Nature Loss and Climate Change: The Twin-Crises Multiplier

We study the economic effects of the interaction of nature loss and climate change in a model that incorporates important aspects of both processes. We capture the distinct ways in which they affect economic activity--with nature constituting a key factor of production and climate change destroying parts of output--but also the ways in which they interact: Climate change causes nature loss, and nature provides both a carbon sink and adaptation tools to reduce climate damages. Our analysis of these feedback loops reveals a novel amplification channel--the twin-crises multiplier--that systematically affects optimal climate and nature conservation policies.