Future Shocks 2023: Safeguarding our natural capital

Excessive emitting of greenhouse gases from human economic activity into the atmosphere is causing global warming, with Europe warming faster than any other continent, according to the World Meteorological Organization (WMO).

© European Union, 2023, EPRS

Written by Jurgita Lekaviciute and Liselotte Jensen.

This paper is one of 10 policy responses set out in a new EPRS study which looks first at 15 risks facing the European Union, in the changed context of a world coming out of the coronavirus crisis, but one in which a war is raging just beyond the Union’s borders. The study then looks in greater detail at 10 policy responses available to the EU to address the risks outlined and to strengthen the Union’s resilience to them. It continues a series launched in spring 2020, which sought to identify means to strengthen the European Union’s long-term resilience in the context of recovery from the coronavirus crisis. Read the full study here.

The issue(s) in short: The challenge and the existing gaps

Excessive emitting of greenhouse gases from human economic activity into the atmosphere is causing global warming, with Europe warming faster than any other continent, according to the World Meteorological Organization (WMO). Among the impacts of global warming, one that is very concerning is the change in weather patterns, with more frequent and intense extreme weather events. Such events include droughts, where reduced rainfall can cause water scarcity and negatively impact the quality or accessibility of water resources. In 2021, the EEA estimated that 20 % of Europe’s territory and 30 % of its population experience water stress on an annual basis. As discussed in the risk chapter on droughts and water scarcity, this can have a serious impact on economic sectors as well as on biodiversity.

Biodiversity is declining faster than at any time in human history in every region of the planet. Around one in eight global animal and plant species are threatened with extinction. In the latest assessment of the state of nature in the EU, an estimated 81 % of EU habitats and 63 % of species have poor or bad conservation status. Still, 36 % continue to deteriorate at the EU scale and only 9 % of these habitats show improving trends. As noted in the risk chapter on biodiversity loss or collapse, biodiversity loss is much more than the extinction of species. Biodiversity provides us with ecosystem services essential for life: the food we eat, the air we breathe, and the medicines we use.

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A key European instrument to tackle water stress and ensure sustainable use is the Water Framework Directive (WFD) (2000/60/EC). Unfortunately, implementation is lacking, with more than half of European water bodies, in 2019, under exemption from staying on track for the WFD targets – which should be reached in 2027.

According to the UN Convention on Biological Diversity (CBD), the main international instrument on biodiversity protection, none of the 20 Aichi biodiversity targets adopted by the international community for the last decade were fully met. In the 15th and most recent meeting of the conference of parties under the CBD (COP15) in December 2022, the 196 parties agreed on a new (non-binding) global biodiversity framework, which consists of 23 targets, including some to restore 30 % of degraded ecosystems and to protect 30 % of land and sea areas by 2030.

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decline caused by habitat loss by 2050, but only if actions are implemented urgently and in an integrated way. Increased conservation efforts are critical but not sufficient; there is a need for strong action on conservation and on the direct and indirect drivers of biodiversity loss. The literature also suggests that if we fail to limit global warming to 1.5°C or even 2°C, the continued impact of extreme weather events and changes in temperature and precipitation will become the dominant cause of biodiversity loss.

Position of the European Parliament

The European Parliament declared a climate and environment emergency in 2019, stating that ‘immediate and ambitious action is crucial to limiting global warming to 1.5°C and avoiding massive biodiversity loss’. This was reiterated in its January 2020 resolution on the European Green Deal, where Parliament argued that a safe, clean, healthy and sustainable environment and a stable climate should be a fundamental right for all people living in Europe. Parliament highlighted that agriculture, fishery and food production remain the biggest driver of terrestrial and marine biodiversity loss, calling for full alignment of the CAP with the European Green Deal ambitions and for the Commission to ensure this in its assessments of Member States’ strategic plans and eco-schemes. Parliament further noted the promise of nature-based solutions to help towards both climate and biodiversity targets, and called for the EU to push for a binding global agreement to halt and reverse biodiversity loss. In its resolution adopted the following day, specifically regarding COP15, it reiterated this need for binding targets at both EU and global level, and for an ambitious EU biodiversity strategy to protect natural areas and restore degraded ecosystems by 2030.

