1420. Economics of a Livable Planet

A World Bank report titled "Reboot Development: The Economics of a Livable Planet" points out that in humanity's pursuit of progress, industrial expansion, energy consumption, and large-scale agriculture have destabilized the systems that enable people to thrive. It argues that improving the stability, productivity, and resilience of natural resources is essential to maintaining a livable planet.

Humans have always relied on the bounty of nature. Early civilizations began near rivers and relied on seasonal rains and fertile soils for their harvests. Human progress has always required ingenuity and resilience, transforming nature's greatest gifts into the foundation of civilization. In just a few generations, much of the world has emerged from the shadow of poverty and hunger to a period of relative prosperity. Globally, extreme poverty rates have fallen significantly, and billions of people now live lives with greater security and opportunity. Food insecurity, once a threat to survival, has given way to a world that produces enough calories to curb hunger, although nutritional challenges remain. Access to clean water, electricity, and modern infrastructure, luxuries for many throughout history, has spread to previously disadvantaged communities.

Today, the majority of humanity lives more comfortably than in any previous generation. However, the industrial expansion, energy consumption, and large-scale agriculture that have driven economic growth now threaten the planet's ability to sustain prosperity. Air pollution shortens millions of lives each year and impacts productivity and employment. Once abundant water resources are now often overused and increasingly polluted by chemical runoff and industrial waste, negatively impacting economies. Forests are being cut down at an alarming rate, and the world's oceans, once thought to be inexhaustible, are bearing the scars of overfishing, acidification, and plastic pollution.

In particular, approximately 80% of the population in low-income countries is exposed to all three environmental hazards: land degradation, dangerous air pollution levels, and water stress. While only 1% of high-income countries' populations are exposed to all three environmental risks, environmental degradation remains a global problem, and 90% of the world's population lives in areas where at least one of three critical resources—land, air, or water—is degraded. The frequent co-occurrence of these environmental challenges, particularly in low-income countries, calls into question the old paradigm that environmental degradation is a necessary evil of industrialization and will decrease in post-industrial societies.

In its pursuit of progress, humanity has destabilized the systems that enable all people to thrive. Maintaining a livable planet requires humanity to maintain environmental health, invest in both human and physical capital, and improve the lives, livelihoods, and living standards of all people. The livability of the Earth depends on the stability, productivity, and resilience of natural resources. Therefore, prudent use of these critical resources is neither a constraint on development nor a mere ecological concern; rather, it is essential for a livable Earth that enables lasting improvements.

Decoupling economic growth from environmental degradation is crucial. Technological advances, process improvements, and improved resource management play crucial roles in decoupling economic growth from environmental degradation. The report focuses on three effects that drive environmental change: the scale effect, the composition effect, and the efficiency effect. As economies expand, the scale effect increases resource use and pollution due to simple increases in production and consumption. The composition effect reflects structural changes in the economy, where a shift toward or away from resource-intensive industries worsens or improves environmental impacts. The efficiency effect captures technological and process improvements that reduce environmental impact per unit of output.

For land, air, and water resources, efficiency gains—producing more with fewer inputs—are a major offsetting factor for scale effects. Technological advances, improved processes, and better resource management play a key role in decoupling economic growth from environmental degradation. There is room for continued improvements in efficiency and productivity. Regarding food, approximately 30% of global food production is lost or wasted, wasting not only calories but also the water, energy, forests, and emissions used. Similarly, more than 50% of nitrogen fertilizer never reaches crops, polluting water and air and contributing to greenhouse gas emissions. In particular, in many regions, fertilizer use has exceeded the point of diminishing returns, meaning that increased nitrogen use reduces rather than increases productivity, and nearly half of the world's calories come from areas where nitrogen is more harmful than beneficial. Misguided subsidies exacerbate the situation, encouraging harmful overuse and resulting in a vicious cycle of soil degradation, reduced yields, and increased chemical dependency. Nitrogen runoff also fuels algae blooms, kills fish, and pollutes coastlines. The cumulative annual global cost of nitrogen pollution is estimated at $3.4 trillion, reflecting widespread damage to public health, fisheries, infrastructure, and biodiversity.

But simply improving efficiency is not enough. Mitigating environmental degradation in growing economies ultimately depends on changing the mix of consumption and production to generate better outcomes. This involves accelerating the transition from resource- and pollution-intensive sectors—such as fossil fuels, nitrogen-intensive agriculture, and linear manufacturing—to more circular and regenerative growth models. For example, shifting diets to foods with lower environmental impacts, investing in public transportation rather than private vehicle infrastructure, and complementing chemical fertilizers with integrated nutrient management strategies can reduce environmental pressures even as production continues to grow. Such changes require both new technologies and appropriate policies.

(Reference)
Damania, Richard, et al. 2025. Reboot Development: The Economics of a Livable Planet. Washington, DC: World Bank. https://www.worldbank.org/en/publication/the-economics-of-a-livable-pla…

Contributor: IIYAMA Miyuki, Information Program