The global economy is incurring losses of up to $25 trillion each year due to the failure of key sectors such as agriculture, energy, and fishing to account for the negative impacts of their operations on nature, climate, and human health, according to a groundbreaking report by the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES).
The report, which was approved by IPBES member states in Namibia on Monday, estimates that these unaccounted-for costs represent a quarter of the world’s annual GDP. This staggering figure arises from industries that neglect to consider the environmental and health repercussions of their activities.
As reported by the Financial Times, the IPBES study, authored by 165 scientists over the past three years, highlights how treating issues like biodiversity loss, climate change, water scarcity, and health risks as separate problems leads to spiraling costs. The report’s co-author, Pam McElwee of Rutgers University, stressed that integrating policy sectors and addressing these crises as interconnected could significantly reduce economic burdens. “By treating these as individual problems, we are wasting money and duplicating efforts,” McElwee said. “There would be significant cost savings if we brought policy sectors together.”
For example, unsustainable farming practices that increase short-term yields may also lead to pollution runoff, harming water quality and human health, McElwee explained. These “externalities” are often passed on to vulnerable communities or insurance companies, compounding the financial costs.
The Financial Times also noted that the IPBES report comes amid growing concerns about stalled international efforts to address biodiversity and climate crises. This year, UN negotiations on issues like biodiversity, desertification, and plastics pollution failed to make substantial progress. Inaction, the report warns, would result in a further $500 billion in annual costs due to climate change, while the price of addressing biodiversity loss doubles if delayed by 10 years.
Biodiversity is declining at an alarming rate of 2 to 6 percent per decade, with severe consequences for food security, climate resilience, and overall ecosystem health. Furthermore, extreme weather events linked to climate change have caused over $4.3 trillion in damages over the past five decades, with lower-income nations bearing the brunt of these effects.
A major driver of these escalating costs is misaligned financial incentives, the report found. Governments continue to spend $1.7 trillion annually on subsidies that encourage environmentally harmful practices, such as fossil fuel production and overfishing. These subsidies often exacerbate the very crises they seek to address. Additionally, the report revealed that $5.3 trillion in private financial flows annually contribute directly to biodiversity loss, including investments in deforestation and pollution-heavy industries.
Despite these challenges, the report emphasizes that solutions to mitigate the crisis are already available. McElwee highlighted over 150 case studies that demonstrate successful integrated approaches to addressing biodiversity, climate, and health challenges simultaneously. “We don’t have to wait for technological advancements,” she said. “The solutions are already in hand.”
