Building a Circular Bioeconomy to address the growing risk of wildfires

• Climate change is stoking wildfire-risk, creating a threat to life, increasing greenhouse gas emissions, and causing huge biodiversity and economic losses
• Globally, the annual number of extreme wildfires is projected to rise by up to 14% by 2030, 30% by 2050, and 50% by the end of the century¹
• Fire suppression has reached its limits. We need a new model that addresses the structural causes of wildfires – this requires systemic economic changes
• The new wildfire paradigm should encompass climate mitigation and adaptation measures embedded within new landscape planning and management strategies, including the rural-urban and economic-ecological interfaces 
• A Circular Bioeconomy offers a route to economic growth by working in harmony with nature, restoring soils to health, boosting biodiversity, and creating wildfire-resilient landscapes that are the anchor for new nature-based value chains
• Investments in nature-based solutions and Circular Bioeconomy value chains must play a central role in catalysing the transition to the new wildfire paradigm within a wider economic-ecological strategy.

Since the evening of Tuesday 7^th January, ferocious wildfires have raged across the Los Angeles area. Well over 180,000 people have been subject to mandatory evacuation orders, while early estimates have put the likely insured losses at USD 20 billion² and the potential overall economic loss as high as USD 150 billion³.

While the cause of the fires is yet to be established, it is likely that last year’s near-normal precipitation, after years of severe drought conditions, fuelled vegetation growth, which has since dried during a recent prolonged dry spell⁴. Combined with strong winds, this has created the ideal conditions for wildfires to spread. The broader science is clear – climate change and today’s methods of landscape management are accelerating the wildfire risk globally.

The broader science is clear – climate change and today’s methods of landscape management are accelerating the wildfire risk globally

A growing threat

A key challenge in California – one it has in common with the Mediterranean, which has seen a rising threat from wildfires in recent years – is the rural-urban interface where the town meets the countryside, with a disproportionate number of residences now located in high wildfire-risk areas.

As residential areas expand deeper into wilderness, the risk to homes and businesses rises – in 2019, Pacific Gas and Electric (PG&E), one of the US’s largest utilities companies, filed for bankruptcy due to an estimated USD 30 billion in wildfire liabilities.⁵ It is estimated that, globally, insurance claims due to wildfires have risen to USD 10 billion annually, a figure that now looks set to be dwarfed in 2025.⁶ Meanwhile many homeowners caught up in the LA fires are without home insurance, after insurers had hiked costs or simply cancelled provision altogether due to the escalating wildfire risk.⁷

In addition to urban spread, climate change and the way we plan and manage our landscapes are thought to be the key factors. As temperatures rise, and droughts become more frequent, the tinderbox conditions that spark and spread wildfires are increasingly common, as has been seen in Los Angeles. Imperial College London’s Professor Apostolos Voulgarakis, Founding Director of the Leverhulme Centre for Wildfires, Environment, and Society, said, “Research has shown that the occurrence of […] winds in the autumn is also likely to get worse with climate change, leading to even drier vegetation, fast fire spread and more intense late-season wildfires.”⁸

Crystal Raymond, deputy director of the Western Fire and Forest Resilience Collaborative at the University of Washington, agrees. “Because of the warming trend of climate change […] we expect wildfires to become more frequent, larger, and happen in a longer fire season,” she said.

By replacing today’s extractive, fossil-based economy with an economy based on nature’s regenerative power, we can cut the emissions that lead to global heating and reduce the risk of extreme weather events

From suppression to adaptation – the rise of the Circular Bioeconomy

Across the world, this new generation of wildfires is exceeding our capacity to suppress them. As we face mounting environmental, economic and social threats we must move from suppression to holistic mitigation-adaptation strategies, to minimise the risk of extreme fires breaking out, and create resilient landscapes⁹ that are capable of recovering quickly should a fire occur.

Recent years have seen substantial advances in how land management practices can integrate prevention-preparedness, detection-response, and restoration-adaptation. Climate smart forestry¹⁰, for instance, which puts resilience and climate benefits at the forefront of forest management¹¹, is emerging as an effective tool for creating landscapes that are resilient to wildfires and other extreme weather events such as droughts and floods.

In November 2023, the Commonwealth Secretariat and the Circular Bioeconomy Alliance, led by Marc Palahí, Chief Nature Officer at Lombard Odier Investment Managers, jointly launched the Wildfire Resilient Landscapes Network (WRLN), to develop on-the-ground proof-of-concept projects known as ‘Living Labs’, to demonstrate how healthy, resilient landscapes can be created in fire-prone regions.

Key to achieving this goal is the growth of the Circular Bioeconomy. By replacing today’s extractive, fossil-based economy with an economy based on nature’s regenerative power, we can cut the emissions that lead to global heating and reduce the risk of extreme weather events. At the local level, the bioeconomy flourishes where nature thrives, meaning that economic growth goes hand-in-hand with the creation of healthy, biodiverse, climate- and fire-resilient landscapes.

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Forests, with their wealth of renewable biological resources, offer perhaps the most immediate opportunity to build this new economic model. New technologies are creating unprecedented opportunities to transform plant-based compounds into many of the fossil-based materials we use today, including construction materials, textiles, plastics, and chemicals. Managing forests in order to produce these resources regeneratively also enhances the ecosystems services forests provide, improving carbon sequestration, soil health, and water retention, and reducing a forest’s susceptibility to fire. 

In the Amazon alone, according to Marc Palahí, the bioeconomy could be worth up to USD 4 trillion, while globally the bioeconomy is expected to be valued at USD 7.7 trillion by 2030

How can we finance wildfire resilience?

As the bioeconomy grows, so does the economic opportunity. In the Amazon alone, according to Marc Palahí, the bioeconomy could be worth up to USD 4 trillion, while globally the bioeconomy is expected to be valued at USD 7.7 trillion by 2030.¹²

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For investors, the growth of the Circular Bioeconomy is creating an opportunity for private finance and public-private partnerships to target returns while creating fire-resistant and resilient landscapes.

Read also: Supporting the transition towards a nature-based economy

For example, nature-based solutions, such as regenerative agriculture, agroforestry and sustainable forestry, can target better long-term economic profits and a rise in land values, while enhancing biodiversity-, water-, soil-, and climate-related ecosystems services. In Southeast Asia, Slow Forest Coffee is proving the model by turning monoculture coffee plantations into healthy agroforests¹³, producing coffee that sells at a premium, grown on climate-resilient farms that sequester more carbon than they emit.

In a world where losses from environmental disasters are growing – in total, climate disasters cost the global economy USD 320 billion in 2024 – urgent action is needed, and investors have an essential role to play

Carbon and biodiversity credit markets can also give investors the chance to target sustainable returns and diversify their portfolios. In Australia, for example, the government-backed Emission Reduction Fund finances strategic savanna fire management via carbon credits. The first Kyoto-compliant instrument of its kind, participants can generate income by managing land to ensure its resilience against wildfire.

However, to bring these and other mechanisms to scale, innovative financial tools will be needed. Schemes such as the Australian Emission Reduction Fund, and the USA’s Forest Resilience Bond – which allows private capital to play a role in public land management – must become the norm rather than the exception.

In a world where losses from environmental disasters are growing – in total, climate disasters cost the global economy USD 320 billion in 2024¹⁴ – urgent action is needed, and investors have an essential role to play. As we search for new ways to finance the fight against wildfires¹⁵ we must take a multi-faceted approach, integrating science, finance and policy to build a Circular Bioeconomy that addresses the root causes of extreme events. In today’s era of climate change, we must take our lead from nature, and build resilience from the ground-up.