The global economy is running a biocapacity deficit

Every year, the Global Footprint Network calculates the point in the year when humanity’s demand for natural resources surpasses the Earth’s capacity to regenerate those resources within the same year. In 20205, this day (Earth Overshoot Day) fell on July 24, which is noted as the “earliest ever.” This means that from July 24 onwards, humanity has been operating in an “ecological overdraft” and is accumulating ecological debt.

From an economic perspective, overshoot is a market failure. It poses a threat to high-consuming entities that depend on larger volumes of underpriced resources, which are becoming increasingly scarce. If uncorrected, this overuse will create disruptions or economic shocks. Although the window for Earth Overshoot Day has remained relatively stable for the past couple of decades, the yearly deficit spending is culminating and creating exponential debt. The Global Footprint Network estimates the current debt is approximately 20.5 Earth-years, meaning if human activity stopped now, the planet would not fully recover until 2045.

On a more tangible level, the impacts of climate change–a symptom of overshoot–are directly contributing to inflation. This happens for several main reasons: first, insurance premiums are rising due to the increased frequency and intensity of natural disasters. Second, energy costs are higher because of the rising cost of fossil fuels. And finally, food prices are increasing because of production costs, rising energy prices, and decreased availability.

Some studies project that these economic losses are the result of climate change, measured in a percentage of global GDP. Data from the past 120 years found that global temperature rise has already cut current GDP by 18 percent, and a 1 degree Celsius increase reduced GDP by 12 percent. A 2024 study revealed that by 2050, climate change may lead to the average global income reducing by 19 percent relative to a scenario with no climate change. The global annual damages may also reach around $38 trillion by that year. These impacts are expected to be much more severe under high emission scenarios, and could potentially decrease the global GDP by 30 percent by 2100, with a 4-degree temperature rise.

These projections emphasise the need for the economic systems to recognise the true cost of resource depletion. Governments must collaborate to strengthen regulation and align fiscal policy wtih ecological boundaries. Without institutional correction, the market failure will continue to generate long-term economic instability.

– By Gwyneth Lee