The integration of ecosystem services into computable general equilibrium modeling: state of the art and ways forward

Reversing the loss and degradation of nature requires changes in how economies operate. However, economic models guiding policy fail to fully reflect nature's contributions to the economy as well as the economic and welfare consequences of ecosystem degradation. Here we review efforts to link ecosystem services (ES) models or estimates with Computable General Equilibrium (CGE) models. We found that provisioning ES with clear market values (like timber and fish) are relatively often linked to CGE models, while regulating and cultural ES are less so. Moreover, studies typically consider only a few direct drivers of ES change, such as land use, which risks underestimating ecological and economic impacts of nature degradation. Most examples lack a temporal dimension and often examine single ES in single regions. We identify four ways forward towards more integrated Earth-economy modeling: 1) more comprehensive integration of ES in CGE models, 2) improving ES models to capture relevant ecological processes, 3) improving CGE models to better capture the consequences of changes in ES, and 4) improving the representation of direct drivers of biodiversity and ES change. Given the urgent and visible effects of environmental degradation, moving towards integrated Earth-economy models is essential to the design of sustainability policies.