Exploring land constraints relating to nature conservation policies in an ecological macroeconomic model

The Global Biodiversity Framework’s ‘30x30 targets’ aim to restore and conserve 30% of degraded ecosystems by 2030, as part of broader efforts to halt and reverse nature loss. Despite representing a rapid transformation in land use, the few studies exploring the potential effects of constraining land use for nature conservation have estimated relatively minor economic impacts. This study presents a novel stylised ecological stock-flow consistent input-output (E-SFC-IO) model for the global economy, which accounts for land use by the agricultural sector, and the effects of land availability on land rents. Our results first show that implementing the 30x30 targets generates cost-push inflationary dynamics that feedback to affect the functional distribution of income. In contrast to other studies, we find that capital investment in the agricultural sector does not automatically increase to offset higher relative scarcity in land input. Instead, lower profit rates disincentivise capital investment and depress productivity growth. We next explore different combinations of policies to encourage agricultural sector investment, and how this transition in capital stock interacts with the inflationary backdrop. We find that taxing rents earned by landowners can mitigate some of the stagflationary consequences of the baseline scenario, but that agricultural investment is unlikely to increase without financial regulatory policies to counteract credit rationing by banks. Finally, we test how agricultural sector investment is affected by two environmental shocks: the first capturing the effects of chronic soil degradation, and the second representing climate damages of different magnitudes. Chronic soil degradation is a long term consequence of the transition to a more intensive form of agriculture, and results in the return of cost-push inflation over time. Climate damages increase the volatility and the cost of the agricultural transition, requiring more supportive policies. Overall, this study provide valuable insights for policymakers seeking to ensure nature conservation policies balance environmental objectives and economic impacts.