Green GDP

Green gross domestic product (green GDP) is an alternative measure of economic growth that accounts for the environmental consequences associated with economic activities. In contrast to traditional GDP calculations that count all productive activity as positive regardless of impacts, green GDP incorporates negative effects such as resource depletion and pollution.

Need for Green GDP

The standard way of measuring GDP does not fully account for changes in a country’s natural asset base. For example:

• Biodiversity loss – Uses of biodiversity are not incorporated, leading to undervaluation
• Resource depletion – Extraction of minerals, fossil fuels, etc. counts as positive gain rather than asset decline
• Deforestation & fisheries – Cutting down forests and overfishing adds to GDP without registering loss of wealth

By omitting environmental costs, GDP encourages unsustainable growth. Green GDP aims to remedy this by factoring environmental impacts.

Accounting for Biodiversity

There is a clear link between biodiversity and ecosystem functioning, but the specific relationship remains uncertain. Key questions include:

• How much biodiversity is needed to maintain ecosystem services?
• What is the economic value of these ecosystem services?
• How can this value be incorporated into GDP figures?

Green GDP attempts to account for biodiversity and ecosystem service losses.

Components of Green GDP

Green GDP adjusts conventional GDP by including:

• Monetized losses of biodiversity
• Costs of climate change
• Depletion costs of natural resources
• Damages from pollution

It provides a more comprehensive measure of sustainable development.

Implementation Challenges

However, calculating green GDP poses several challenges:

• Measuring diffuse environmental impacts
• Monetizing non-market costs and benefits
• Lack of reliable data, especially in developing countries
• Developing robust valuation methodologies
• Potentially slowing measured economic growth

These barriers have limited adoption, though efforts are underway to standardize methodologies.

Policy Implications

Transitioning to green GDP could inform policy choices such as:

• Taxes & subsidies to account for externalities
• Pricing nature’s services to incentivize conservation
• Regulations on resource use and pollutants
• Investments in natural capital and green technology

By measuring sustainability, green GDP aims to balance economic growth with environmental protection.

Adoption

A number of countries have explored green GDP metrics, but full adoption has been slow. Prominent efforts include:

• China – Announced plans to implement a green GDP system over a decade ago but has struggled with methodology issues.
• India – Also announced intentions to shift toward green GDP but facing data constraints.
• Smaller trials – Canada, Japan, Germany, Indonesia, and others have prototype accounts.

Broader uptake of standardized green GDP frameworks could support the transition toward sustainable economies.