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In integrated assessment models (IAMs) economic activity leads to global warming, which causes future economic costs. However, typical IAMs do not explicitly represent the role of natural capital. In this paper, the DICE model by Nordhaus (2008) is expanded with a natural capital variable that is affected both by climate change and by depletive effects of economic activity. Due to a synergy between the two effects, the optimal policy of the expanded model features more and earlier abatement of CO 2 emissions than DICE. Interestingly, the policy implications are different from what follows if one tries to capture the depletive effects on natural capital by simply reducing factor productivity growth in DICE. Acknowledging considerable uncertainty, simulations show that climate- and savings rate policies from the expanded model are more robust in the long term than policies that do not consider non-climatic depletion effects on natural capital. [ABSTRACT FROM AUTHOR]

Ecological economics was formally established in 1989 with the ambitious vision of developing a new economic paradigm embedding the social and economic systems in the biophysical world. Ecological economics had its roots in the biophysical understanding of economics that pioneers of the field Georgescu-Roegen (1971), Odum (1971), Daly (1977), Jansson (1984), Martinez-Alier (1987) and others developed while studying the thermodynamic bedrocks shared by natural and social systems. Subsequently, however, ecological economics has explicitly but controversially adopted a 'big umbrella' approach to methodological pluralism, focusing more on topics such as valuing nature and its functions rather than attempting to understand and quantify the biophysical roots of economic activities. Biophysical economics was established in response to these concerns, focusing more on developing analyses and models of the transformations of nature to generate wealth and approached mostly from an energy and material flows perspective. The present paper argues that to achieve its original vision ecological economics must return to its biophysical roots. Collaboration between the two fields will help the next generation of thinkers to address the socio-ecological challenges of the 21st century requiring an energy transformation called for by aspirations such as the Green New Deal and the UN Sustainable Development Goals. • The biophysical foundation of socio-economic systems must be at the center of the research agenda of ecological economics. • The socio-ecological challenges of the 21st century are biophysical in nature and will require education, management and policy that is based more on these biophysical realities and principles. • Prioritizing these biophysical foundations is fundamental for the next energy transition. • If proper biophysical procedures (such as comprehensive energy analyses) are not undertaken no "sustainable" recommendations can be considered valid. [ABSTRACT FROM AUTHOR]