The rainfall loss caused by deforestation could cost over $1 trillion of GDP annually in Europe, China and the USA, a new study has found.
Around the world, over 130 countries are economically dependent on the rainfall that is generated by forests, according to researchers at the London School of Economics’ Grantham Research Institute on Climate Change.
They estimate that in these countries, the direct economic dependencies on “green water” generated by forests alone exceed US$5 trillion. This is in addition to the other revenue that is generated by having healthy forests, such as “timber production, climate regulation, water purification, air-quality enhancement and flood mitigation”.
“Our findings illustrate how forest systems perform a critical infrastructure function by sustaining rainfall patterns that support economic activity across countries, sectors and supply chains,” said co-author Thea Philip. “They are as vital to national resilience and prosperity as road, rail and energy networks.”
The three main blocs of China, Europe and the US account for almost half of the world's GDP, collectively raising $76.3 trillion in 2026, meaning that roughly 1 per cent of that GDP is currently linked to rainfall from forests.
A separate LSE report by researchers under Dr James Rising of the University of Delaware, last week found that current warming is causing direct damage and productivity loss of as much as 4 per cent of GDP in the UK alone. This, they found, could rise to 20 per cent if global ocean surface temperatures rise by 4 per cent over the historic figure.
A separate survey published in the spring reinforced the view that food systems and other areas of economic activity were threatened by ecological collapse.
The report, led by Anglia Ruskin University and the Institute and Faculty of Actuaries researchers, warned that soil degradation and water scarcity have already led to lower crop yields, higher prices and reduced availability in recent years.
Large-scale deforestation, particularly in the Amazon rainforest, is increasingly disrupting the rainfall and carbon cycles that are essential for stable crop yields. Globally the decline in pollinators, which underpin around three quarters of global crop production, will continue to hit food production.
Add in the consequences of overfishing, pollution and climate change, and marine ecosystems are also past critical thresholds, which could lead to a collapse in fish populations. Investing in measures to sustainable land use, protect pollinators and strengthen supply-chain resilience,
The authors of this report argued that prevention will be cheaper than a crisis response to acute shocks. It said policymakers and regulators must recognise nature as the critical foundation of society and the economy, using integrated climate-nature scenarios to understand the interconnection between biodiversity and climate, the paper added.
A UK government report compiled by intelligence officials found biodiversity loss and ecosystem collapse is a realistic possibility that could trigger a global competition for food, mass migration to the UK and nuclear war in Asia.
The LSE authors, Ms Philip and Nicola Ranger, propose a new concept to describe the most vulnerable points of the economy as Systemically Important Natural Systems (Sins). The report argues that their degradation “would pose serious risks to economic and financial stability, either globally ('G-Sins') or domestically ('D-Sins’).”
Forests that should be Sins-designated would include tropical forests in Indonesia and New Guinea, the Amazon countries and the Congo Basin, boreal forests in the Northern Hemisphere. Coral reefs in the Coral Triangle and Great Barrier Reef and the major agricultural regions would also qualify for Sins designation, the authors said.
Co-author, professor Nicola Ranger, compared the proposal to the G-Sins concept proposed to regulate banks after the 2008 financial crash.
“The challenge is not a lack of environmental commitments, but the absence of mechanisms that formally recognise, value and embed the systemic importance of these critical natural systems.
“Just as regulators identified the banks that were too big to fail after 2008, the G-Sins concept offers governments, regulators, corporates and financial institutions one possible framework to identify the ecosystems that are too important to fail – and to put in place the monitoring, investment and risk management needed to close that gap.”