In its resolution of 17 December 2020 on the implementation of EU water legislation, Parliament stressed the need to update the list of priority substances (Annex X of the WFD) and insisted that pollutants of emerging concern and mixed toxicity should be addressed within the framework of the WFD and its ‘daughter’ directives. It called on the Commission to strengthen monitoring of potential pollutants and their risk profiles and to take decisive action when Member States fail to meet environmental quality standards set in EU legislation for priority substances.

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In June 2021, Parliament welcomed the EU biodiversity strategy for 2030 and its level of ambition, while making nearly 200 recommendations to strengthen it. Parliament asked the Commission and Member States to increase their efforts towards reaching the goals laid down in the strategy. It also called on the Commission to submit, in 2022, a proposal for a legally binding governance framework – a ‘biodiversity law’, as a counterpart to the EU climate law – to steer a path to 2050. In the subsequent 2021 resolution on the farm to fork strategy, Parliament called for a pollinator indicator and a restoration target, reiterating the need to reduce harmful pesticides use.

In response to the droughts of 2022, potentially the worst for at least 500 years, which left 64 % of the continent under a drought warning (with 17 % on drought alert) according to the European Drought Observatory, Parliament adopted a resolution on the consequences of drought, fire and other extreme weather phenomena. This linked pressures on water ecosystems and broader biodiversity concerns with the general health of EU citizens and with impacts on and from the agricultural sector, in particular, and other high water demand sectors, highlighting the risk exposures, along with measures to adapt and increase resilience. Parliament pointed to the potential of specific types of nature-based solutions to increase overall resilience of ecosystems, and noted the human right to drinking water and the need to recognise violations.

The resilience of the agricultural sector, as a key sector in terms of both its impact on and dependence on ecosystem services, has required particular attention. During the June 2023 plenary, Parliament adopted an own-initiative resolution on ‘Ensuring food security and the long-term resilience of EU agriculture’. It specifically addresses the need for new cultivation methods to increase crops’ resilience to climate change and protect agricultural yields in view of the droughts and water shortages faced by more and more EU Member States. While Parliament stressed the importance of restoration and conservation of biodiversity, soil health, and the use of agro-ecological and organic methods in relation to crop resilience and yield, it also called for further research and dissemination efforts towards farmers regarding new breeding techniques, including new genomic techniques. Some of these aspects are included in the 6 July 2023 package on food and biodiversity.

While Parliament has called for a reduction in the use of harmful pesticides, the food security resolution above reiterated the need for integrated pest management measures and research into alternatives to synthetic fertilisers and pesticides. It criticised the Commission’s proposal to limit, and in some areas ban, pesticides without offering alternatives to protect farmers’ livelihoods and safeguarding EU food security.

EU policy responses (Commission and Council responses so far)

Climate change affects human activity and our natural capital. The European Green Deal of December 2019 proposes many measures for combating climate change, with the 2021 EU climate law making action to cut greenhouse gas emissions legally binding and the ‘Fit for 55’ package strengthening the main instruments to do so. Likewise, the EU has a dedicated line of action for safeguarding our natural capital.

The EU framework for nature protection is based on two main nature directives: the Birds Directive and the Habitats Directive. They seek to ensure the conservation of species and habitat types of EU importance by establishing an extensive network of special protected areas called the Natura2000 network. In 2020, the EU adopted the biodiversity strategy for 2030, aligned with the ambitions and commitment set out in the European Green Deal. It is dedicated to protecting and restoring nature and to reducing direct pressures such as pollution and invasive species, and seeks to enable transformational change to address underlying drivers of biodiversity loss, with ambitions reaching the global level. It also proposes to set legally binding nature restoration targets, which formed the flagship proposal for a nature restoration law in 2022.

The WFD is the main legal tool for protecting Europe’s water bodies, together with its two daughter directives: the Environmental Quality Standards Directive and the Groundwater Directive. Among other things, the legislation lists priority substances posing risks to water quality and requiring monitoring and concentration limits. Currently, 53 substances are covered in legislation for surface water (mainly pesticides, industrial chemicals and metals). The fitness check of EU water legislation identified shortcomings regarding chemical pollution, and a revision of the list of pollutants and the corresponding regulatory standards are underway. The proposed text would add 23 individual substances to the list of priority substances for surface waters, including pesticides such as glyphosate, some pharmaceuticals (painkillers, anti-inflammatory drugs, antibiotics), Bisphenol A, and a group of 24 Per- and polyfluoroalkyl substances (PFAS). The proposal would also introduce an obligation, in exceptional circumstances of natural origin or force majeure (extreme floods, prolonged droughts, or significant pollution incidents), for competent authorities of all possibly affected water bodies to alert each other and cooperate to minimise damage and address consequences. Another important tool with regard to water management, the Urban Wastewater Treatment Directive, is also currently under review.

