The overall aim of this work package is to construct a model of the global economy that includes the main connections between the economy and the planetary pressures. The model will thus include the economic sectors that are the main drivers of the environmental pressures and the sectors and populations that are most heavily affected by environmental change. The work in WP1 will build and expand on the work in Engström et al (2019). That work presents a model, capturing the main drivers of planetary pressures, that allows for analysis of the effects of various policies on the planetary pressures. While providing a good starting point, a number of improvements to that model are required for analysis of the two-way interaction between the global economy and the Earth System. Perhaps most importantly, that model does not include the effects of changes in the earth system on the economy and human welfare. We aim to extend the model in that respect. In setting up and extending the model, it should allow for transparent understanding of the most important aspects of the two-way economy-environment interaction. A careful balance between tractability and completeness is important. The model aims to cover more than 90% of the drivers of each planetary pressure.

Main participants: Johan Gars (leader), Gustav Engström, Daniel Spiro, Lint Barrage, Peter Jørgensen, Fei Ao

The purpose of WP2 is to 1) supply the model with inputs of real-world empirical estimates of the key parameters and factor shares (to calibrate it to the world economy and the earth system processes) and 2) test the model’s performance by comparing its output to observed empirical regularities and studies.

On the input side, the model currently contains about 50 parameters of various kinds (see Engström et al. 2019). Some parameters defining the degree of substitutability between inputs in agriculture and manufacturing, and between different types of food for consumption have not yet been estimated, or are particularly inconclusive in the literature. A significant part of WP2 is dedicated to the estimation of these parameters through production function estimation, econometric techniques, and, where possible, natural experiments.

The output component of WP2 tests the model’s performance, that is, its output, against panel data and existing empirical studies. For example, one key model output is the response of carbon emissions to a tax on fossil fuels. Such output can be compared to findings in the empirical literature on the effects of carbon taxes. We also conduct novel empirical research by identifying key model outputs for which no prior estimate exists.

Main participants: Arthur van Benthem (leader), Lint Barrage, Daniel Spiro, Daniel Moran

In this WP we aim to improve our understanding of how the Earth system processes interact and impact economic development. By integrating existing estimates of planetary boundary interactions and linking spatial distributions of these interactions to concrete economic activities, we will characterize economic damage functions for Earth system processes that will be integrated in WP1&4. A particular focus of this WP will further be on biodiversity-loss as it is recognised as both a crucial Earth system process and to the best of our knowledge largely missing from integrated economic analysis.

A first interim step is capturing the interactions among the planetary boundaries. Such interactions are of crucial importance since they may involve cascades and feedbacks which can amplify individual processes. We will also assess the joint spatial impact distribution of economic activities on planetary boundaries processes by mapping out the joint impact distribution on global biodiversity and climate change through recent land use expansion.

Another aim of this WP is an assessment of cropland biodiversity’s contribution to agricultural economies, climate change mitigation and adaptation. The role of biodiversity in croplands in supporting agricultural productivity and in promoting carbon sequestration are prime examples of a biodiversity dependent ecosystem services (BES, Cardinale et al. 2012). Previous work on BES underestimate the support function of biodiversity for economy and climate by: (1) indirect effects of biodiversity on provisioning services such as agricultural yield through its effects on regulating services have not been quantified (Jørgensen et al. 2018). (2) the climate adaptation promoting functions of biodiversity through yield stability have been omitted (Nyström et al. 2019). We build upon previous work to gain a more comprehensive estimate of the economic value of biodiversity to society.

A final goal of this WP is to characterize the impacts of biodiversity-loss for integrated assessment modelling. Climate and biodiversity have been seen as separate issues, and only the former has been perceived as a global problem. We aim to close this gap by developing an economic damage function that is able to capture the effects of biodiversity loss on economic output. This is crucial in order to be to integrate this process in a way that closes the environment-economy feedback loop, which is integral to WP1.With this damage function, we will develop the first dynamic economic model which integrates both climate and biodiversity loss.

Main participants: Sarah Cornell, Daniel Moran, Peter Jørgensen, Steve Lade, Gustav Engström

The purpose of this WP is to analyze the impact of specific policies or sets of policies on Earth system processes and their feedback on human society.

The whole project is motivated by, arguably, one of the most important questions facing mankind the next 100 years: Which policies would keep humanity within the planet’s safe operating space without hindering progress on the sustainable development goals?

The ultimate purpose of the developed model is thus to enable us, and others, to move forward in pursuit of the answer to this grand question. Naturally, we won’t be able to provide a final and conclusive answer to that question. It needs to be broken down to a number of “smaller” policy questions:

1. What impact would a policy, which simultaneously solves the climate and hunger problems, have on the planetary pressures?

2. What is the effect on the planetary pressures of directing technical change towards agriculture?

3. Can, and if so how should, the energy system be changed to enable economic growth within the planetary boundaries?

4. What is the effect of a unilateral carbon pricing implemented by, say, the EU on the planetary pressures?

5. What would be the effect of an enforced deforestation ban on biodiversity?

6. How much improved efficiency would be needed in agriculture to not increase food prices while respecting all planetary boundaries?

7. What would be the environmental impact of market consolidation in various sectors?

All of these necessitate a framework like ours to answer. While extremely important in their own right, they should be considered examples rather than an exhaustive list of what can be addressed within our framework. The purpose of this work package is to provide answers to a subset of such questions. To determine which additional questions to analyze, we turn to our stakeholders.This ensures that the policies we analyze are practically implementable and of interest to actual policy makers. Hence as part of this work package we also conduct a qualitative study aimed at answering:

• Which policies do policy makers (i.e., politicians, government agencies, think tanks, multilateral organizations etc.) consider to be of special interest to analyze?

• Which policies do they think are practically feasible to implement?

Main participants: All