Introduction

World population in 1950 was around 2.5 billion and global output of final goods and services, at 2011 prices, a little over 9.2 trillion international dollars (dollars at purchasing price parity, PPP) (Figures 4.1 and 4.2). As noted in Chapter 0, the average person’s annual income was about 3,300 dollars PPP, a high figure by historical standards (Reference MaddisonMaddison, 2018) (Figure 4.3). Since then the world has prospered beyond recognition. Life expectancy at birth in 1950 was 46; today it is above 72. The proportion of the world’s population living in absolute poverty (currently 1.90 dollars PPP a day) has fallen from nearly 60% in 1950 to less than 10% today (World Bank, 2020a). In 2019, the global population had grown to over 7.7 billion even while global income per capita had risen to 15,000 dollars PPP (at 2011 prices). The world’s output of final goods and services was a little above 120 trillion dollars PPP (at 2011 prices), meaning that globally measured economic activity had increased 13-fold in only 70 years, none of which had been remotely experienced before (Chapter 0).

Figure 4.1 Global Real GDP since 1750

Source: Our World in Data based on World Bank (2020a), Reference MaddisonMaddison (2018), Reference Bolt, Inklaar, de Jong and van ZandenBolt et al. (2018) and Review calculations.

Figure 4.2 Global Population since 1750

Source: Reference MaddisonMaddison (2010), United Nations Population Division (2019) and Review calculations.

Figure 4.3 Global Real GDP Per Capita since 1750

Source: Our World in Data based on World Bank (2020a), Reference MaddisonMaddison (2018), Reference Bolt, Inklaar, de Jong and van ZandenBolt et al. (2018) and Review calculations.

This remarkable achievement has, however, come in tandem with a massive deterioration of the biosphere. This chapter collates scientific evidence that points to this deterioration (Section 4.1) and then constructs a heuristic device for expressing the global demand for the biosphere’s goods and services per unit of time and the rate at which the biosphere supplies them (Sections 4.2, 4.3 and 4.4). The latter could be thought of as the biosphere’s regeneration rate.Footnote ¹¹⁴ We call the difference between demand and supply the Impact Inequality (Expression 4.1). That difference has been widening in recent decades. Because demand is decomposed in Expression (4.1) into its several factors, the Impact Inequality points to policy levers that can help steer the global economy toward equality between supply and demand on a sustainable basis, which would convert the Impact Inequality into an Impact Equality. Attaining Impact Equality should be a minimum requirement of the United Nations’ Sustainable Development Goals (SDGs). The chapter offers a way to construct quantitative estimates of what has to happen as a minimum if the SDGs are to be sustainable.

4.1 Depreciating the Biosphere

In Chapter 2 (Box 2.3) we offered a qualitative argument, based on crude estimates of own rates of return on primary producers were presented and compared with own rates of return on composite baskets of financial assets to signal that global investments in recent decades have been enormously skewed against Nature. Three related types of evidence have been offered by environmental scientists and one (also related) by economists that vastly enrich that finding. They show that there has been, for some decades, an enormous overshoot in the demands we make of the biosphere.

4.1.1 The Anthropocene and Species Extinction

One route to examining our demand overshoot involves the study of the Earth’s biogeochemical signatures. In a wide-ranging survey, Reference Williams, Zalasiewicz, Haff, Schwägerl, Barnosky and EllisWilliams et al. (2015) divided the evolution of the biosphere into three stages: (1) a microbial stage from about 3.5 billion years ago to about 650 million years ago; (2) a metazoan stage, evident by 650 million years ago when the oxygen level in the atmosphere had begun to rise; (3) the modern stage, starting with the use of stone stools by our ancestral Hominids some 2.6 million years ago and accelerating since the beginnings of agriculture some 14,000 years ago. The authors characterise the current face of the modern stage as (i) global homogenisation of flora and fauna; (ii) a single species, Homo sapiens, commanding 25–40% of net primary production (NPP) and also mining fossil fuels to overcome photosynthetic energy constraints; (iii) human directed evolution of other species; and (iv) a rising and less modular interaction of the biosphere with the global human enterprise. The authors suggest that these features of today’s biosphere point to a new era in the planet’s history that could persist over geological timescales.

In a review of evidence from the past 11,000 years (the Holocene), Reference Waters, Zalasiewicz, Summerhayes, Barnosky, Poirier, Galuszka, Cearreta, Edgeworth, Ellis, Ellis, Jeandel, Leinfelder, McNeill, Richter, Steffen, Syritski, Vidas, Wagreich, Williams, Zhisheng, Grineveld, Odada, Oreskes and WolfeWaters et al. (2016) have taken a closer look, by tracking the human-induced evolution of soil nitrogen and phosphorus inventories, and carbon dioxide and methane in sediments and ice cores. The authors reported that the now-famous figure of the ‘hockey stick’ that characterises time series of carbon concentration in the atmosphere is also displayed by time series of a broad class of global biogeochemical signatures (Reference Masson-Delmotte, Zhai, Pörtner, Roberts, Skea, Shukla, Pirani, Moufouma-Okia, Péan, Pidcock, Connors, Matthews, Chen, Zhou, Gomis, Lonnoy, Maycock, Tignor and WaterfieldIPCC, 2018). They display a flat trend over millennia until some 250 years ago, when they begin a slow increase that continues until the middle of the 20^th century, when they show a sharp and continuing rise. The trends in global economic activity over the past 70 years that we have summarised above and displayed in Figures 4.1 and 4.2 are entirely consistent with these findings.Footnote ¹¹⁵ Reference Waters, Zalasiewicz, Summerhayes, Barnosky, Poirier, Galuszka, Cearreta, Edgeworth, Ellis, Ellis, Jeandel, Leinfelder, McNeill, Richter, Steffen, Syritski, Vidas, Wagreich, Williams, Zhisheng, Grineveld, Odada, Oreskes and WolfeWaters et al. (2016) suggested that the mid-20^th century should be regarded as the time we entered the Anthropocene. Figure 4.4 summarises the time profile of key anthropogenic markers that are indicative of the Anthropocene.Footnote ¹¹⁶

Figure 4.4 Magnitude of Key Markers of Anthropogenic Change Indicative of the Anthropocene

Source: Reference Waters, Zalasiewicz, Summerhayes, Barnosky, Poirier, Galuszka, Cearreta, Edgeworth, Ellis, Ellis, Jeandel, Leinfelder, McNeill, Richter, Steffen, Syritski, Vidas, Wagreich, Williams, Zhisheng, Grineveld, Odada, Oreskes and WolfeWaters et al. (2016). Permission to reproduce from The American Association for the Advancement of Science (AAAS).

One indelible signature of the Anthropocene is species extinction. As noted previously, there are 8 to possibly 20 million or more species of eukaryotes, but only about 2 million have been recognised and named (Reference Raven, Al-Delaimy, Ramanathan and SorondoRaven, 2020). Current extinction rates of species in various orders are estimated to have risen to 100–1,000 times the average extinction rate over the past tens of millions of years (the ‘background rate’) of 0.1–1 per million species per year (expressed as E/ MSY), and are continuing to rise.Footnote ¹¹⁷ In absolute terms, 1,000 species are becoming extinct every year if 10 million is taken to be the number of species and 100 E/MSY the current extinction rate.

Extinction rates are inferred from comparisons with fossil records in groups that have hard body parts, like vertebrates and molluscs, and from empirically drawn relationships between the number of species in an area and the size of the area (Box 4.1). But the latter relationships are known to vary substantially among communities and habitats, which is why, as the range shows, there are great uncertainties in the estimates. Despite the uncertainties, the figures put the scale of humanity’s presence in the biosphere in perspective.Footnote ¹¹⁸ The figures also tell us why Earth scientists and ecologists say we are witnessing the sixth great biological extinction since life began.Footnote ¹¹⁹

Box 4.1 Deforestation and Species Extinction

Human induced habitat destruction is today the leading cause of species extinction. A quarter of all tropical forests have been cut since the Convention on Biodiversity (CBD) was ratified 27 years ago. Reference Pimm and RavenPimm and Raven (2000) observed that generally speaking, many of the species found across large areas of a given habitat reside in small areas within it. That means habitat loss initially causes few extinctions, but the numbers rise as the last remnants of habitat are destroyed. At current rates of habitat destruction, the peak of extinctions may not occur for a long while, even decades.

