Skip to main content

Thank you for visiting nature.com. You are using a browser version with limited support for CSS. To obtain the best experience, we recommend you use a more up to date browser (or turn off compatibility mode in Internet Explorer). In the meantime, to ensure continued support, we are displaying the site without styles and JavaScript.

Wealth reallocation and sustainability under climate change

Abstract

Climate change is often described as the greatest environmental challenge of our time. In addition, a changing climate can reallocate natural capital, change the value of all forms of capital and lead to mass redistribution of wealth. Here we explain how the inclusive wealth framework provides a means to measure shifts in the amounts and distribution of wealth induced by climate change. Biophysical effects on prices, pre-existing institutions and socio-ecological changes related to shifts in climate cause wealth to change in ways not correlated with biophysical changes. This implies that sustainable development in the face of climate change requires a coherent approach that integrates biophysical and social measurement. Inclusive wealth provides a measure that indicates sustainability and has the added benefit of providing an organizational framework for integrating the multiple disciplines studying global change.

Access options

Rent or Buy article

Get time limited or full article access on ReadCube.

from$8.99

All prices are NET prices.

Figure 1: The reallocation of natural capital wealth between two otherwise identical locations, when accounting prices reflect some degree of economic scarcity.
Figure 2: The influence of demographic changes on marginal growth, and hence the accounting price of a fish stock.
Figure 3: The reallocation of wealth between asymmetric regions.

References

  1. 1

    Does Income Inequality Hurt Economic Growth? (Directorate for Employment, Labour and Social Affairs, OECD, 2014).

  2. 2

    Stiglitz, J. E., Sen, A., Fitoussi, J.-P. Mis-measuring Our Lives: Why GDP Doesn't Add Up (New Press, 2010).

    Google Scholar 

  3. 3

    UNU-IHDP and UNEP Inclusive Wealth Report 2014: Measuring Progress Toward Sustainability (Cambridge Univ. Press, 2014).

  4. 4

    Agarwala, M., Atkinson, G., Baldock, C. & Gardiner, B. Natural capital accounting and climate change. Nature Clim. Change 4, 520–522 (2014).

    Google Scholar 

  5. 5

    Parry, M. L., Canziani, O. F., Palutikof, J. P., van der Linden, P. J. & Hanson, C. E. (eds) Climate Change 2007: Impacts, Adaptation and Vulnerability (IPCC, Cambridge Univ. Press, 2007).

    Google Scholar 

  6. 6

    Nelson, E. J. et al. Climate change's impact on key ecosystem services and the human well-being they support in the US. Front. Ecol. Environ. 11, 483–893 (2013).

    Google Scholar 

  7. 7

    O'Brien, K. L. & Leichenko, R. M. Double exposure: assessing the impacts of climate change within the context of economic globalization. Glob. Environ. Change 10, 221–232 (2000).

    Google Scholar 

  8. 8

    O'Brien, K. & Leichenko, R. Climate change, equity and human security. Die Erde 137, 165–179 (2006).

    Google Scholar 

  9. 9

    Adger, W. N. Fairness in Adaptation to Climate Change (MIT, 2006).

    Google Scholar 

  10. 10

    Cheung, W. W. L., Close, C., Lam, V., Watson, R. & Pauly, D. Application of macroecological theory to predict effects of climate change on global fisheries potential. Mar. Ecol. Prog. Ser. 365, 187–197 (2008).

    Google Scholar 

  11. 11

    Turner, W. R. et al. Climate change: helping nature survive the human response. Conserv. Lett. 3, 304–312 (2010).

    Google Scholar 

  12. 12

    Quaas, M. F., Reusch, T. B., Schmidt, J. O., Tahvonen, O. & Voss, R. It is the economy, stupid! Projecting the fate of fish populations using ecological-economic modeling. Glob. Change Biol. 22, 264–270 (2016).

    Google Scholar 

  13. 13

    Tavoni, A. & Levin, S. A. Managing the climate commons at the nexus of ecology, behaviour and economics. Nature Clim. Change 4, 1057–1063 (2014).

    Google Scholar 

  14. 14

    Dasgupta, P. Human Well-Being and the Natural Environment (Oxford Univ. Press, 2007).

