A recent technical note by C3A examines the need for Ministries of Finance to mainstream nature within their agenda and the analytical tools and operational frameworks needed to support this.
Current nature-related scenarios have limited capacity to provide meaningful insights for policymaking, as the complexity of nature related processes makes predictions drawing on their dynamics unreliable, and current scenarios do not capture all relevant transmission channels between nature and the economy.
- Capturing nature in a limited number of metrics is bound to be imperfect and is more difficult than capturing climate change via greenhouse gas emissions, for which clear metrics and targeted policy options exist. Thus, defining clear metrics of interest for nature is a work in progress.
- Existing models for assessing the macrofinancial impacts of nature-related scenarios tend to underestimate and misrepresent the economic relevance of nature loss and the major changes needed to address it. IAMs in particular often assume nature is readily substitutable with other factors of production and that growth is exogenously determined, leading to an artificially smooth adjustment to shocks and failure to show the possible large and nonlinear impacts of nature loss and the nature transition.
- Further development of scenarios and models that address nature are needed, and MoFs would stand to benefit if this development is accompanied by knowledge-sharing.
The technical note lays out a research program to advance scenario and model development. It shows first how a “nature-transition dashboard” could help assess different nature scenarios, including against the Global Biodiversity Framework targets. A taxonomy of available financial instruments for nature mitigation and adaptation, highlighting their uses, benefits, and drawbacks in different contexts, may help MoFs determine the macrofinancial and environmental impact of such instruments. Second, it proposes exploring whether (nonequilibrium) system dynamics models are more apt for assessing the macrofinancial implications of nature loss and the nature transition. Third, it advises that training and knowledge-sharing during the process of mainstreaming nature in MoFs can build in-house capacity and help identify structural obstacles and leverage points to tackle nature-related issues.
Keywords
capacity buildingecosystem servicesmodelsnaturescenarios