The above reasoning follows also from species-area graphs familiar from island biogeography, which have the broad features of power functions. Writing the number of species by S and area by A, their relationship can be approximated as a two-parameter power function

$S=\alpha A^{\beta },\alpha >0,0<\beta <1$(B4.1.1)

Reference RosenzweigRosenzweig (1995) reported that for birds, ants and plants β has been found to be in the region 0.2–0.8.Footnote ¹²¹ To see the salience of species-area relationships for estimating extinction rates, here is a rough estimate of extinctions that can be expected from the continuing destruction of tropical rainforests.Footnote ¹²²

Of the approximately 10,000 bird species today, some 5,000 inhabit tropical rainforests. As a reasonable approximation we set β = 0.25 in equation (B4.1.1). Suppose a further 50% of tropical forests were destroyed in the next 100 years. It would mean a loss of about 13% of bird species there, which would amount to 650 species. Other things equal, extinction of 650 species of birds in 100 years out of a total of 10,000 species of birds yields a figure of 650 E/MSY. That is either 65 times or 650 times the background extinction rate, depending on whether that rate is taken to be 0.1 E/MSY or 1 E/MSY.

Suppose, however, that humanity is able to restrain itself in the future and limits the destruction of tropical forests to only a further 25%. That would mean an eventual extinction of 6% of bird species, that is, 300 species. That is either 30 times or 300 times the background extinction rate, depending on whether that rate is taken to be 0.1 E/MSY or 1 E/MSY.

Suppose for a moment too, that humanity is able to come to grips with species extinction and limits tropical deforestation to only a further 0.8% over the next 100 years. That would mean an eventual extinction of 0.1% of bird species, that is, 10 species. Even that is 10 or 100 times the background extinction rate, depending on whether that rate is taken to be 0.1 E/MSY or 1 E/MSY. It is clear that destruction of tropical rainforests has to come to a complete halt if the extinction rates of birds are to be brought down to anything like background rates of species extinction. And we have not accounted for the millions of other, uncounted species that are being extinguished in those forests and elsewhere.

Species-area relationships allow one to estimate, albeit very crudely, extinction rates that follow habitat destruction. But one can flip the reasoning and ask what limits should be set on habitat destruction if bounds are set on further species extinction. There is a temptation to do that because one can then set the bounds by relating them to the background rate, as we have just done (Reference Rounsevell, Harfoot, Harrison, Newbold, Gregory and MaceRounsevell et al. 2020).

But it is doubtful that the line of reasoning is fruitful. Even expert knowledge is so incomplete about species numbers and their distribution and mix, that setting extinction bounds would not provide a guide to policy. For example, the recorded number of species of mites is around 45,000 and there may perhaps be 1 million more; of nematodes around 25,000 and 500,000 more; and of fungi round 100,000 and 2.2 to 3.8 million more (Reference Mueller and SchmitMueller et al. 2007; Reference Kiontke and FitchKiontke and Fitch, 2013; Reference Walter and ProctorWalter and Proctor, 2013; Reference Hawksworth and LückingHawksworth and Lücking, 2017).Footnote ¹²³ There is vast uncertainty in these numbers. Moreover, unlike habitats, species numbers cannot be observed directly. So, it is not possible to place bounds on species extinction rates as policy targets when the number of species lies within a large range (perhaps 8 to 20 million). In contrast, habitat destruction can be observed and verified. The approach taken by the CBD in the Aichi Biodiversity Targets of 1992, which was to set limits on habitat destruction and specify Protected Areas is in line with this reasoning. That the targets are far from being met is not a fault in reasoning, it is, as in the case of international targets on carbon emissions, an inability of countries to design an enforcement mechanism.

Judged by what is known about relatively well-studied groups (terrestrial vertebrates, plants), some 20% of the species could become extinct within the next several decades, perhaps twice as many by the end of the century. It is estimated that 84 mammal species have become extinct since 1500 and 32 species of mammal have gone extinct since 1900 (IUCN, 2020; Reference Pimm, Raven, Dasgupta and McIvorPimm and Raven, 2019).Footnote ¹²⁰ In their recent survey of population data on nearly 30,000 species of terrestrial vertebrates, Reference Ceballos, Ehrlich and RavenCeballos, Ehrlich and Raven (2020) have estimated how many are on the brink of extinction. Their criterion was populations with fewer than 1,000 individuals. By this measure, 515 species are on the brink, representing 1.7% of the vertebrates on the authors’ survey list. If extinction follows at the same rate, the population of terrestrial vertebrates will halve in about 40 years. But the rate is likely to increase at an accelerated rate, for several reasons. First, human pressure on the biosphere is increasing (see below); second, the distribution of those species on the brink coincides with hundreds of other endangered species, surviving precariously in regions with high human impact; and third, close ecological interactions among species tend to move other species toward annihilation – extinction breeds extinction. Assuming all species on the brink have experienced similar trends, the authors estimate that more than 237,000 populations of those species have vanished since 1900.

4.1.2 Safe Operating Distances from Planetary Boundaries

Further evidence of the biosphere’s degradation is adduced from a study of Earth System processes. The idea has been to identify processes of the biosphere that are critical for maintaining the stable state we experienced in the Holocene. Reference Rockström, Steffen, Noone, Persson, F. S. Chapin, Lenton, Scheffer, Folke, Schellnhuber, Nykvist, de Wit, Hughes, van der Leeuw, Rodhe, Sörlin, Snyder, Costanza, Svedin, Falkenmark, Karlberg, Corell, Fabry, Hansen, Walker, Liverman, Richardson, Crutzen and FoleyRockström et al. (2009) identified nine biophysical processes that are critical for Earth System functioning. The authors’ proposal was to set quantitative boundaries for each, beyond which the Earth’s Holocene state would be put at further risk, making the move to the Anthropocene firmer. The authors named the markers that may be used to check whether the processes are undergoing rapid change planetary boundaries. A planetary boundary is not equivalent to a global threshold or tipping point. In any case, not all nine key processes are known to possess single definable thresholds, and for those where a threshold is known to exist, there are uncertainties about where they might lie. Boundaries are placed upstream of these thresholds at the safe end of the zone of uncertainty.Footnote ¹²⁴

Although not all the nine processes have single identifiable markers, crossing the boundaries increases the risk of large-scale, potentially irreversible, environmental changes. Four of the nine processes have taken the planet into regions the authors regard as outside safe operating space, meaning that there is now increasing risk of a significant change from the biosphere’s conditions in the Holocene. Biosphere integrity (for which one may read ‘biodiversity’) and nitrogen and phosphorus cycles have exceeded their boundaries farthest. But land-use change and climate change are also outside their safe operating space (Figure 4.5).

Figure 4.5 Critical Earth System Processes and their Boundaries

Source: Lokrantz/Azote based on Reference Steffen, Richardson, Rockström, Cornell, Fetzer, Bennett, Biggs, Carpenter, de Vries, de Wit, Folke, Gerten, Heinke, Mace, Persson, Ramanathan, Reyers and SörlinSteffen et al. (2015). Note: P = phosphorus; N = nitrogen; BII = Biodiversity Intactness Index and E/MSY = extinctions per million species per year.

Unravelling the notion of biosphere integrity has proved problematic. As Figure 4.5 shows, Reference Rockström, Steffen, Noone, Persson, F. S. Chapin, Lenton, Scheffer, Folke, Schellnhuber, Nykvist, de Wit, Hughes, van der Leeuw, Rodhe, Sörlin, Snyder, Costanza, Svedin, Falkenmark, Karlberg, Corell, Fabry, Hansen, Walker, Liverman, Richardson, Crutzen and FoleyRockström et al. (2009) had identified it with the extinction rate of species per million per year (E/MSY). One problem with the use of this metric is that extinction rates are estimated most often for vertebrate species (only amounting to <2% of described species). Reference Mace, Reyers, Alkemade, Biggs, Chapin, Cornell, Díaz, Jennings, Leadley, Mumby, Purvis, Scholes, Seddon, Solan, Steffen and WoodwardMace et al. (2014) have argued moreover that extinction rates do not reflect the genetic library of life, nor the functional diversity of ecosystems, nor the conditions and coverage of Earth’s biomes. The authors’ observations speak to the markers of biodiversity we explored in Chapters 2 and 3. We see below that those markers reflect ominous features of the Anthropocene. A new boundary based on the Biodiversity Intactness Index (BII) is under development, but has yet to be quantified (Steffen et al. 2015a).

A further respect in which the idea of planetary boundaries has been extended is to study sub-global boundaries. This is important because, as was noted in Chapter 2, crossing a boundary at a regional level (e.g. destruction of the Amazon rainforest) can have implications for the whole Earth System. Regional level boundaries have now been developed for biosphere integrity, biogeochemical flows, land-use systems and freshwater use.

