ensuring sustainable resource use

Land and water resources

Anne-Sophie Crépin participates in a SESYNC project Advancing integrated process-based modelling of complex socio-environmental systems, with the aim of improving decision support for policy makers who deal with land and water resources. Current decision support focuses on each aspect separately, but all aspects are intertwined so current decisions are based on partial and biased information. The project will deliver comprehensive integrated models of ecosystems, hydrology and economics that also incorporate relevant thresholds.

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Collaborations have been initiated with hydrologists to improve methods for integrating atmospheric moisture into transport modelling and economics. They submitted a joint application for funding to the Swedish Research Council in March 2020.

Project members: Anne-Sophie Crépin (Beijer Institute), Samuel C. Zipper (Kansas University), Lan Wang Erlandsson (Stockholm Resilience Centre).

Anne-Sophie Crépin is also collaborating with Juan Carlos Rocha (SRC) to model cascading regime shifts in resource and pollution systems and their implications for policy.

Integrated assessment models of global environmental problems

Research has primarily been concerned with extending standard climate-economy integrated assessment models to capture additional environmental processes and problems. The research methods employed include a variety of modelling approaches, using static, dynamic and stochastic general equilibrium frameworks of the economy-environment interaction. Much of this research has been conducted within the four year project Global biophysical processes for climate-economy modelling, funded by the Ragnar Söderberg Foundation, which has now come to an end.

Valuation of biodiversity and resilience
From the project start, there was a realisation that the role of biodiversity, a central planetary boundary process, was particularly difficult to include in the standard climate economy framework. A study published in Spatial Economic Analysis can be seen as a first attempt to address this problem, by considering the example of diversity in pollination services in particular.

Carbon pricing and planetary boundaries
Inspired by the overarching research objective of the project a paper in Nature Communications assesses how the principal drivers of the planetary boundaries would be affected by a global carbon pricing policy. In particular, it is established that the common notion of climate change mitigation as a matter of “applying the brakes” to greenhouse gas emissions may falter with a multi-boundary perspective, as it may inadvertently redirect economic activities in ways that exacerbate other planetary processes. By building an integrated global economic model, the authors find that the case for carbon pricing globally is actually even stronger in a multi-boundary world, since it can ameliorate many other planetary pressures (apart from climate change). Extending the model with a biofuel policy, shows that, a combination of global carbon price and a biofuel policy can alleviate all the planetary pressures.

Project members (Beijer Institute): Johan Gars, Gustav Engström, Chandra Kiran Krishnamurthy, Therese Lindahl

Recent publications:
Crépin, A.-S. 2019. Complexity, resilience and economics. In: V. Galaz, editor. Global Challenges, Governance, and Complexity: Applications and Frontiers. Edward Elgar Publishing, Cheltenham, UK. Pp. 166-188.

Arvaniti, M., A.-S. Crépin, and C. K. Krishnamurthy. 2019. Time-consistent resource management with regime shifts. CER-ETH Economics working paper series 19/329. Center of Economic Research, ETH Zurich, Switzerland

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Engström, G., Å. Gren, C.Z. Li, and C. Kiran. 2020. Valuing biodiversity and resilience: An application to pollinator diversity in the Stockholm region. Spatial Economic Analysis 15(3):238-261.

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Engström G., J. Gars, C. K. Krishnamurthy, D. Spiro, R. Calel, T. Lindahl and B. Narayanan. 2020. Carbon pricing and planetary boundaries. Nature Communications 11(4688).

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