IEEM+ESM APPLICATION
Malaysia
What a portfolio of nature-based policies is worth to an economy that has been converting its forests into growth. Choose a policy and run the platform.
A recursive dynamic economy-wide model, solved year by year to 2050.
Stage 1. The economy
Difference from the baseline in gross domestic product
Source: IEEM+ESM Platform.
Note: annual difference from the baseline, per cent.
The land cover, ecosystem service and integrated results that follow were modeled for the three policies running together. Continuing takes you through the full portfolio.
Stage 2. The land
Business as usual takes a third of the standing forest by 2050. The portfolio keeps 2.75 million hectares of it.
Source: IEEM+ESM Platform.
Tap the map to enlarge it.
Where the forest is held matters as much as how much of it. The conserved area concentrates in Sabah and Sarawak and along the forested east coast of the Peninsula, which is where the service gains appear next.
Stage 3. What the land does
Benefits worth tens of billions of dollars that nobody pays for, and no national account records.
Physical trajectories, each service against its own 2025 level
Source: IEEM+ESM Platform.
Note: erosion, water purification and water regulation are reported as export quantities, where lower is better.
Carbon is counted apart from the rest
Carbon storage rises by 498 million tons of carbon, which is 1,827 million tons of carbon dioxide. There is no transaction for it, so it is valued outside the economic model and never added to the figures above.
US$36.54 billion at a conservative US$20 a ton, and US$347.11 billion at the US Environmental Protection Agency’s US$190.
Each value above comes from a separate model run in which that service alone is active. They are not additive and no total is shown. The joint result is the next stage.
Stage 4. The integrated platform
Counting what the forest does turns a US$11.7 billion cost into a US$61.1 billion gain.
Without the services, the portfolio drops below the baseline in 2042 and ends the period 0.49 percent down. With them it never falls below the baseline in any year and ends 0.33 percent up.
Net present value at 12 percent
Source: IEEM+ESM Platform.
Note: a conventional appraisal reports less than half the return, and would reject an investment that raises national wealth on either measure.
What the portfolio is worth inside each climate future
Source: IEEM+ESM Platform.
Note: cumulative 2026 to 2050, US$ billion. Each bar is the difference between running the portfolio and not running it, holding the climate pathway fixed. The portfolio is worth more the worse the climate gets.
Stage 5. The report
Which number a ministry sees depends only on what its appraisal method counts.
The question
What is a portfolio of nature-based policies worth to an economy that has been converting natural capital into economic growth?
The scenario
Three policies run together to 2050: an end to deforestation, forest plantations, and higher agricultural productivity. Twenty-six scenarios were solved in total, including each policy alone and each crossed with two climate pathways.
What the platform found
The portfolio holds 2050 forest cover 19 percent below its 2020 level rather than the 33 percent lost under business as usual, preserving 2,745,976 hectares. National sediment export falls about 52 percent, nitrogen export about 16.4 percent, and pollinator abundance rises about 11.2 percent. Carbon storage rises by 498 million tons of carbon.
Appraised on gross domestic product alone the portfolio costs US$11.7 billion. Appraised on national wealth it is a gain of US$22.1 billion. Appraised with the ecosystem services the retained forest provides, the same portfolio raises gross domestic product by US$61.1 billion and wealth by US$49.5 billion.
What it means for public finance
An appraisal that stops at the national accounts rejects an investment that raises national wealth on either measure. Discounting does not rescue it: at 12 percent the return is US$2,055 million without the services and US$4,588 million with them. The carbon the portfolio stores is worth a further US$36.54 billion at a conservative price and is not in either figure.
The transferable result, for environmental managers outside Malaysia, is that wherever regulating services enter production but not the national accounts, conventional appraisal will reject conservation that raises national wealth.
What the analysis rests on
A recursive dynamic economy-wide model of Malaysia, coupled to a spatially explicit land use model and to biophysical models of erosion mitigation, water purification, crop pollination, flood mitigation, air filtration, coastal protection, climate regulation and water regulation. Five services are transmitted to the economy through their own feedback modules. Climate regulation and water regulation are quantified in physical units and valued outside the economic model. Coastal protection carries a full feedback module, and registers no change here because none of these policies alters coastal habitat.
Citation
Banerjee, O., Cicowiez, M., et al. Malaysia: valuing nature-based solutions in an economy-wide framework. RMGEO Consultants Inc. and the World Bank.