The idea of planetary boundaries has powerful heuristic appeal and has excited the public’s imagination of the processes that govern the Earth System. It may have proved to be a problematic concept, but it is a useful classification of the Earth System’s biogeochemical processes.Footnote ¹²⁵

Box 4.2 Deoxidation of the Oceans

To many people today the oceans are a source of cultural services. In fact, they are an essential part of the biosphere. They help to stabilise climate, produce oxygen, nurture biodiversity, store carbon and directly support us by providing food and nutrients. The OECD estimates that by 2030 the oceans will generate US$3 trillion of goods and services annually (OECD, 2016b). By the looks of the state of the oceans today, that is an ominous forecast, for that is very likely to increase further the burdens we have inflicted on them.

Oxygen is essential for life in the oceans, but alarmingly, the levels of oxygen in our oceans have been declining dramatically over the past 50 years. While it is natural to have some low oxygen areas in our seas, the size of these areas has expanded by 4.5 million km² – roughly the size of the European Union – and the volume of water with zero oxygen has quadrupled. In coastal waters, the number of sites with low oxygen has risen from 50 to 500, which is probably an underestimate due to a lack of comprehensive monitoring data around the world (Figure 4.6; Reference Breitburg, Levin, Oschlies, Grégoire, Chavez, Conley, Garçon, Gilbert, Gutiérrez, Isensee, Jacinto, Limburg, Montes, Naqvi, Pitcher, Rabalais, Roman, Rose, Seibel, Telszewski, Yasuhara and ZhangBreitburg et al. 2018)).

Figure 4.6 Low and Declining Oxygen Levels in Ocean and Coastal Waters

Source: Reference Breitburg, Levin, Oschlies, Grégoire, Chavez, Conley, Garçon, Gilbert, Gutiérrez, Isensee, Jacinto, Limburg, Montes, Naqvi, Pitcher, Rabalais, Roman, Rose, Seibel, Telszewski, Yasuhara and ZhangBreitburg et al. (2018). Permission to reproduce from The American Association for the Advancement of Science (AAAS). Note: Map created from data provided by R. Diaz, updated by members of the GO2NE network, and downloaded from the World Ocean Atlas 2009.

The reduction in oxygen in the oceans is largely due to human activities, including the global warming we are causing. Ocean warming reduces the solubility of oxygen in the water, but it also increases metabolic rates of organisms, thereby increasing oxygen consumption. This causes the water column to become more stratified, which in turn is likely to reduce the ventilation of oxygen into the ocean interior and reduce the availability of nutrients.

In coastal waters, oxygen declines are caused by increased levels of nitrogen, phosphorus and organic matter from agriculture and sewage, causing eutrophication. This increases the volume of organic matter reaching the sediments where microbial decomposition consumes oxygen. Once the oxygen levels are low the systems often do not return back to their original state.

What would happen to the biosphere if life in the oceans was to be extinguished? Here is a possible scenario:

Given that prokaryotes (bacteria, fungi) are masters of difficult environments, we could imagine they would be able to live, even thrive, in the oceans after everything else died. The biogeochemical cycles, planetary gas (for example CO₂) cycles and nutrient flows stemming from deaths in the oceans would rapidly cascade toward major, abrupt changes in ecosystems on land and in river systems; to an extent that one could reasonably envisage a steady major long-term decline in terrestrial biodiversity through extinctions. It could even be that the changes would be so enormous that life on land itself ceases for the vast majority of organismal lineages. Perhaps not total annihilation over time, but a mass extinction that has not occurred since life began.Footnote ¹²⁶

4.1.3 Biodiversity Indicators

Erosion of natural capital usually goes unrecorded in official economic statistics because Gross Domestic Product (GDP) does not record depreciation of capital assets. Destroy biodiversity so as to build a shopping mall, and the national accounts will record the increase in produced capital (the shopping mall is an investment), but not the disinvestment in natural capital unless it commanded a market price. While industrial output increased by a multiple of 40 during the 20^th century, the use of energy increased by a multiple of 16, methane-producing cattle population grew in pace with human population, fish catch increased by a multiple of 35, and carbon and sulphur dioxide emissions rose by more than 10. Human appropriation of terrestrial NPP has been variously estimated to be around 20–40%, and it is thought that over 50% are being appropriated in many of the most intensively farmed regions (Reference Krausmann, Erb, Gingrich, Haberl, Bondeau, Gaube, Lauk, Plutzar and SearchingerKrausmann et al. 2013; Reference Haberl, Erb and KrausmannHaberl, Erb and Krausmann, 2014; Reference Williams, Zalasiewicz, Haff, Schwägerl, Barnosky and EllisWilliams et al. 2015). Human activity today deposits more nitrogen compounds into terrestrial and marine ecosystems than is generated in the natural nitrogen cycle (Reference Vitousek, Mooney, Lubchenco and MelilloVitousek et al. 1997). In Chapter 3, it was noted that discharges of phosphorus from agriculture into water bodies is a major ecological concern. Soil acidification, eutrophication of freshwater lakes and marine dead zones are among the consequences of nitrogen and phosphorus overload. These figures tell us much about the extent to which humanity is interfering with biogeochemical processes.

Biodiversity loss at a local level may be observable but tracking the state of the biosphere at the global level is no easy matter. Regulating and maintenance services (Chapter 2) are in any case hard to monitor. Which is why it is prudent to track biodiversity loss along as many routes as experience and evidence point to. Although the work of the Intergovernmental Panel on Climate Change (IPCC) on global climate change justifiably receives continuous global attention, the Millennium Ecosystem Assessment (Reference Hassan, Scholes and AshMA, 2005a-Reference Capistrano, Samper K., Lee and Randsepp-Hearned) recorded large-scale biodiversity losses in a wide range of ecosystems but has rarely been acknowledged by the public. The MA reported that 15 of the 24 ecosystems the authors had reviewed world-wide were either degraded or being exploited at unsustainable rates. The publication also reported that extraction of provisioning goods has increased, while regulating and maintenance services have declined. It also noted a decline in cultural services.

The MA noted, for example, that coastal zones account for some 20% of the Earth’s surface but are inhabited by more than 45% of the world’s population. An overwhelming majority of megacities are located there as well. The ecosystems in the zones include coral reefs, mangrove forests, salt marshes and other wetlands, seagrasses and seaweed beds, beaches and sand dunes, estuaries and lagoons, forests and grasslands (Reference Turner, Kareiva, Tallis, Ricketts, Daily and PolaskyTurner, 2011). These ecosystems provide a range of services, including carbon, nutrient and sediment storage; water flow regulation; and quality control. They also serve as a buffer against storms and soil erosion. MA reported that over the previous three decades 50% of marshes, 35% of mangroves and 40% of reefs had been either lost or degraded.Footnote ¹²⁷ In a decade-long study (2003 to 2014) that peers deeper into the state of the world’s rainforests than satellite images are able to provide, Reference Baccini, Walker, Carvalho, Farina, Sulla-Menashe and HoughtonBaccini et al. (2017) estimated that annually the forests captured around 435 million tonnes of carbon but lost over around 860 million tonnes, 70% of which was due to deforestation and, more generally, land degradation.

The publication by the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (Reference Díaz, Settele, Brondízio, Ngo, Guèze, Agard, Arneth, Balvanera, Brauman, Butchart, Chan, Garibaldi, Ichii, Liu, Subramanian, Midgley, Miloslavich, Molnár, Obura, Pfaff, Polasky, Purvis, Razzaque, Reyers, Roy Chowdhury, Shin, Visseren-Hamakers, Willis and ZayasIPBES, 2019a) presents an extensive, spatially sensitive coverage of the biodiversity loss that is taking place today. The evidence collated there is even more disturbing than in the previous assessment by the MA. For example, since the early 1970s, there has been a decline in 14 of 18 categories of Nature’s services, including purification of water, air quality, and disease regulation.Footnote ¹²⁸ Reporting the ongoing work on the Amazon by environmental scientists (see Reference Lovejoy and HannahLovejoy and Hannah, 2019), IPBES notes that the Amazon rainforest has shrunk by a sixth since the UN Convention on Biological Diversity was established in Rio de Janeiro in 1992. The publication also reports that the extent and condition of our ecosystems have declined by nearly 50% from their natural state and that only 23% of the land and 13% of the sea remain classified as ‘wilderness’. Figure 4.7 presents the authors’ findings in greater detail.

Figure 4.7 Global Trends in the Capacity of Nature to Sustain Contributions to Good Quality of Life from 1970 to the Present

Source: Reference Díaz, Settele, Brondízio, Ngo, Guèze, Agard, Arneth, Balvanera, Brauman, Butchart, Chan, Garibaldi, Ichii, Liu, Subramanian, Midgley, Miloslavich, Molnár, Obura, Pfaff, Polasky, Purvis, Razzaque, Reyers, Roy Chowdhury, Shin, Visseren-Hamakers, Willis and ZayasIPBES (2019a).

