Positive externalities of nature in Australia

Nature in Australia is vital economic infrastructure. When the value of non-market ecosystem services—such as climate regulation, water purification, pollination, and flood protection—is included, its contribution to the economy exceeds $511 billion each year. This represents around 20% of GDP, placing it on par with the combined output of the mining and finance sectors.

The Dasgupta Review (2021), led by Professor Sir Partha Dasgupta for the UK Treasury, highlighted the need to treat biodiversity as an economic asset on par with physical and human capital. It argued that growth is unsustainable if natural resources are depleted faster than they regenerate. The review stressed the economic value of natural capital through raw materials, ecosystem services (like healthy soil, water, and pollination), climate regulation, natural defences (mangroves, reefs), and contributions to tourism and medicine. It has since shaped policies worldwide, influencing finance ministries and economic strategies.

Positive externalities (see graph) of nature are the benefits that nature provides to individuals or society without direct payment or compensation. These spillover benefits often go unpriced in markets but are valuable. These arise from natural ecosystems, but are not captured in market prices, such as improved mental and physical health from green spaces, clean air and water for various industries, pollination for agriculture, and climate regulation through carbon sequestration. Below are two tables from:

‘Nature Economics Analysis of the case for Australian Government investment in nature’ which gives examples of economic and social benefits of nature.

Economic benefits

Social benefits

Reversing the under-investment in nature will make an essential contribution to combatting Australia’s growing biodiversity crisis and improve the resilience of industries that contribute a fifth of Australia’s GDP. If done in combination with the right policy settings to ensure effectiveness, it will also provide significant economy-wide benefits and increase the productivity of Australia’s lands, workforce and economy. Investment in nature is investment in restoring and protecting Australia’s core economic infrastructure. (Page 5)

Source: ‘Nature Economics Analysis of the case for Australian Government investment in nature’

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