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Green Gross Domestic Product

Green Gross Domestic Product

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The green gross domestic product (green GDP) is an index of economic growth
Economic growth
In economics, economic growth is defined as the increasing capacity of the economy to satisfy the wants of goods and services of the members of society. Economic growth is enabled by increases in productivity, which lowers the inputs for a given amount of output. Lowered costs increase demand...

 with the environmental consequences of that growth factored in. Green GDP monetizes the loss of biodiversity
Biodiversity
Biodiversity is the degree of variation of life forms within a given ecosystem, biome, or an entire planet. Biodiversity is a measure of the health of ecosystems. Biodiversity is in part a function of climate. In terrestrial habitats, tropical regions are typically rich whereas polar regions...

, and accounts for costs caused by climate change
Climate change
Climate change is a significant and lasting change in the statistical distribution of weather patterns over periods ranging from decades to millions of years. It may be a change in average weather conditions or the distribution of events around that average...

. Some environmental experts prefer physical indicators (such as "waste per capita" or "carbon dioxide emissions per year"), which may be aggregated to indices such as the "Sustainable Development Index".

History


This is an idea that has gained in popularity over the past 20 years, ever since the Rio Earth Summit in 1992. in 1993 the Bureau of Economic Analysis, the official bookkeeper of the U.S. economy, began responding to concerns that the GDP needed retooling. The agency began working on a green accounting system called Integrated Environmental and Economic Accounts. These initial results released in 1994 showed that GDP numbers were overstating the impact of mining companies to the nation's economic wealth. Mining companies didn't like those results, and in 1995 Alan B. Mollohan, a Democratic House Representative from West Virginia's coal country, sponsored an amendment to the 1995 Appropriations Bill that stopped the Bureau of Economic Analysis from working on revising the GDP and that's where things stand today.

In 2004, Wen Jiabao
Wen Jiabao
Wen Jiabao is the sixth and current Premier and Party secretary of the State Council of the People's Republic of China, serving as China's head of government and leading its cabinet. In his capacity as Premier, Wen is regarded as the leading figure behind China's economic policy...

, the Chinese premier, announced that the green GDP
Gross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....

 index would replace the Chinese GDP index itself as a performance measure for government and party officials at the highest levels.
The first green GDP accounting report, for 2004, was published in September 2006. It showed that the financial loss caused by pollution was 511.8 billion yuan ($66.3 billion), or 3.05 percent of the nation's economy.
As an experiment in national accounting, the Green GDP effort collapsed in failure in 2007, when it became clear that the adjustment for environmental damage had reduced the growth rate to politically unacceptable levels, nearly zero in some provinces. In the face of mounting evidence that environmental damage and resource depletion was far more costly than anticipated, the government withdrew its support for the Green GDP methodology and suppressed the 2005 report, which had been due out in March, 2007.

Independent estimates of the cost to China of environmental degradation and resource depletion have for the last decade ranged from 8 to 12 percentage points of GDP growth. These estimates support the idea that, by this measure at least, the growth of the Chinese economy is close to zero.

The most promising national activity on the Green GDP has been from India. The country's Environmental Minister, Jairam Ramesh, stated in 2009 that “It is possible for scientists to estimate green GDP. An exercise has started under the country’s chief statistician Pronab Sen and by 2015, India’s GDP numbers will be adjusted with economic costs of environmental degradation."

Organizations


Global Reporting Initiative
Global Reporting Initiative
The Global Reporting Initiative produces one of the world's most prevalent standards for sustainability reporting - also known as ecological footprint reporting, Environmental Social Governance reporting, Triple Bottom Line reporting, Corporate Social Responsibility reporting...

: GRI’s core goals include the mainstreaming of disclosure on environmental, social and governance performance. Although the GRI is independent, it remains a collaborating centre of UNEP and works in cooperation with the United Nations Global Compact. GRI produces one of the world's most prevalent standards for sustainability reporting - also known as ecological footprint reporting, Environmental Social Governance (ESG) reporting, Triple Bottom Line (TBL) reporting, Corporate Social Responsibility (CSR) reporting. It is currently working on a Green GDP to be implemented worldwide.

See also


  • Genuine Progress Indicator
    Genuine Progress Indicator
    The genuine progress indicator is an alternative metric system which is an addition to the national system of accounts that has been suggested to replace, or supplement, gross domestic product as a metric of economic growth...

     (GPI)
  • Environment of China
    Environment of China
    The environment in the People's Republic of China has traditionally been neglected as the country concentrates on its rise as an economic power. Chasing the political gains of economic development, local officials in China often overlook environmental pollution, worker safety and public health...


Further reading