Box 4.3 Soil Biodiversity Loss

Soil erosion is usually slow in stable ecosystems but accelerates with the removal of vegetation; for example, deforestation.Footnote ¹²⁹ According to a 1998 estimate, we obtain more than 99% of our food calories from land-based products, even while loss of soil organic carbon through conversion to agriculture is significant (Reference PimentelPimentel, 2006; Reference Sanderman, Hengl and FiskeSanderman, Hengl, and Fiske, 2017).Footnote ¹³⁰ Studies suggest that some 80% of the globe’s farmland has moderate to severe erosion, first (surprisingly, to the uninitiated) from water and second from wind. Wetlands hold specific types of soil, rich in carbon and nutrients (as in peatlands; Box 4.7). Nearly 90% of wetlands have been lost over the past 300 years; about 35% since 1970 (Reference Montanarella, Scholes and BrainichIPBES, 2018). Collating data on soil erosion, WWF (2017) reported that some half of all top soils have eroded in the past 150 years. A typical estimate is that 75 billion tonnes of soil erode annually at a rate 13 to 40 times the background rates of erosion that prevailed before the acceleration caused by human dominance of the biosphere (Reference Pimentel and KounangPimentel and Kounang, 1998). The rate of soil erosion accompanying land-use change is judged to be the highest in the past 500 million years (Reference Wilkinson and McElroyWilkinson and McElroy, 2007), and some regard it to be the greatest geomorphic agent on the planet today (Reference HookeHooke, 2000).

What happens when the diversity of life within soil is lost? Reference Wagg, Bender, Widmer and Van Der HeijdenWagg et al. (2014) found a strong relationship between ecosystem functions and indicators of soil biodiversity. Reductions in soil biodiversity contribute to eutrophication of surface water, reduced above-ground biodiversity and global warming. Declines in soil biodiversity cause declines in performance of a number of regulating and maintenance services (Reference Bender, Wagg and van der HeijdenBender, Wagg and Van Der Heijden, 2016). Alarmingly, if soil biodiversity were lost completely, the land-based food system would cease to function.

Soil biodiversity loss can be identified by combining quantitative estimates of the circumstances and substances that destroy soil organisms. They include habitat fragmentation, invasive species, climate change, urban sprawl over soils, soil erosion, and soil pollution such as industrial fertilisers and pesticides. Moreover, soil degradation accelerates runoff, and erosion moves the organic sediments, rich in macronutrients, to water bodies, resulting in eutrophication and oxygen collapse in aquatic ecosystems. Dead zones, as in the Gulf of Mexico, are an example.

Once lost, can soil biodiversity be restored? Reduced soil disturbance and increased organic matter as well as the use of deeper rooting crop varieties can help improve soil health, as can cover crops, changes to crop rotations, and no-till approaches. Such practices are the substance of ‘organic farming’, a subject that we return to in Chapter 16.

4.1.4 Global Natural Capital Accounts

National accounting systems do not track our use of the biosphere’s goods and services. GDP does not record the depreciation (nor possible appreciation) of natural capital. The evidence we have cited here so far says that while modern technology has enabled humanity in recent decades to obtain provisioning goods at an increasing rate (the Green Revolution of the 1960s and the 1970s was the defining event for that), regulating and maintenance services and cultural services have shrunk.

If we were to think of the biosphere as a stock of capital – natural capital – its net regeneration rate would be its yield per unit of time. By this reckoning, natural capital is a stock, its yield is a flow. Of course, that stock is composed of a myriad of stocks of assets, which we may call natural resources, some being non-renewable (fossil fuels), while others are self-renewable with regeneration rates that can differ by orders of magnitudes (bacteria, minnows, whales, redwoods). Thus, the biosphere’s yield in a period of time is not a single number, but the yields of a myriad of goods and services. Accounting for them provides the beginnings of a way to record the value of the biosphere’s (net) regeneration rate. By ‘value’ we do not mean market value, for many forms of natural capital do not have markets at all – they are free to all who use them – and those that do reflect distorted values owing to institutional imperfections. So, by value we mean ‘accounting value’.

The accounting value of the stock of an asset is its contribution to societal well-being; that is, it reflects the asset’s social worth. The asset’s accounting price is the accounting value of a (marginal) unit of the asset. The way natural capital accountants estimate the value of ecosystems is to estimate the accounting value of the flows of goods and services provided by ecosystems, and then estimate the corresponding accounting value of the ecosystems themselves by computing the present (discounted) value (PDV) of the flows. Chapter 13 shows how that conversion is made.

A country’s natural capital accounts constitute a system that records the state of the economy’s natural capital. The idea is to impute an accounting value to each type of natural capital and then add the values to reach the accounting value of the entire stock of natural capital to which the economy has ‘claim’. The notion of claim, or the related notion of ‘ownership’, is the subject of Chapters 7–9.

That is all well and good in theory. In practice, estimating stocks and their accounting prices is so fraught with difficulty that the natural capital accounts that have so far been developed for sectors (e.g. Reference Kareiva, Tallis, Ricketts, Daily and PolaskyKareiva et al. 2011), national economies (e.g. Reference Arrow, Dasgupta, Goulder, Mumford and OlesonArrow et al. 2012) and the global economy (e.g. UNU-IHDP and UNEP, 2012, 2014; Reference Managi and KumarManagi and Kumar, 2018) are yet nowhere near as polished as the national accounts of the breakdown of the gross domestic product of national economies. Practical methods for estimating accounting prices cut through many of the problems, if only to provide simple but informative pictures of the time trajectory paths of the accounting value of natural capital, including sub-soil resources.

A decline in the accounting value of natural capital in an economy over a period of time would mean depreciation of natural capital. The estimates provide quantitative information on changes in the state of a country’s natural capital, and are meant to be placed in parallel to estimates of changes in the value of produced capital and human capital. The aggregate value of a nation’s produced capital, human capital and natural capital is called inclusive wealth, a concept that was introduced in Chapter 1.

As we noted in Chapter 1, inclusive wealth taken on its own is meaningless. It is changes in inclusive wealth that are not only meaningful, but of enormous use to anyone wanting to understand the meaning of sustainable development. The difference between inclusive wealth in one year and in the next measures net inclusive investment in the country’s capital goods that year. The idea of inclusive wealth and inclusive investment extends naturally to the global economy. We develop these ideas more fully in Chapter 13.

Reference Managi and KumarManagi and Kumar (2018) tracked the accounting values of produced capital, human capital and natural capital over the period 1992 to 2014 in 140 countries.Footnote ¹³¹ The authors built their estimates using the UN data base. In their work, renewable resources include forest resources (stocks of timber and a selected group of non-timber resources), fisheries (stocks were estimated from past records of catch), agricultural land (cropland and pastureland); while non-renewable resources cover fossil fuels and a selected set of minerals. Figures for the social cost of carbon (a negative accounting price) of greenhouse gas emissions were used to address future losses from global carbon change (see Chapter 10). Figure 4.8 displays the authors’ estimates of global per capita accounting values of the three classes of capital goods over the period 1992 to 2014. It shows that globally produced capital per head doubled and human capital per head increased by about 13%, but the value of the stock of natural capital per head declined by nearly 40%.

Figure 4.8 Global Wealth Per Capita, 1992 to 2014

Source: Reference Managi and KumarManagi and Kumar (2018).

4.2 Demand and Supply

In a classic decomposition of humanity’s impact on the biosphere, Reference Ehrlich and HoldrenEhrlich and Holdren (1971) identified global population size, individual demands on the biosphere – as reflected in, say, living standards – and the technologies and institutions in play as shaping humanity’s demand for the biosphere’s goods and services. We build on their analysis by decomposing the demand in quantitative terms. We first decompose the demands that are made, but by smaller economic units – from national economies to village economies in poor countries. We then sum the demands to arrive at the aggregate demand of the global economy. The decomposition of demand allows us to identify the overarching factors that determine it. It is then possible to ask what steps need to be taken in order to alter the demand. We then compare that demand with the biosphere’s regeneration rate. When humanity’s demand exceeds the regeneration rate, the biosphere depreciates; if it were to be less, the biosphere would appreciate. Uncovering the relationship between demand and supply is the core of the Review.Footnote ¹³²

4.2.1 Aggregate Demand

Humanity’s demands on the biosphere per unit of time – Ehrlich and Holdren called it impact – is known today as the global ecological footprint. We begin by defining the footprint of smaller economic units and then sum them to define the global footprint. For convenience we shall use the terms ‘ecological footprint’ and ‘human impact’ interchangeably.

Let us divide the global economy into distinct economic units, labelled by i, numbered as 1, 2, … and so on. Depending on the context, the units are individuals (that is the relevant partition of population when sociologists study age-related consumption patterns), households (the relevant partition for national environmental policy), nations (the relevant partition in climate negotiations) or the world as a whole (the scope of this Review). Let N_i be the population size of i and y_i an index of human activity per person in i per unit of time. Then N_iy_i is aggregate activity by members of i.

