Natural capital drives EU regional growth

Natural capital, which incorporates natural resources and ecosystem assets, is instrumental in sustaining economic activity, particularly in regions reliant on sectors that use mostly natural resources.

A recent JRC study estimated the contribution of natural capital to the economic growth of EU regions at NUTS2 level, a classification used for EU cohesion policy funding. According to the study, a 10 % increase in natural capital leads to a 0.7 % rise in gross value added, with 0.4 % attributed to direct effects and 0.3 % to benefits from neighbouring regions. 

Put differently, a 10 % increase in the average annual value of natural capital over the period studied (i.e. €9.3 billion), as planned under the 2014-2020 cohesion policy, would result in a €71.4 billion increase (0.7% of €10,195 billion) in gross value added in the EU regions.

It is worth noting that the contribution of natural capital to economic growth varies across regions. Investing in regions with higher natural capital contributions can yield greater returns, as both the region itself and its neighbours experience economic growth. This, in turn, fosters regional cohesion and amplifies the economic impact across a broader geographic area.  Regions where natural capital contributions are lower may require more targeted interventions to unlock their full potential.

In other words, protecting biodiversity and restoring ecosystems can help unlock the natural capital potential in regions that are lagging behind, and support EU cohesion policy that aims to reduce regional disparities. 

The findings of the study stem from research work within the Integrated Natural Capital Accounting (INCA) project, and are published in the report Natural capital and regional growth: Insights from the European Union. The analysis will inform the next programming period (2028-2034) of the EU cohesion policy.

Incorporating natural capital into growth models

Within the framework of the European Green Deal, the EU Biodiversity Strategy for 2030, and the EU’s Cohesion Policy, there is a pressing need to ensure that economic growth at regional level does not come at the expense of nature. Traditional growth models often disregard the contribution of natural resources and assets, resulting in an incomplete understanding of economic performance. 

Incorporating natural capital into growth models provides a more comprehensive perspective, which helps recognise the importance of ecosystems in delivering critical services such as pollination, soil retention and carbon sequestration. Such recognition is driving a shift towards more environmentally sustainable economic practices and policymaking, particularly within the green transition goals. 

Related content

Natural capital and regional growth: Insights from the European Union

Joint OECD-UNECE Seminar on SEEA Implementation