    Google Scholar 

  15. 15

    Adger, W. N., Arnell, N. W. & Tompkins, E. L. Successful adaptation to climate change across scales. Glob. Environ. Change 15, 77–86 (2005).

    Google Scholar 

  16. 16

    Eriksen, S. et al. When not every response to climate change is a good one: Identifying principles for sustainable adaptation. Clim. Dev. 3, 7–20 (2011).

    Google Scholar 

  17. 17

    Denton, F. et al. in Climate Change 2014: Impacts, Adaptation, and Vulnerability. Part A: Global and Sectoral Aspects (eds Field, C. B. et al.) 1101–1131 (IPCC, Cambridge Univ. Press, 2014)

    Google Scholar 

  18. 18

    Heal, G. Reflections—defining and measuring sustainability. Rev. Environ. Econ. Policy 6, 147–163 (2012).

    Google Scholar 

  19. 19

    Hanley, N., Dupuy, L. & McLaughlin, E. Genuine savings and sustainability. J. Econ. Surv. 29, 779–806 (2015).

    Google Scholar 

  20. 20

    Dasgupta, P. The welfare economic theory of green national accounts. Environ. Resour. Econ. 42, 3–38 (2009).

    Google Scholar 

  21. 21

    Dasgupta, P. Measuring the wealth of nations. Annu. Rev. Res. Econ. 6, 17–31 (2014).

    Google Scholar 

  22. 22

    Arrow, K. et al. Are we consuming too much? J. Econ. Perspect. 18, 147–172 (2004).

    Google Scholar 

  23. 23

    Pearson, L. J., Biggs, R., Harris, M. & Walker, B. Measuring sustainable development: the promise and difficulties of implementing Inclusive Wealth in the Goulburn-Broken Catchment, Australia. Sustain. Sci. Pract. Policy 9, 16–27 (2013).

    Google Scholar 

  24. 24

    Miller, K. A. & Munro, G. R. Climate and cooperation: a new perspective on the management of shared fish stocks. Mar. Resour. Econ. 19, 367–393 (2004).

    Google Scholar 

  25. 25

    Sumaila, U. R., Cheung, W. W. L., Lam, V. W. Y., Pauly, D. & Herrick, S. Climate change impacts on the biophysics and economics of world fisheries. Nature Clim. Change 1, 449–456 (2011).

    Google Scholar 

  26. 26

    Chen, I.-C., Hill, J. K., Ohlemüller, R., Roy, D. B. & Thomas, C. D. Rapid range shifts of species associated with high levels of climate warming. Science 333, 1024–1026 (2011).

    CAS  Google Scholar 

  27. 27

    Pinsky, M. L., Worm, B., Fogarty, M. J., Sarmiento, J. L. & Levin, S. A. Marine taxa track local climate velocities. Science 341, 1239–1242 (2013).

    CAS  Google Scholar 

  28. 28

    Poloczanska, E. S., Hoegh-Guldberg, O., Cheung, W. W. L., Pörtner, H. O. & Burrows, M. T. in Climate Change 2014: Impacts, Adaptation, and Vulnerability. Part A: Global and Sectoral Aspects (eds Barros, V. R. et al.) 123–127 (IPCC, Cambridge Univ. Press, 2013).

    Google Scholar 

  29. 29

    Lin, H. et al. Spatio-temporal dynamics on the distribution, extent, and net primary productivity of potential grassland in response to climate changes in China. Rangeland J. 35, 409–425 (2013).

    Google Scholar 

  30. 30

    Petitgas, P. et al. Anchovy population expansion in the North Sea. Mar. Ecol. Prog. Ser. 444, 1–13 (2012).

    Google Scholar 

  31. 31

    Mendelsohn, R. O. The economics of adaptation to climate change in developing countries. Clim. Change Econ. 3, 1250006 (2012).

    Google Scholar 

  32. 32

    Mendelsohn, R. & Dinar, A. Climate Change and Agriculture: An Economic Analysis of Global Impacts, Adaptation, and Distributional Effects (Edward Elgar, 2009).

    Google Scholar 

  33. 33

    Lawler, J. J. et al. Resource management in a changing and uncertain climate. Front. Ecol. Environ. 8, 35–43 (2010).

    Google Scholar 

  34. 34

    Ostrom, E. Governing the Commons: The Evolution of Institutions for Collective Action (Cambridge Univ. Press, 1990).

