World Bank shares keys to unlocking economic opportunities from ‘pollution markets’

Investment in reducing pollution can yield as much as US$215 to the dollar – but inaction is costing billions of dollars, the World Bank warns in a new report.

In Reboot Development: The Economics of a Livable Planet, the World Bank Group details economic losses from the degradation of our forests, soils and waters. For instance, the loss of natural forests dries out soils and reduces crop yields, costing the world US$379 billion annually – around 8% of global agricultural gross domestic product (GDP). At the same time, nitrogen overuse is polluting the land, air, and water, costing up to US$3.4 trillion a year globally.

Today, 90% of the world lives with degraded land, unhealthy air or water stress – and in low-income countries, eight out of 10 people live without all three: healthy air, water, and land, the report points out.

And yet, acting to reduce pollution is not only possible, but highly lucrative: each US$1 spent in these ‘pollution markets’ yields about US$26 to US$215 in benefits. For example, using natural resources more efficiently could reduce pollution by as much as 50%, and improving farm-level practices of nitrogen fertiliser use can deliver 25 times greater benefits than their cost, all while boosting crop yields. 

“People and communities around the world are not just facing an environmental crisis, but an economic one. The good news is that solutions exist. If countries make the right investments now, natural systems can be restored, with substantial returns on growth and jobs,” said Axel van Trotsenburg, Senior Managing Director, World Bank. “This report offers a new lens for looking at environmental challenges – not as constraints, but as opportunities for smarter development.”

Information, coordination and evaluation

To reduce pollution and unlock this economic opportunity, the World Bank identifies three key elements, based on successful examples from countries that have demonstrated that it is possible to grow an economy without further degrading the environment.

The first key is information: real-time data to monitor air pollution can help governments better target issues, empower citizens and drive accountability. Then, coordination is crucial for the implementation of pollution reduction schemes. “Policies work best when they work together,” notes the World Bank.

A systems approach can align actions across sectors and help avoid unintended consequences, such as cutting pollution in one area while increasing it elsewhere. It can also help manage trade-offs between efficiency and equity.

Finally, regular evaluation is necessary to keep policies on track and help them adjust to shifting realities.