The 2021 zero pollution action plan outlines several measures with relevance to biodiversity and water stress, which are also prevalent in the 2020 farm to fork strategy. These include, for example, the halving by 2030 of nutrient losses and the use and risk of chemical pesticides, including the use of the more hazardous ones, subsequently proposed as part of the 2022 proposal for a regulation concerning the sustainable use of plant protection products, replacing the existing Directive on Sustainable Use of Pesticides. As a result of reduced nutrient losses, fertiliser use is expected to decrease by a further 20 %. The EU biodiversity strategy for 2030, the farm to fork strategy and the zero pollution action plan are expected to substantially reinforce actions to protect pollinators.

Targets for nature-friendly agriculture under Pillar 2 of the biodiversity strategy go beyond reducing chemical pesticides and fertilisers and include expanding organic farming and high-diversity landscape features that enhance carbon sequestration and increase agro-forestry and urban greening. Most of these targets are also part of the farm to fork strategy, which aims to make EU food systems more sustainable. The combined measures targeting sustainable food production and land use make the EU common agricultural policy (CAP) an essential tool to help in the transition of agricultural practices. The new EU forest strategy for 2030 and the 2023 regulation on deforestation-free products are also key steps to protect and preserve biodiversity in Europe and beyond.

In many of the strategies highlighted above, as well as in the EU strategy on adaptation to climate change and the EU climate law, nature- or ecosystem-based solutions are noted as key win-win options to adapt to a changing climate, enhance biodiversity and increase resilience of ecosystems and sectors simultaneously. According to Eggermont et al (2015), nature-based solutions (NBS) refer to the sustainable management and use of nature to tackle societal challenges. There are different NBS for different sectors, such as green buildings, public and urban spaces, water management, sustainable forestry, sustainable agriculture, sustainable tourism, and others. One NBS area of relevance here are solutions for water management that involve the use of ecosystem services to improve water quantity and quality, and to increase resilience to climate change. These include natural solutions for the management of flood and surface water in rural, peri-urban, and urban contexts, wastewater management and treatment, and resource recovery.

Pyramid of instruments at the disposal of the EU and its Member States
Figure 41 – Pyramid of instruments at the disposal of the EU and its Member States

Figure 41 shows some of the core tools of relevance to water stress or biodiversity concerns; not all are directly touched upon in the text, but all play or could play a significant part in safeguarding Europe’s natural capital. Implementation of EU legislation happens at local, regional and national level, while joint action and cooperation can support innovation and sharing of best practices. Similar tools to the natural capital fund used to exist through the EIB’s natural capital financing facility, which was merged into InvestEU, though the section on obstacles below suggests targeted financing is needed. The TEN-W box under EU primary action links back to the idea in the risk chapter on droughts and water scarcity to establish a trans-European network (TEN) for water – using an ecosystem approach to apply foresight and planning – to safeguard people, biodiversity and businesses relying on water as a resource. TENs already exist in the areas of transport, energy and telecommunications, with a focus on delivering a functioning single market. A TEN-W could help prioritise and secure water resources for water transport, energy production, farming or human consumption while respecting the carrying capacity of ecosystems at a transnational level, as water in Europe crosses many borders.

Obstacles to implementation of response

In the United Nations Environment Programme (UNEP) synthesis report entitled ‘Making Peace With Nature: A scientific blueprint to tackle the climate, biodiversity and pollution emergencies’ (2021), human-induced environmental degradation is identified as one of the factors impeding the end of poverty and hunger, the reduction of inequalities and the achievement of sustainable economic growth. The report highlights that natural capital needs to be included in decision-making and that environmentally harmful subsidies need to be stopped.

One of the main obstacles to adequately integrating biodiversity and natural capital concerns comes from biodiversity and nature not having a clear economic value. Nature’s value and the benefits it provides are, as a result, not considered in economic activities, but every sector or company depends on nature to a certain degree. While exploring the links between economic activities and natural ecosystems, it was found that 55 % of global gross domestic product (GDP) is moderately or highly dependent on nature. In five industries (agriculture; forestry; fishery and aquaculture; food, beverages and tobacco; and construction), 100 % of the economic value generated by direct operations (and a minimum of 60 % generated in the supply chains) exhibits high dependence on nature (these five industries represent 12 % of global GDP, amounting to US$13 trillion).