    Google Scholar 

  35. 35

    Stavins, R. N. The problem of the commons:still unsettled after 100 years. Am. Econ. Rev. 101, 81–108 (2011).

    Google Scholar 

  36. 36

    Libecap, G. D. Contracting for Property Rights (Cambridge Univ. Press, 1994).

    Google Scholar 

  37. 37

    Reed, W. J. & Heras, H. E. The conservation and exploitation of vulnerable resources. Bull. Math. Biol. 54, 185–207 (1992).

    Google Scholar 

  38. 38

    Dasgupta, P. & Maler, K.-G. Net national product, wealth, and social well-being. Environ. Dev. Econ. 5, 69–93 (2000).

    Google Scholar 

  39. 39

    Barbier, E. B. Wealth accounting, ecological capital and ecosystem services. Environ. Dev. Econ. 18, 133–161 (2013).

    Google Scholar 

  40. 40

    Barbier, E. B. Account for depreciation of natural capital. Nature 515, 32–33 (2014).

    CAS  Google Scholar 

  41. 41

    Fisher, I. The Nature of Capital and Income (Norwood, 1906).

    Google Scholar 

  42. 42

    Hotelling, H. The economics of exhaustible resources. J. Polit. Econ. 39, 137–175 (1931).

    Google Scholar 

  43. 43

    Arrow, K. J., Dasgupta, P. & Maler, K.-G. Evaluating projects and assessing sustainable development in imperfect economies. Environ. Resour. Econ. 26, 647–685 (2003).

    Google Scholar 

  44. 44

    Arrow, K. J., Dasgupta, P., Goulder, L. H., Mumford, K. J. & Oleson, K. Sustainability and the measurement of wealth. Environ. Dev. Econ. 17, 317–353 (2012).

    Google Scholar 

  45. 45

    World Commisson on Environment and Development Our Common Future (Oxford Univ. Press, 1987).

  46. 46

    Fenichel, E. P. & Abbott, J. K. Natural capital from metaphor to measurement. J. Assoc. Environ. Res. Econ. 1, 1–27 (2014).

    Google Scholar 

  47. 47

    Inklaar, R. & Timmer, M. P. Capital, Labor and TFP in PWT8.0. (Groningen Growth and Development Centre, University of Groningen, 2013); http://www.rug.nl/research/ggdc/data/pwt/v80/capital_labor_and_tfp_in_pwt80.pdf

    Google Scholar 

  48. 48

    Fenichel, E. P. et al. Measuring the value of groundwater and other forms of natural capital. Proc. Natl Acad. Sci. USA http://dx.doi.org/10.1073/pnas.1513779113 (2015).

  49. 49

    Miranda, M. J. & Fackler, P. L. Applied Computational Economics and Finance (MIT, 2002).

    Google Scholar 

  50. 50

    Jorgenson, D. W. Capital theory and investment behavior. Am. Econ. Rev. 53, 247–259 (1963).

    Google Scholar 

  51. 51

    McCay, B.J., Brandt, S. & Creed, C. F. Human dimensions of climate change and fisheries in a coupled system: the Atlantic surfclam case. ICES J. Mar. Sci. 68, 1354–1367 (2011).

    Google Scholar 

  52. 52

    Pinsky, M. L. & Fogarty, M. J. Lagged social-ecological responses to climate and range shifts in fisheries. Climatic Change 115, 883–891 (2012).

    Google Scholar 

  53. 53

    Pörtner, H. & Knust, R. Climate change affects marine fishes through the oxygen limitation of thermal tolerance. Science 315, 95–97 (2007).

    Google Scholar 

  54. 54

    Bates, A. E. et al. Defining and observing stages of climate-mediated range shifts in marine systems. Glob. Environ. Change 26, 27–38 (2014).

    Google Scholar 

  55. 55

    Worm, B. et al. Rebuilding global fisheries. Science 325, 578–585 (2009).

    CAS  Google Scholar 

  56. 56

    Behrenfeld, M. J. et al. Climate-driven trends in contemporary ocean productivity. Nature 444, 752–755 (2006).

    CAS  Google Scholar 

  57. 57

    Bopp, L. et al. Multiple stressors of ocean ecosystems in the 21st century: Projections with CMIP5 models. Biogeosciences 10, 6225–6245 (2013).