All human activity requires the biosphere’s goods and services as inputs. So, we need to link y_i to the demands the average person in economic unit i makes of the biosphere. Estimating y_i poses huge measurement problems, so for tractability we suppose it corresponds to the standard of living as measured by income per capita in i. For example, if i is a household, y_i is income per head in the household; if i is a nation, y_i is GDP per capita in that country; and so on. Using income as a measure of human activity almost surely yields an underestimate of what we are after, for there are many human activities that are not captured in income as measured by economic statisticians. On occasion, national income statisticians offer estimates of the magnitude of economic transactions that are missing in gross domestic income (equivalently gross domestic product, GDP), for example, the size of the black economy, but they are too scanty to be of use here. And there are human activities that would not be covered even by those corrections. So even though we know income per capita in i is an underestimate of the activity of the average person in i, we shall use it as a proxy.

We now place our analysis on the global economy. Let N denote the global population, y per capita global GDP, and let i cover the world’s population. Then

$Ny{=}_i\sum N_i{y}_i$(4.1)

(In equation (4.1) the incomes y_i are summed over the whole world’s population.) We now trace y to the biosphere’s goods and services.

The demands we make of the biosphere take two forms: (1) We harvest Nature’s goods and use Nature’s services for consumption and production. Fish, timber and fresh water constitute goods; whereas pollination, water purification, flood protection, and carbon sequestration and storage constitute services. (2) We use the biosphere as a sink for our waste products. Landfills, rivers carrying pollutants into estuaries and carbon concentration in the atmosphere are examples of our use of the biosphere as a sink for our waste.

Let X denote what we extract or harvest from the biosphere and let Z denote the demand we make of the biosphere as a pollution sink. As both are functions of Ny, we write X = X(Ny) and $Z=Z\left(Ny\right)$ . The X-function records that both production and consumption require the biosphere’s goods and services as inputs, while the Z-function reflects the fact that waste products are inevitably associated with production and consumption and they impose a strain on the biosphere. Partitioning our ecological footprint into X and Z reconfirms that pollution is the reverse of conservation.

Let α_X be a numerical measure of the efficiency with which the biosphere’s goods and services are converted into global GDP; and let α_Z be a numerical measure of the extent to which the biosphere is transformed by global waste products (the latter in part depends on the extent to which we treat our waste before discharging them). So, we have $X=Ny/{\alpha }_X$ and $Z=Ny/{\alpha }_Z$ .

Define $\alpha =({\alpha }_{\text{X}}+{\alpha }_{\text{Z}})/\left({\alpha }_{\text{X}}{\alpha }_{\text{Z}}\right)$ . Then $(Ny/{\alpha }_{\text{X}}+Ny/{\alpha }_{\text{Z}})\equiv Ny/\alpha$ is our proxy measure of the global ecological footprint.Footnote ¹³³ Writing the latter as I (Ehrlich-Holdren’s ‘Impact’) we have

(4.2)$I=(Ny/{\alpha }_{\text{X}}+Ny/{\alpha }_{\text{Z}})\equiv Ny/\alpha$

The distribution of global GDP affects the efficiency coefficients α_X and α_Z, but here we are concerned with global aggregates.Footnote ¹³⁴ In Section 4.5, we study the distribution of ecological footprints across households, villages, regions, or other disaggregated groups of institutions. There we will replace the word ‘biosphere’ by the term ‘ecosystem’.Footnote ¹³⁵ The distribution of components of the Impact Inequality is considered further in Chapter 14.

Decoupling the global ecological footprint, Ny/α, also serves to remind us that measures to reduce environmental pollution, Z, can raise our demand for the biosphere’s products (X). Solar panels require minerals such as aluminium, cadmium, and zinc. But to obtain those minerals usually requires fragmenting forests (Section 4.7 and Chapter 3).

Box 4.4 Impact of the Fast Fashion Industry

The global fast fashion industry relies on cheap manufacturing to encourage more frequent purchase. Garments are discarded well before their physical life span. This consumes large amounts of textiles (rising from 5.9 kg to 13 kg per capita between 1975 and 2018) and has significant environmental impact (Reference Peters, Sandin and SpakPeters, Sandin and Spak, 2019; Reference Niinimäki, Peters, Dahlbo, Perry, Rissanen and GwiltNiinimäki et al. 2020). The industry has periodically been subjected to adverse publicity, but it continues to grow. In 2019, the industry was worth around US$36 billion globally and is expected to be worth around US$38 billion in 2023 (Research and Markets, 2020). Its environmental impacts include water use, chemical pollution, carbon dioxide emissions and textile waste. It is estimated that the industry produces 8–10% of global emissions of CO₂ annually and uses over 79 trillion litres of water per year (Reference Niinimäki, Peters, Dahlbo, Perry, Rissanen and GwiltNiinimäki et ki et al. 2020). The industry is responsible also for pollution from textile treatment and dyeing, amounting to around 20% of industrial water pollution (Reference KantKant, 2012) and is responsible for approximately 35% (190,000 tonnes per year) of oceanic microplastic pollution (United Nations Climate Change, 2018). Over 92 million tonnes of textile waste ends up in landfill or is burnt (Reference Niinimäki, Peters, Dahlbo, Perry, Rissanen and GwiltNiinimäki et ki et al. 2020).

4.3 The Impact Inequality

Section 4.1 produced evidence that over several decades aggregate demand per unit of time, $Ny/{\alpha }_{\text{X}}+Ny/{\alpha }_{\text{Z}}$ , has exceeded aggregate supply G(S) per unit of time. That reads as

$Ny/\alpha >G\left(S\right)$(4.3)

We call expression (4.3) the Impact Inequality (see also Figure 4.9).Footnote ¹³⁷

Figure 4.9 The Impact Inequality

Source: Described in Reference Barrett, Dasgupta, Dasgupta, Adger, Anderies, van den Bergh, Bledsoe, Bongaarts, Carpenter, Chapin, Crépin, Daily, Ehrlich, Folke, Kautsky, Lambin, Levin, Mäler, Naylor, Nyborg, Polasky, Scheffer, Shogren, Jørgensen, Walker and WilenBarrett et al. (2020).

The Impact Inequality as presented in expression (4.3) applies to the biosphere as a whole. Although the notion of ecological footprint (the left-hand side of the Inequality) can be applied to any group of individuals – from the individual and the household, to nations and the global population – trade in commodities and services breaks the link between demand (Ny/α) and supply (G(S)) for economic units smaller than the world as a whole. The ecological footprint of a nation will not balance the regenerative rate of its ecosystems if its trade in the biosphere’s goods and services does not balance, in units of biospheric material. Of course, it could be that a country pays for its imports, perhaps even at their appropriate prices, but that is a different matter. Here we are only formulating a way to break down the global imbalance of demand and supply of those goods and services into imbalances among groups in the global population; we are not discussing ‘fair trade’. Trade is discussed further in Chapter 15.

If the global ecological footprint, I, exceeds the biosphere’s regenerative rate, G, the biosphere as a stock diminishes, and the gap between I and G increases. Similarly, if the footprint is less than the biosphere’s regenerative rate, the stock increases, and the gap between I and G shrinks.Footnote ¹³⁸ However, either global population (N) or global output per capita (y), or both, could increase without making additional demands on the biosphere provided either α_X or α_Z and thus α was to increase correspondingly. Improvements in technology (e.g. substituting degradable waste for persistent pollutants; decarbonising the energy sector) and institutions and practices (e.g. establishing Protected Areas; reducing food waste), and appropriate redistributions of wealth are among the means by which α can be raised.

The factors affecting our demand for the biosphere’s goods and services, namely N, y, α_X and α_Z, affect one another. When a region of the Amazon rainforest is converted into cattle ranches, the transformation would be expected to raise food production by raising the efficiency with which land is used to grow crops (a rise in the corresponding α_X), but it lowers α_Z (industrial fertilisers and pesticides degrade the soils and water bodies). The transformation could be read as reducing S, or alternatively, because the composition of the biome changes, it could be read as a less productive G-function. The overall effect would be to widen the gap between G(S) and $(Ny/{\alpha }_{\text{X}}+Ny/{\alpha }_{\text{Z}})$ .