According to a top European Central Bank (ECB) executive, an ECB study evaluating data on 4.2 million companies concluded that 72 % of Eurozone companies and three-quarters of bank loans in the region are exposed to loss of biodiversity; the study assessed how many rely on at least one ‘nature-related service’ such as pollination, clean water, healthy soil, timber, or sand. The executive warns that destroying nature will ‘destroy the economy’.

A better understanding of the economic value of biodiversity and of the financing of biodiversity is therefore an important issue that will need attention in the future. A 2022 Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) report on valuing nature warns that, though we need to value nature more in decision-making at all levels, putting a price on nature remains a complex challenge due to natural ecosystems’ interconnectedness and intrinsic values, often depending on context and culture and rarely substitutable.

A recurring obstacle concerns the overall implementation of adopted legislation, such as the WFD, and of achieving biodiversity targets set out in the EU biodiversity strategy for 2030 and agreed at COP15. It is also important to strengthen international cooperation, as well as the alignment of local, national and international efforts towards sustainability, and this is best done leading by example.

In October 2020, the Council conclusions on the EU biodiversity strategy reaffirmed that more ambition on nature restoration is needed, including measures to protect and restore biodiversity beyond protected areas. The conclusions also recognised the important link between climate change and biodiversity loss, as well as their respective solutions. In the conclusions for COP15, the Council called for the adoption of an ambitious, comprehensive and transformative post-2020 global biodiversity framework that includes long-term 2050 goals, 2030 intermediate outcomes and action-oriented 2030 targets that effectively and simultaneously address the direct and indirect drivers of biodiversity loss. When Parliament welcomed the biodiversity strategy, it endorsed, by 515 votes to 90, with 86 abstentions, the main targets of the Commission’s proposal. Parliament also supported the idea of restoring at least 30 % of the EU’s land and sea and requested a binding governance framework towards 2050 with 2030 targets – comparable to the EU climate law.

The proposed nature restoration law is argued, by many, to be an essential step, yet policymakers across the Council and Parliament have questioned the best approach to safeguarding our natural capital, citing concerns for farmers and food security in particular (see box below); trilogues between the institutions started in July 2023. Scientists, NGOs and various organisations, including joint statements from ‘EU Farmers for Nature Restoration‘ and the industry-linked Forum for the Future of Agriculture, reconfirmed their full support for the proposed legislation, stating that ‘the science is clear that nature restoration will increase our resilience to extreme weather events and support long-term food security’.

In focus: The fate of the proposed EU nature restoration law
The June 2022 proposal for a nature restoration law is the core element of the EU biodiversity strategy for 2030. It sets multiple binding restoration targets and obligations across a broad range of ecosystems, complementing existing legislation. These nature restoration measures should cover at least 20 % of the EU’s land and sea areas by 2030, and all ecosystems in need of restoration by 2050. The proposed nature restoration law also has a specific objective to reverse the decline of pollinator populations by 2030.
In May 2023, the EU nature restoration law was voted in the opinion-giving committees, where the European Parliament’s Committee on Agriculture and Rural Development and Committee on Fisheries, both associated to the Committee on the Environment, Public Health and Food Safety (ENVI) file on EU nature restoration law, voted to reject the proposal. In a speech to the ENVI committee, European Commission Vice-President Frans Timmermans said there would not be another proposal, stating that ‘[the] nature restoration law is a climate law of biodiversity and therefore a pillar of the Green Deal’ and that ‘there is no such thing as supporting the outcome of COP15 but refusing to implement it at home’. His final statement concluded that we cannot ‘maintain the Green Deal without the nature pillar, because without the nature pillar, the climate pillar is also not viable’.
The ENVI committee voted on amendments to the proposed text on 15 and 27 June 2023. The final vote was tied (44 votes in favour, 44 against, with no abstention), meaning that, even if it was not rejected, there was no clear majority in the ENVI committee to support the proposal as amended. ENVI was therefore bound to table a proposal to reject the Commission’s text.
The Council adopted its general approach on the file on 20 June 2023, supporting an ambition for restoration measures to cover jointly at least 20 % of the EU’s land and 20 % of sea areas by 2030. However, it introduced various flexibilities in the ecosystem-specific obligations, a step-by-step approach for the delivery of national restoration plans, provisions on financing, and some derogations.
During the plenary on 12 July, the proposal to reject the Commission’s proposal did not pass (312 votes in favour to 324 against, with 12 abstentions). In a tight vote, Parliament finally adopted its position in favour of the nature restoration law (by 336 votes to 300, with 13 abstentions). A proposed amendment to increase to 30 % the overall 2030 restoration target, with reference to the COP15 agreement, was not adopted, with the target of 20 % from the Commission proposal being agreed to. Yet, other amendments resulted in a weaker position from the Parliament than that of the original proposal or even the Council’s general approach. Examples of such amendments include the deletion of the proposed article concerning restoration of agricultural ecosystems and sub-targets regarding rewetting of drained peatlands. The Council reduced the proposed mandatory indicators for forest ecosystems from six to three, while Parliament left only one of them (Article 10). Article 4 revisions deleted the time-bound targets (2030, 2040 and 2050, with linked percentages) and non-deterioration obligations, and (in 4.1) limited land, coastal and freshwater restoration measures to within Natura2000 areas only. The new Article 22a would allow targets to be postponed due to socioeconomic concerns and Article 23 would require an impact assessment on food security before the law would apply.
Following the plenary vote, several environmental NGOs released a joint statement noting that the fact the proposal was not rejected was a victory, but criticising the resulting ‘shell of a law’ due to the low level of ambition.

