Green Gross Domestic Product


Green GDP – Things you need to know


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What is Green GDP?

  • The green gross domestic product (Green GDP) is an index of economic growth with the environmental consequences of that growth factored into a country’s conventional GDP.
  • It’s a measure of how a country is prepared for sustainable economic development
  • Green GDP measures GDP growth along with the environmental consequences of that growth factored in.
  • The Green GDP figure accounts for the environmental costs of depletion and degradation of natural resources into the country’s economic growth figures.

Green GDP

Green GDP and China

  • Countries such as China and Norway have already experimented with green accounting. China launched the process in 2004, only to drop it in 2007. Factoring in environmental costs had a significant impact on the country’s perceived “economic growth”, resulting in a hasty departure.
  • China is the only major nation that has used Green Gross Domestic Product to measure its economic viability.
  • In 2004, Green GDP replaced the traditional GDP as a financial productivity measure.
  • In 2006, the Chinese Green GDP showed that the financial loss caused by pollution in China was 511.8 billion yuan ($66.3 billion), which was 3.05% of the nation’s economy.

India and Green GDP

  • A Framework for the Development of Environmental Statistics (FDES) was developed by the Central Statistics Office (CSO) of India in the early 1990s. The Compendium of Environment Statistics is being released since 1997.
  • The Ministry of Statistics and Programme Implementation set up an expert group in 2011 led by Partha Dasgupta, Professor Emeritus of Economics at Cambridge University, to work out a framework for green national accounts in India.
  • The Dasgupta-led expert group had submitted its report in March 2013, recommending that economic evaluation be made on the basis of a comprehensive notion of wealth, including aspects such as infrastructure and capital equipment, human capital and natural capital.
  • This process was supposed to be culminated in 2015 but is still pending.

Accounting of Green GDP

  • The System of National Accounts (SNA) is an accounting framework for measuring the economic activities of production, consumption and accumulation of wealth in an economy during a period of time. When information on economy’s use of the natural environment is integrated into the system of national accounts, it becomes green national accounts or environmental accounting.
  • The process of environmental accounting involves three steps viz. Physical accounting; Monetary valuation; and integration with national Income/wealth Accounts.
    • Physical accounting determines the state of the resources, types, and extent (qualitative and quantitative) in spatial and temporal terms.
    • Monetary valuation is done to determine its tangible and intangible components.
    • Thereafter, the net change in natural resources in monetary terms is integrated into the Gross Domestic Product in order to reach the value of Green GDP.