In an ingenious set of exercises, Reference Wackernagel and BeyersWackernagel and Beyers (2019) have estimated G by calculating the area of land and sea surface covering different categories of ecosystems (agricultural land, plantations, wetlands, fisheries, marshes, oceans, forests, and so on) that is needed, given existing technologies, to meet humanity’s current demands for various provisioning goods, while leaving space to allow for other life forms to provide pollination, seed dispersal, fertilization, and decomposition of waste. Thus, the land-sea area required to meet our demand for natural fibres on a sustainable basis is taken to be Earth’s bio-capacity for that demand. And so on for our other demands. However, ecosystems differ in their ability to provide the same service. For example, marshes sequester 10 times the carbon temperate forests do. A sq. m of marshland is therefore awarded a weight 10 as against 1 for a sq. m of a temperate forest, and so on. The authors obtain G by estimating the weighted sum of the areas required. Using that apparatus, they calculate that the ratio of the left-hand side to the right-hand side in expression (4.3) is currently about 1.7, whence the metaphor that we need 1.7 Earths to meet humanity’s current demands from it. Whatever the term ‘sustainable development’ could mean, it must as a minimum mean transforming the Impact Inequality into an equality; that is, reducing our overreach of the biosphere to zero. (Net-zero emissions is the corresponding idea when restricted to the Earth system as a sink for our carbon emissions.)

4.4 Two Notions of Inequality

The decomposition of Impact into N, y, and α has been expressed in aggregate terms. Quite obviously, it is decomposable into income groups. Let i, j, variously denote households. Households differ according to their incomes, y_i, y_j, and so on, but they differ as well with regard to the efficiency with which they convert the biosphere’s goods and services into income. It is conventional to view inequality in terms of the distribution of household incomes, but in the Review we are interested also in inequality among households in terms of the impact they have on the biosphere. The latter is reflected in the distribution of incomes when corrected for the efficiency with which the biosphere’s goods and services are converted into income (i.e. y_i/α_i). And income and income in efficiency units are not the same. We may read y_i/α_i as household i’s ecological footprint.Footnote ¹⁴⁰

Imagine that you label households by income and rank them in terms of increasing income. In an economy with N households, we then have $y_i<y_{i+1}$ for i = 1, …, N. The Reference Pachauri and MeyerIPCC (2014) reported from cross-national statistics that carbon emissions are an increasing function of income. There is a corresponding finding that says ecological footprint is an increasing function of income (Reference Díaz, Settele, Brondízio, Ngo, Guèze, Agard, Arneth, Balvanera, Brauman, Butchart, Chan, Garibaldi, Ichii, Liu, Subramanian, Midgley, Miloslavich, Molnár, Obura, Pfaff, Polasky, Purvis, Razzaque, Reyers, Roy Chowdhury, Shin, Visseren-Hamakers, Willis and ZayasIPBES, 2019a; Reference Wackernagel, Lin, Evans, Hanscom and RavenWackernagel et al. 2019). So we assume that $y_i/{\alpha }_i<y_{i+1}/{\alpha }_{i+1}$ , for all i. In this reading, households enjoying higher income demand more from the biosphere.

A question arises whether the curve y_i/α_i is convex or concave. Consider an income interval where the function is convex. An egalitarian redistribution of incomes among households in that interval would lead to a smaller global ecological footprint, implying there is no conflict between income equality and the biosphere’s integrity. But in a concave interval, the reverse holds: egalitarian redistributions of incomes would lead to larger global ecological footprints and society would face a cruel choice between income equality and the biosphere’s integrity (Reference Dasgupta and DasguptaA. Dasgupta and Dasgupta, 2017).Footnote ¹⁴¹ Figure 4.10, which displays a regression between the ecological footprint of nations and GDP per capita, shows that our demand for the biosphere’s goods and services increases with affluence and development but that the efficiency with which we transform them so increases with affluence that ecological footprint is a concave function of income at all levels of incomes. In short, ecological footprint rises less than proportionately with income. That suggests, ominously, that egalitarian redistributions of incomes lead to larger global ecological footprints, other things the same.Footnote ¹⁴² Distribution is discussed further in Chapter 14.

Figure 4.10 Ecological Footprint and Income

Source: World Bank (2020a), Global Footprint Network (2019), and Review calculations.

4.5 The Impact Equation

Over the long run, global demand (per unit of time) must equal the biosphere’s ability to meet that supply (per unit of time) on a sustainable basis. The widely discussed UN SDGs were formulated on the assumption that they can be attained, but the background documents did not probe the question of whether they are sustainable in a global economy that simultaneously enjoys growth in global GDP.

The economics of biodiversity involves a dynamic resource allocation problem (Chapter 4* and Chapter 13*). The demand we make on the biosphere per unit of time does not have to equal the biosphere’s ability to supply goods and services per unit of time, because the difference is naturally accommodated by a change in the biosphere’s stock S. A world rich in healthy ecosystems could, on utilitarian grounds, choose to draw down the biosphere and use the goods and services it supplies so as to accumulate produced capital and human capital. That is what economic development has come to mean among many thinkers, but the scenario comes in tandem with an overshoot in our demands from the biosphere. The overshoot cannot be maintained indefinitely because our life support system would be threatened.

We therefore work backwards, by first identifying a condition the global economy’s treatment of the biosphere must satisfy if the SDGs are themselves to be sustainable. That condition tells us to find ways in which S can be stabilised. To sustain that stabilised value of S requires that the global ecological footprint equals the biosphere’s regenerative rate, that is,

$Ny/{\alpha }_X+Ny/{\alpha }_Z\equiv Ny/\alpha =G\left(S\right)$(4.4)

Equation (4.4), which we call the Impact Equation, applies to the biosphere as a whole.

The Impact Equation is a condition of global sustainability. The equation does not say what S should be. There is an entire range of values of S and corresponding sets of values of the remaining factors, N, y, α_X, α_Z, and the parameters of the G-function for which equation (4.4) can be expected to hold. The requirement that a state of affairs is sustainable is that it can persist indefinitely. That is different from a requirement we may insist on, that the state of affairs we should aim for should in addition be desirable. This distinction will be studied in Chapters 11–13.Footnote ¹⁴³

Suppose then that we have identified the most desirable value of S, say S*, which is the state of the biosphere the global economy should aim for. The problem remains that there are potentially an infinite number of paths that would lead the biosphere from today’s S to the target level S*. And that is a dynamic portfolio management problem (Chapter 1). Therefore the most desirable way for getting from where we are today to where we ought to be must at each moment satisfy arbitrage conditions among all assets (produced, human and natural), and they must also include a set of arbitrage conditions that mediate between the present generation’s well-being and the well-being of future generations (Chapter 10). In Chapter 13, we show that these arbitrage conditions would be satisfied if the allocation of assets toward different activities and engagements were to be governed by the rule that an inclusive measure of wealth should be maximised. Optimal portfolio management for an economy, be it a national economy or the global economy, involves wealth maximisation at each moment. The implication is striking: economic progress should be read as growth in inclusive wealth, not growth in GDP nor growth in any of the other ad hoc measures that have been proposed in recent years such as the UN’s Human Development Index.

Box 4.6 Reaching the UN SDGs

The Impact Inequality offers a way to discover the policies and behavioural changes that will be required if the global economy is to achieve the UN SDGs. To illustrate, we consider the Goals related to reaching a sustainable use of the environment by year 2030.

We have defined the global ecological footprint by Ny/α. The Global Footprint Network (GFN) in contrast defines it as the ratio of the global demand for the biosphere’s goods and services and the biosphere’s current capacity to supply them on a sustainable basis (which we interpret here as G). The GFN’s global ecological footprint is then [Ny/α]/G. Reference Wackernagel and BeyersWackernagel and Beyers (2019) report that the ratio increased from 1 in 1970 to 1.7 in 2019. That means the ratio increased at an average annual rate of 1.1%.Footnote ¹⁴⁴ Moreover, global GDP at constant prices has increased since 1970 at an average annual rate of 3.4%.

We turn to the right-hand side of the Impact Inequality. As noted previously, Reference Managi and KumarManagi and Kumar (2018) estimated that the value of per capita global natural capital declined by 40% between 1992 and 2014. That converts to an annual percentage rate of decline of 2.3%. But world population grew approximately at 1.1% in that period. Taken together it follows that the value of global natural capital declined at an annual rate of 1.2%. Because there are no estimates of the form of the G-function, we assume for simplicity that local variation is a good approximation, meaning that G is proportional to S. So, G can also be taken to have declined at an annual rate of 1.2%.Footnote ¹⁴⁵

The estimates for the annual percentage rates of change of Ny, G, and [Ny/α]/G enable us to calculate that α had been increasing at an annual percentage rate of 3.5% in the period 1992 to 2014. Suppose we want to reach Impact Equality in year 2030. That would require [Ny/α]/G to shrink from its current value of 1.7 to 1 in 10 years’ time, implying that it must decline at an average annual rate of 5.4%. Assuming global GDP continues to grow at 3.4% annually and G continues to decline at 1.2% (i.e. business is assumed to continue as usual), how fast must α rise?

