Estimated reading time: 3 minutes
As natural capital and biodiversity rise up the global agenda, Planet Tracker examines the economic implications of countries’ dependence on nature.
International trade is dependent on nature.
Around 40% of global output is dependent on natural resources, financial think tank Planet Tracker’s latest report highlights.
For some countries, more than 80% of exports are dependent on natural resources.
This raises questions about how well this natural capital is looked after and how well financial markets incorporate this knowledge into their models of the world.
By presenting a new metric of countries’ nature dependence based on trade, Planet Tracker reveals not only the scale of certain economies’ dependency on nature but also the results of this dependency.
Understanding this is crucial for reducing export risks as climate change accelerates and for building sustainable economies for nature-dependent exporters.
The new report:
- Classifies world exports into those dependent on nature––both renewable (like agricultural, forestry and seafood products) and non-renewable (such as oil, minerals, metals, ores etc)––and those that are not.
- Divides countries into high, medium, and low nature-dependent exporters.
- Examines countries with high dependency, by looking at common characteristics based on a few broad measures, including credit ratings, gross domestic product (GDP) per capita, economic inequality, food security, soil erosion, and climate resilience. It then explores threats to those resources and the exposure certain countries face when their traded resources are threatened. It also adds to growing evidence challenging the so-called ‘resource curse’ or ‘paradox of plenty.’
Some of the report’s key findings include:
- Countries with a high dependency on renewable resources generally have poorer credit ratings than countries with medium to low dependency.
- Countries with a high dependency on non-renewable resources, notably those with well-established oil wealth and good governance, are much more likely to have strong credit ratings.
- Economic, political, financial, and technological improvements lead countries to become less dependent on natural resources and more dependent on production- or service-based economies.
- Political instability is a likely result of non-renewable resource extraction.
- Less inequality and greater GDP per capita levels can lead to decreases in renewable exports.
“Russia’s invasion of Ukraine has pushed the international trade of natural resources – such as oil, gas, and wheat – to the top of the international agenda,” John Willis, director of research at Planet Tracker, said.
“But there are other systemic risks associated with the trade of natural resources that long pre-date the invasion.
“No country is immune to the challenges that nature is now facing, and the pressures they place on our world’s ecosystems are often out of sight, out of mind and, as a result, underregulated.
“Our latest paper shines a light on major issues relating to the international trade of natural resources in key areas and the avoidable risks to society they present.”
The underlying data of the report can be examined in further detail at the Planet Tracker NDE Interactive Dashboard.
[erratum: figures changed to reflect accurate statistics in the market]