As regards the uptake of NBS, a key obstacle frequently noted by city authorities and private developers concerns knowledge gaps about the types of NBS available on the market, as well as a perceived lack of evidence of the effectiveness of such solutions; this in turn results in a lack of experience when it comes to public and private procurement of NBS. The 2022 independent expert report on ‘nature-based solutions in a nature positive economy’ outlines these obstacles as well as the evidence supporting the effectiveness of NBS for specific sectors.

For agriculture in particular, NBS are highlighted as a transition pathway towards sustainable agriculture, where agricultural activities become part of the natural system using methods which conserve and restore soils and ecosystems over those that degrade the environment on which it depends. NBS in the agricultural sector can comprise agricultural landscapes or agricultural production. For agricultural landscapes, the focus is on multifunctional landscapes and waterscapes, improving conditions for biodiversity, increasing resilience to extreme events, and enhancing ecosystem services. For agricultural production, there is a focus on optimisation through nutrient management and retention, and resilience through mixed production such as in agro-forestry.

In general, the report states that working with NBS increases resilience to extreme weather events, improves yields over time and has lower costs. For other sectors, such as tourism, applying NBS can help conserve tourism activities and attractions by lowering the impacts from visitors on the natural world and engaging tourists in conservation. For the water management sector, its relevance was touched upon in the section above on EU policy responses – although it is important to reiterate that water management is not only essential to secure drinking water and irrigation for human society, but that it also includes returning nutrients to the soil and ensuring resilience of wetlands and river systems providing both economic and biodiversity benefits.

Obstacles to the implementation of NBS and evidence of their benefits therefore point to a need for greater attention to be paid to integrating biodiversity across different sectors and policies, to deliver co-benefits.

As Figure 42 highlights, the next decade has significant milestones and opportunities for pushing higher ambitions or, at the very least, reflection at all levels on the adequacy of EU actions. The obstacles already experienced in implementing the WFD and agreeing on the nature restoration proposal put in question the commitments to address the environment and climate crisis, where the global stocktake is likely to demand increased efforts by developed countries.

Timeline of key milestones in action to safeguard natural capital
Figure 42 – Timeline of key milestones in action to safeguard natural capital

Policy gaps and pathway proposals

On the global level, at the recent COP15 meeting of the UN CBD, it was agreed that investors and businesses need to integrate nature and biodiversity issues into their strategic planning and reporting, alongside climate change. It was agreed to mobilise, by 2030, at least US$200 billion per year across all sources and raise international biodiversity financing from developed to developing countries to at least US$20 billion per year by 2025, and to at least US$30 billion per year by 2030. In the EU, the biodiversity strategy for 2030 envisages the need to unlock at least €20 billion a year for spending on nature, and further expects a significant part of the EU budget dedicated to climate action to go towards biodiversity and NBS. The European Parliament secured the introduction of an annual biodiversity spending target of 7.5 % from 2024, with the aim of reaching 10 % in 2026 and 2027.

Possible action

Safeguarding our natural capital - possible action

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