To calculate that, let us write as g(X) the percentage rate of change of any variable X. We then have

$\text{g}\left(\right[Ny/\alpha ]/G)=\text{g}\left(Ny\right)–\text{g}\left(\alpha \right)–\text{g}\left(G\right)$(B4.6.1)

Equation (B4.6.1) can be re-arranged as

$\text{g}\left(\alpha \right)=\text{g}\left(Ny\right)–\text{g}\left(\right[Ny/\alpha ]/G)–\text{g}\left(G\right)$(B4.6.2)

We now place the estimates of the terms on the right-hand side of equation (B4.6.2) to obtain

$\text{g}\left(\alpha \right)=0.034+0.054+0.012=0.1$

In short, α must increase at an annual rate of 10.0%. As that is a huge hike from the historical rate of 3.5%, we consider a different scenario.

Suppose global output was to remain constant from now to year 2030 and draconian steps were taken by us over our demands to limit the rate of deterioration of the biosphere to an annual 0.1%. What would be required rate of increase in α need to be? Using equation (B4.6.2) we have

$\text{g}\left(\alpha \right)=0.054+0.001=5.5\%$

Even that is considerably larger than the 3.5% rate at which α has been increasing in recent decades.

4.6 Technology and Institutions

The expression $(Ny/{\alpha }_{\text{X}}+Ny/{\alpha }_{\text{Z}})$ is the global ecological footprint in absolute terms. As noted earlier, the Global Footprint Network (Reference Wackernagel and BeyersWackernagel and Beyers, 2019) defines the footprint instead as the ratio of the demand to supply; that is, $(Ny/{\alpha }_{\text{X}}+Ny/{\alpha }_{\text{Z}})/G\left(S\right)$ . The network’s latest estimate (2020) is 1.6, which they read as a demand that can only be satisfied on a sustainable basis by, as a minimum, 1.6 Earths (Reference Lin, Wambersie, Wackernagel and HanscomLin et al. 2020).Footnote ¹⁴⁶ The estimate is very rough, but the point should not be to focus on the exact estimate. What should be uncontroversial is that $(Ny/{\alpha }_{\text{X}}+Ny/{\alpha }_{\text{Z}})$ has exceeded G(S) since the 1970s.

In subsequent chapters, we study ways in which the trajectories of y and N can be altered (see in particular Chapters 9 and 16). Here we consider a few ways by which α_X and α_Z could be raised so as to close the gap between $(Ny/{\alpha }_{\text{X}}+Ny/{\alpha }_{\text{Z}})$ and (G(S)). The twin pillars of technology and institutions would be involved, for together they determine α_X and α_Z.

That institutions and technology influence one another is a commonplace assertion. Institutions are the seat of incentives, and incentives shape the production, dissemination and use of knowledge. A state that invests vigorously in life-saving technology and then applies it is able to transform society for the better. Likewise, technological possibilities shape institutions. Advances in mapping the geographical spread of natural capital and in methods to monitor its use can help enforce property rights. History is rife with examples where institutions and technology have influenced one another beneficially.

That each can be made at least partially to mitigate the other’s failure is also widely recognised. While it is widely recognised that degradation of the biosphere is a manifestation of institutional failure, hope is often expressed that progress in science and technology can put things right. The economics of climate change has encouraged that thought. Development of cheap renewable energy sources would help to reduce carbon emissions to the point where carbon concentrations are kept within acceptable levels.

Nature saving technology, for example, substituting degradable waste for persistent pollutants and decarbonising the energy sector, is one class of ways in which technology can raise the aggregate efficiency index α. Institutional changes, such as improving the character and enforcement of property rights to natural resources points to another class of ways in which α can be raised. Directives that establish Protected Areas to conserve natural habitats; imposition of pollution taxes; and removal of subsidies on resource extraction and agricultural production make up another class of institutional changes that can be brought about by public policy.

Changes in behavioural norms, such as those that lead to a reduction in food waste, is yet another avenue. The incentives entrepreneurs have for developing technology are shaped by the systems of property rights in place. Remarkable post-war developments in sonar technology and advances in the technology for harvesting fish came about in large measure because ocean fisheries beyond national jurisdiction are free. Unbridled application of modern technology in clearing tropical rainforests has been made possible because governments have permitted it at a small price. Both forms of environmental destruction would have been avoided had institutions not failed. There is nothing good or bad about technology per se, it is the use to which it is put that affects α. Indeed, a wealth of examples of technologies that can be a force for sustainability in the food sector are given in Chapter 16. But no matter how effectively institutions are established to synergise with technological advances, unending growth in global output is an ecological impossibility. The biosphere is bounded and there are theoretical bounds on global output. Or so we argue in Section 4.7 and Chapter 4*.

Decoupling the demand humanity makes on the biosphere into X and Z in the left-hand side of equation (4.2) also serves to remind us that measures to reduce environmental pollution (Z) can raise our demand for the biosphere’s goods and services (X). As noted already, solar panels offer a technology for reducing carbon emissions, but solar panels are built on aluminium, zinc, cadmium, and other minerals. And mining and quarrying usually require that forests be destroyed. Equation (4.2) also reminds us that the two sides are not independent of one another. A move away from intensive farming to methods that rely on mulch, among other practices, gives rise changes in α_X and α_Z (the latter parameter would increase) in food production, but it also leads to a change in the G-function.

In Chapter 8, we argue that effective institutional structures are polycentric.Footnote ¹⁴⁷ The most well-known among such structures is a system of markets for private goods and services, in which a central authority supplies public goods and services, including measures that brings about a fair distribution of assets among people. The price system is the hallmark of markets. It serves not only to coordinate the choices people make, it simultaneously aggregates diffused information across the economy.Footnote ¹⁴⁸ That system however cannot serve adequately in humanity’s engagement with the biosphere, because Nature’s processes do not satisfy the technical conditions on production possibilities that are required for markets to function well. Three conditions are especially pertinent:

1. (1) Because Nature is mobile, much of the biosphere consists of ‘fugitive resources’, meaning that it is impossible to establish property rights to them (Chapters 7 and 8). By property rights we mean not only private rights, but also group rights including those of communities and nations.

2. (2) Production and consumption possibilities involving the biosphere (in other words, all production and consumption possibilities!) are characterised by non-linearities (Chapters 3), a condition that is at odds with a requirement of any well-functioning market system (Chapter 7).Footnote ¹⁴⁹

3. (3) The risks to life and property that are associated with ecological degradation are positively correlated across people (Chapter 5). That means insurance premia cannot be set at fair odds by private firms. Insurance markets are inevitably imperfect, and national and supra-national institution are needed to fill the gap. Nature-related financial risks are covered further in Chapter 17.

In later chapters of this Review we study the character of institutions that can in principle implement the Impact Equation. We will discover that the polycentric structure requires layered institutions: global, regional, national and communitarian. Each layer however requires an authority at the apex to achieve coordination below.

4.7 Ecosystem Complementarities and the Bounded Global Economy

Within bounds the biosphere is a self-regenerative asset, supplying us with a bewildering variety of services. In Ch. 2 (Sec. 2.4) a distinction was drawn between Nature’s ‘provisioning goods’ and her ‘regulating and maintenance services.’ The former category includes food, water, timber, fibres, pharmaceuticals, and non-living material, which we transform into consumption and investment and record the transformation at the national level as GDP. The latter category, it will be remembered, includes among many other services, climate regulation, decomposition of waste, disease regulation, nutrient recycling, nitrogen fixation, air and water purification, soil regeneration, and pollination.

The evidence we have brought together in this chapter has shown that humanity has increasingly drawn on Nature’s regulating and maintenance services to provide ourselves with provisioning goods. We have done that by mining ecosystems and transforming the landscape (land-use change, as it is called generically). The worldwide conversion of grasslands and forests (ecosystems with rich biodiversity) into farms, ranches, and plantations (assets with poor biodiversity) is an example. There is thus a tension between our desire for provisioning goods on the one hand and our need for regulating and maintenance services on the other. But regulating and maintenance services are fundamental, for without them there would be no provisioning goods, nor for that matter cultural services. Which is why the tension in question expresses itself today in our overshoot in demand for Nature’s provisioning goods relative to her ability meet that demand on a sustainable basis (i.e., the Impact Inequality). Put another way, when we speak of a shrinking biosphere, we mean a decline in Nature’s ability to supply regulating and maintenance services, caused by our ever-increasing demand for provisioning goods.

And here is another sobering finding: the processes governing the biosphere’s ability to provide regulating and maintenance services are complementary to one another, meaning that if you draw down one such service (e.g., climate regulation) sufficiently, you will in due course draw down Nature’s capacity to supply the others (e.g., as reflected in biodiversity). Nature is, to be sure, resilient – it has, after all, evolved over 4.5 billion years – but we humans today are so powerful, that we could if we put our mind to it, bring it down like a house of cards. Recent concerns over global climate change and biodiversity loss are an acknowledgement of that possibility.

