Contents lists available at ScienceDirect Ecological Economics journal homepage: www.elsevier.com/locate/ecolecon The Economy-Wide Value-at-Risk from the Exposure of Natural Capital to ClimateChangeandExtremeNaturalEvents:TheCaseofWindDamageand Forest Recreational Services in New Zealand Juan J. Monge a, ⁎ , Garry W. McDonald b a Market Economics Ltd, Digital Basecamp, 1132 Hinemoa Street, Rotorua 3010, New Zealand b Market Economics Ltd, Level 5, 507 Lake Road, Takapuna 0740, Auckland, New Zealand ARTICLEINFO Keywords: Extreme natural events Natural capital Ecosystem services Input-Output inoperability Probabilistic risk assessment Value at risk Climate change ABSTRACT The long-term management of natural capital is essential for the stable and resilient flow of ecosystem services for future generations facing climatic uncertainty. Understanding its resilience to extreme natural events, using biological principles, and integrating them into more holistic systems-wide modelling techniques is crucial to evaluate and design the wider economic impacts from alternative management interventions. Here we devel- oped a probabilistic and system-wide bio-economic model to measure extreme economic impacts from natural eventsusingthefinancialconceptofValueatRisk.Wehaveappliedthenewextremeeconomicimpactmetricto measure the economy-wide impact from the disruption of mountain-biking recreational services in the Whakarewarewa peri-urban forest in Rotorua, New Zealand from a potential windthrow event. We identified thatextremenaturalevents,suchaswindthrows,couldexertasubstantialimpactontheurbanforest-dependent regional economy. This impact could potentially be intensified by the CO 2 forest fertilization effects predicted under future climate scenarios and by adopting low-intensity silvicultural regimes currently rewarded by na- tionalclimatechangemitigationpolicies.Someoftheinsightsfromthisstudycouldbetheprecursorstodevelop robust adaptation strategies using robust decision-making techniques considering inclusive environmental- economic accounting frameworks. 1. Introduction The long-term management of natural capital is essential for the stable and resilient flow of ecosystem services for future generations facing evolving socio-economic and climatic uncertainty. Under the current economic system, solely rewarding the short-term provision of marketedcommoditiesandecosystemservicesisnotenoughasitmight result in the depletion of natural capital stocks in the long run. Hence, understanding the role of natural capital, and its interactions with the other four types of capital (i.e. manufactured, financial, social and human), is key to inform decision- and policy-makers in charge of de- signing reward mechanisms to incentivise long-term stewardship (Fenichel et al., 2016; Guerry et al., 2015). Forest ecosystems are some of the most valuable terrestrial ecosys- tems in the world generating services valued at approximately $25 billion/year (Costanzaetal.,2014). 1 These valuable ecosystem services depend on the interaction between the natural capital within the forest ecosystems and other types of capital to support human well-being. For example, recreational ecosystem services such as mountain biking de- pend on natural capital in the form of forests, social capital in the form of a symbiotic public-private governance structure, improve human capital in the form of human health, and affect regional economies sustained by manufactured capital backed by financial capital. Within the wider forest ecosystem, urban forests are also highly valuable natural capital when considering the concentration of people benefiting from their ecosystem services - approximately 55% of the world's population generating more than 80% of global Gross Domestic Product (GDP) (United Nations, 2018; Dobbs et al., 2011; Willis and Petrokofsky, 2017). For example, the median annual benefit in nine megacities, across five continents and biomes, was estimated to be approximately $781 million from urban forests reducing air pollution, avoiding processed stormwater, saving building energy and https://doi.org/10.1016/j.ecolecon.2020.106747 Received 11 February 2020; Received in revised form 15 April 2020; Accepted 2 June 2020 ⁎ Corresponding author. E-mail addresses: juan@me.co.nz (J.J. Monge), garry@me.co.nz (G.W. McDonald). 1 $ will represent New Zealand Dollars throughout the article. The going exchange rate at the moment of the development of the article was NZ$1.57/US$. Hence the original value assigned for forest ecosystem services was approximately US$16 billion/year. Ecological Economics 176 (2020) 106747 0921-8009/ © 2020 Elsevier B.V. All rights reserved. T