Green GDP

The green gross domestic product is an index of economic growth with the environmental consequences of that growth factored into a country’s conventional GDP. Green GDP monetizes the loss of biodiversity, and accounts for costs caused by climate change

History:

The Green GDP was adopted by economic superpowers like China as early as 2004

Why Implement Green GDP ?

The major arguments in favor of the Green GDP system that have been cited by researchers and have been accepted by many countries are as follows:

• Interrelationship between market and nature: The heart of the Green GDP approach lies in the belief that nature and market are not mutually exclusive variables. In fact both of them have a deep interconnected relationship. Natural resources fuel market growth and excessive market growth has the potential to destroy natural resources. Hence, there is a need to actively manage this relationship between these variables. Also, since measurement is the first step towards management, there is an immediate need for a metric which can measure the relationship between them and summarize it.
• Comparison across peers and periods: Countries like China have also stated that Green GDP can be used to make comparisons for the same country across various years or it could be used to compare a country’s environmental status with that of another country. The idea is to include reports like depletion analysis in the GDP reports. This will enable analysts to predict even more accurately how the growth of those economies will be affected in the future.
• Accountability: Last but not the least it will bring some accountability to government’s worldwide. It has become a common practice to ensure that the market system grows while the natural system perishes.

Challenges Facing Green GDP

The biggest challenge facing the Green GDP is that of realistic accounting. Since we are essentially measuring the intangible, it is very difficult to estimate the monetary values associated with them. The Green GDP system is not perfect. However, it is developing. Many scholars and researchers are working towards a solution wherein Green GDP can become more pragmatic and realistic.

The idea is to ensure that the flaws of the GDP system are not replaced by another flawed system. The process might take time but seems to be on the right track.