The impact of biodiversity and environmental policies on the economy: Potential remedies out of the Covid-19 crisis

Sara Taha, German University in Cairo

For decades, societies have been planting the seed of their own destruction. The environmental degradation catastrophe has become so voluminous and complex, seen in many forms and extending across various dimensions of nature. Air pollution, water pollution, and soil pollution have caused tremendous amounts of damage. Species extinction and the loss of various forms of life have been massively increasing at an unprecedented rate. It is calculated that approximately 0.01% – 0.1% of all known species will become extinct each year. This raises a major concern: Could biodiversity loss affect the wellbeing of nations through hindering economic growth? If so, to what extent? The case of COVID-19 has been a powerful example enabling the world to witness how biodiversity loss could affect economic growth, which has posed as an economic threat to all nations. Therefore, policy measures must be implemented in order to prevent further environmental damage and economic losses. Environmental protection policies, however, have been widely claimed to have a hindrance on economic growth and business activities.

Nevertheless, it is important to discover the true relationship between environmental protection policies and economic growth. Does environmental protection hinder GDP growth? This is a question that this study aims to investigate, in addition to exploring the relationship between biodiversity loss and economic growth. A fixed effects panel regression has been conducted using a selected sample of OECD countries. Results indicate that biodiversity loss does in fact hinder GDP growth in the long-run, and that environmental protection evidently promotes economic growth.