Economics Seminar - "Values of Sustainability Interventions in China's National Land System"

Addressing the critical challenges of resource depletion and environmental degradation resulting from rapid socioeconomic growth is imperative for promoting sustainable development. In response to the national-scale sustainability crisis, China has implemented extensive programs to conserve and restore ecosystems and biodiversity. Over the past two decades, a cumulative investment of $1.172 trillion has been allocated across 16 national programs aimed at managing the country’s soil, forests, and wetlands. Despite this substantial investment, the immense values embedded in these non-marketed natural capital assets—critical in generating economic services for society—remain largely unquantified.
This paper is the first to evaluate these sustainability interventions within China’s Wealth Balance Sheet from the perspective of natural capital. We construct a dynamic land investment model that manages five major land-capital stocks: forests, grasslands, wetlands, croplands, and urban land, while accounting for market imperfections. This model enables the valuation of natural capital by jointly considering biophysical factors, human behavior, policy interventions, and the price dynamics of ecological resources. Empirically, we quantify the stock and investment-driven forces of annual land conversion in China using a comprehensive land-use dataset from NASA’s MODIS product and socioeconomic data from China’s county statistical yearbooks (2001–2020). With the estimated empirical coefficients, we establish trajectories for the evolution of all ecological land types and derive their shadow values using a numerical programming approach adapted from Fenichel and Abbott (2014). We then recover the inclusive wealth of ecological lands by integrating their shadow values with simulated future stocks at both national and county levels, enabling a detailed understanding of spatial heterogeneity. Additionally, we evaluate four distinct policy scenarios by adjusting investment levels in various sustainable interventions and compare them against the current inclusive wealth derived from ecological assets.