IMPACD: Integrated macroeconomic model of pandemics, climate change, & deforestation

• Applicant: Professor Dr. Thomas Siegmund Lontzek
• Subject Area: Economic Theory
• Term: from 2021 to 2023
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 458465334

This project will incorporate pandemic risk and climatic risk in an integrated global macroeconomic growth model with climate and forest ecosystems. We will provide first insights into the impact of pandemic risk on the social cost of deforestation and compute the societal value of deforestation reduction not only in the context of climate change, but also as an option to mitigate the risk of global pandemics.Our current economic system has put great pressure on the natural environment, especially the world’s climate and rain forests. The crucial role of forests globally for Earth’s climate and biodiversity has already been studied in several global economic integrated assessment models. Given the forests’ role as natural carbon sinks, deforestation creates social costs that go beyond the direct loss of biodiversity. There is, however, rising evidence that forests have an additional ecosystem service: they also host diseases. Rain forests, for example, have constituted a natural barrier between “civilized” regions and wild fauna for centuries, limiting human contact with new zoonotic diseases. Deforestation not only relocates or destroys this barrier; it also leads to a loss of the very biodiversity that has in the past also limited the spread of new diseases. Over the past two decades a rich body of empirical research has linked deforestation measure as part of anthropogenic encroachment on natural ecosystems to the emergence of infectious diseases. That link, however, has so far been only present on a regional scale.Recent studies show that among these emerging diseases, some even have the potential to cause health and economic impacts on a global scale, as demonstrated recently by the outbreak of the COVID-19 pandemic. Incorporating the link between deforestation and emerging infectious diseases with the risk of devastating global impacts will change the assessment of the total cost of deforestation to society.This project is based on the idea that the potential impacts of deforestation should be combined in a single, integrated economic framework. That framework must incorporate the feedback effects between the economic incentives of deforestation, the permanent loss of biodiversity, the damages and risks from global warming, and the increasing risks posed by emerging infectious diseases. Moreover, this project will explicitly consider the effects of stochastic interactions between deforestation and the occurrences of emerging infectious diseases, taking into account not only the economic benefits of deforestation but also its expected negative long-term consequences with regard to the climate, ecosystem, and pandemic outbreaks. Identifying the source of emerging diseases and directly including these factors in an integrated macroeconomic growth model can raise our understanding of the long-term consequences of human impact on the environment and help in identifying the “true” social costs of deforestation and diminishing biodiversity.

• DFG Programme: Research Grants
• International Connection: Netherlands, Switzerland, United Kingdom
• Cooperation Partners: Professor Timothy Lenton, Ph.D.; Professor Karl Schmedders, Ph.D.; Professor Dr. Ole Wilms