The force of complementarities becomes evident when we study the components of objects that are indivisible. A steering wheel, for example, is of little use on its own, brake pads are of no use on their own, a gear appliance taken alone serves no purpose, and so on; but together they can be assembled to manufacture an automobile. Repair shops carry inventories of automobile parts, but that simply re-enforces the point that automobiles are indivisible capital goods. A car with worn out brake pads is not roadworthy. They have to be replaced.

The components of indivisible object are perfect complements. Complementarities among ecosystem services are not perfect, but they are far from being substitutes. In that less rigid sense, complementarities are an essential feature of the Earth System also at levels of aggregation higher than ecosystems. Within bounds the biosphere is a self-regulating entity. The bounds are defined by its stability regimes. Regulating and maintenance services, for example, are provided by the biosphere as joint products. Weaken any one sufficiently by overuse, and the biosphere would flip into a different stability regime.

Our ecological footprint is not only of the material we take from the biosphere, but also the transformed material we deposit into it; what is requisitioned for human use has to be returned. The macroeconomic models of growth and development in use in finance ministries and planning commissions, however, do not acknowledge that material must balance – from source to sink. Persistent pollutants such as plastics, nylon (fishing nets and synthetic textiles), toxic chemicals and metals provide examples of waste that have adverse consequences for the soils and water bodies especially. But even (perhaps, especially) biodegradable waste has to be accounted for. It does not do to imagine that if waste is biodegradable it leaves no footprint. If we overload Nature with such waste, the process of decomposition compromises other biospheric services. Pharmaceuticals such as antibiotics and fashion products such as cosmetics contaminate the soils and water bodies. They have an adverse effect on the food we eat, the water we drink, and the air we breathe. Chemical fertilisers and waste from livestock emerge at the other end of farms as waste, causing nutrient overload in streams and water bodies, disrupting the nitrogen cycle. Even the carbon dioxide emitted by our economies is a biodegradable waste: it is absorbed by primary producers for photosynthesis. But an overload compromises the ability of the biosphere to regulate climate. Global climate change will increasingly be a major cause of biodiversity loss (Reference Lovejoy and HannahLovejoy and Hannah, 2019). That will compromise the functional integrity of ecosystems. Rising concentration of carbon in the atmosphere is thus expected to bring about a chain of events that will radically alter the biosphere’s workings. Regulating and maintenance services will move out of the bounds within which our economies have evolved. That is an expression of biospheric complementarities.

Those complementarities find expression in the growth of all forms of waste. It may not be possible yet to predict how that will in time affect biospheric services (Box 4.2) but what one can anticipate with a level of certainty is that the transformations will be adverse to the human economy because we did not evolve under them. If the mass of waste material continues to increase, the composition of the biota can be expected to undergo sufficient change to bring about biospheric regime shifts. No such shift could be expected to bring good news to us, for human activities evolved only under gradual changes in the biosphere’s operations.

Biospheric complementarities point to a further truth: The efficiency with which its goods and services can be converted into produced goods and services is bounded. Formally, α is bounded (Equation (4.2)). As the biosphere’s regenerative rate G is also bounded, global output is also bounded (the Impact Equality). That is the sense in which humanity is embedded in Nature.

That G is bounded finds vivid expression in the idea of planetary boundaries (Reference Rockström, Steffen, Noone, Persson, F. S. Chapin, Lenton, Scheffer, Folke, Schellnhuber, Nykvist, de Wit, Hughes, van der Leeuw, Rodhe, Sörlin, Snyder, Costanza, Svedin, Falkenmark, Karlberg, Corell, Fabry, Hansen, Walker, Liverman, Richardson, Crutzen and FoleyRockström et al. 2009; Section 4.1.1). Contemporary models of macroeconomic growth and development do not necessarily overlook the fact that Earth is bounded, what they explore instead are production possibilities in which, by exercising sufficient ingenuity (read technological progress), humanity will be able to free itself from the biosphere’s constraints.

The increasing share of non-material goods in the GDP of high income countries is often cited as a move in that direction, miniaturisation in the production and use of information technology being a concrete example. One problem with the example is that the miniatures themselves are built with material goods; another is that the income drawn from a rising GDP can be, and is, spent on material goods. Currently global raw material consumption is estimated to be 90 gigatonnes a year (OECD, 2019c).Footnote ¹⁵¹ Mining and quarrying operations degrade ecosystems. Applying methods similar to ones deployed for estimating our global ecological footprint (Section 4.2), 50 billion tonnes a year is reckoned to be a sustainable rate. The OECD (2019c) has estimated that if the global population N in 2060 was to rise to 10 billion and per capita global income y was to rise to today’s per capita income in OECD countries, raw material consumption would be about 180 billion tonnes a year. That’s nearly four times the sustainable rate. Even if the idea of a weightless economy was to be believed, it would provide no solace if the biosphere was to flip to an uninhabitable state before it could be realised. We return to this issue in Chapter 9 in connection with population growth.

Contemporary models of macroeconomic growth may be interpreted as saying that the boundedness of the biosphere does not imply that the human economy has to be bounded. The existence of planetary boundaries would not necessarily preclude the possibility of perpetual economic growth, for we may feel we are entitled to imagine that with sufficient ingenuity humanity would be able to convert the biosphere’s goods and services into final products at an unbounded rate, that is, that there are no theoretical bounds on α. So, we need a further argument.

It is significant that a mechanical engine that converts heat into work at 100% efficiency is a theoretical impossibility. The biological counterpart is that it would not be possible even theoretically to convert our further waste into a state that makes no further demands on the assimilative services of the biosphere; for if we were able to do that, we would be able to break free of Nature. Chapter 4* presents a model of production possibilities for the global economy in which that dependence on the biosphere is represented by the idea that no matter how ingenious we are able to be, we cannot increase α to infinity (Figure 4.11).

Figure 4.11 The Economy is Embedded in the Biosphere

4.8 Core of the Review

Studying our aggregate demand $(Ny/{\alpha }_{\text{X}}+Ny/{\alpha }_{\text{Z}})$ and the biosphere’s aggregate supply G(S) allows us to unravel the proximate factors affecting our relationship with Nature. They consist of humanity’s numbers (N), our wants and desires (summarised in y), the efficiency (α_X, α_Z) with which we make use of the biosphere’s goods and services to provide us with our wants and desires, and the biosphere’s supply of its goods and services (G(S)). These are, however, proximate factors. The Review peers into them so as to unravel the forces that shape those factors and the way they influence one another. Depending on the context, that will require us to study the socio-ecological systems that define in turn households, communities, national governments, and even the world as a whole.

In subsequent chapters, we discuss ways to influence the future trajectories of y and N. Our analysis shows that, fortunately, it may be possible to reduce both projected values of N and y without unacceptable human cost. We also study ways in which the G-function can be raised (e.g. by introducing GM crops).

To find a way to convert the Impact Inequality into an Impact Equality, it pays to imagine the reasoning to be iterative:

To contemporary sensibilities, this mode of reasoning could appear strange, perhaps even repulsive. Some would invoke the language of rights. Should S not be determined by market forces? Whose business is it to choose y_i if not household i? Should N not be left to the personal choices of individual couples? And who other than entrepreneurs know how best to devise α_X and α_Z? And should the G-function not be left to be enhanced by agronomists, energy specialists and technologists?

There are several reasons these questions misread the socio-ecological world entirely. The stresses humanity has inflicted on the biosphere to the point where our mode of conduct is not sustainable are due to institutional failure writ large. That failure is not only due to malfunctioning markets, but also to households, communities and states. Ultimately, the finger should point to we citizens. Chapters 7 and 8 (environmental externalities) and Chapters 9 and 10 (reproductive externalities) provide an outline of the source of that overarching failure and relates it to fundamental properties of the biosphere we have studied in the previous chapter. When they are taken together, it is apparent that we are far removed from the model of the world that has shaped the contemporary reading not only of economic growth but also of economic development. Economics provides a remarkably effective language in which to read the socio-ecological world. The problem is not with economics, it is rather the fundamentally flawed reading of the structure of economic reasoning. The Review will use examples and illustrations to provide a language for identifying institutional arrangements that align the incentives facing various actors in an economy, so as to protect and sustain our place in the biosphere. It is a fundamental misconception of economists that we can continue to rely on models of growth and development in which our impact on the biosphere is of second-order importance (Chapter 4*). This Review is an attempt at constructing a formulation of economic reasoning that has the biosphere always in sight. Much remains to be done in advancing the subject; this is only a start.