    Google Scholar 

  58. 58

    Sillmann, J., Kharin, V. V., Zwiers, F. W., Zhang, X. & Bronaugh, D. Climate extremes indices in the CMIP5 multimodel ensemble: Part 2. Future climate projections. J. Geophys. Res. Atmos. 118, 2473–2493 (2013).

    Google Scholar 

  59. 59

    Caswell, H. Matrix Population Models: Construction, Analysis, and Interpretation 2nd edn (Sinauer, 2001).

    Google Scholar 

  60. 60

    Gutierrez, A. P. & Regev, U. The bioeconomics of tritrophic systems: application to invasive species. Ecol. Econ. 52, 383–396 (2005).

    Google Scholar 

  61. 61

    Homans, F. R. & Wilen, J. E. A model of regulated open access resource use. J. Environ. Econ. Manag. 32, 1–21 (1997).

    Google Scholar 

  62. 62

    Deacon, R. T., Finnoff, D. & Tschirhart, J. Restricted capacity and rent dissipation in a regulated open access fishery. Resour. Energy Econ. 33, 366–380 (2011).

    Google Scholar 

  63. 63

    Fenichel, E. P., Gopalakrishnan, S. & Bayasgalan, O. in Handbook on the Economics of Natural Resources (eds Halvorsen, R. & Layton, D. F.) 165–205 (Edward Elgar, 2015).

    Google Scholar 

  64. 64

    Clark, C. W. Mathematical Bioeconomics: the Optimal Management of Renewable Resources 2nd edn (Wiley, 2005.)

    Google Scholar 

  65. 65

    Horan, R. D., Fenichel, E. P., Drury, K. L. S. & Lodge, D. M. Managing ecological thresholds in coupled environmental–human systems. Proc. Natl Acad. Sci. USA 108, 7333–7338 (2011).

    CAS  Google Scholar 

  66. 66

    Muller, J. & Albers, H. J. Enforcement, payments, and development projects near protected areas: how the market setting determines what works where. Resour. Energy Econ. 26, 185–204 (2004).

    Google Scholar 

  67. 67

    Nadiri, M. I. & Rosen, S. Interrelated factor demand function. Am. Econ. Rev. 59, 457–471 (1969).

    Google Scholar 

  68. 68

    Nordhaus, W. D. Rolling the 'DICE': an optimal transition path for controlling greenhouse gases. Resour. Energy Econ. 15, 27–50 (1993).

    Google Scholar 

  69. 69

    Nordhaus, W. D. The Climate Casino (Yale Univ. Press, 2013).

    Google Scholar 

  70. 70

    Manne, A., Mendelsohn, R.O. & Richels, R. MERGE: a model for evaluating regional and global effects of GHG reduction policies. Energy Policy 23, 17–34 (1995).

    Google Scholar 

  71. 71

    Stanton, E. A. Negishi welfare weights in integrated assessment models: the mathematics of global inequality. Climatic Change 107, 417–432 (2011).

    Google Scholar 

Download references

Acknowledgements

Research support by NSF awards OCE-1426700, OCE-1426746 and OCE-1426891, NJ Sea Grant award R/6410-0011, the Knobloch Family Foundation, and the project Green Growth Based on Marine Resources: Ecological and Socio-Economic Constraints (GreenMAR), funded by Nordforsk.

Author information

Affiliations

Authors

Contributions

E.P.F. and M.L.P. conceived the paper; E.P.F., M.L.P. and J.K.A. conducted analyses; E.P.F. led writing and all authors contributed to edits.

Corresponding author

Correspondence to Eli P. Fenichel.

Ethics declarations

Competing interests

The authors declare no competing financial interests.

Rights and permissions

Reprints and Permissions

About this article

Verify currency and authenticity via CrossMark

Cite this article

Fenichel, E., Levin, S., McCay, B. et al. Wealth reallocation and sustainability under climate change. Nature Clim Change 6, 237–244 (2016). https://doi.org/10.1038/nclimate2871

Download citation

Further reading

Search

Quick links

Nature Briefing

Sign up for the Nature Briefing newsletter — what matters in science, free to your inbox daily.

Get the most important science stories of the day, free in your inbox. Sign up for Nature Briefing