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Concept
Green gross domestic product
Summary
The green gross domestic product (green GDP or GGDP) 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. 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".
The environmental and related social costs to develop the economy are taken into consideration when calculating the green GDP, which can be expressed as:
Green GDP = GDP – Environmental Costs – Social Costs
where the environmental cost typically qualifies:
Depletion value of natural resources, e.g. oil, coal, natural gas, wood, and metals;
Degradation cost of ecological environment, e.g. underground water pollution, topsoil erosion, and extinction of wildlife;
Restoration cost of natural resources, e.g. waste recycling, wetland restoration, and afforestation;
and the social costs typically include:
Poverty caused by degradation of environment, e.g. shortage of natural resources after exploitation;
Extra healthcare expenditure coming with the degradation of ecological environment;
Above calculations can also be applied to net domestic product (NDP), which deducts the depreciation of produced capital from GDP.
It should be noticed that since the indicators of environment are generally expressed in national accounts, the conversion of the resource activity into a monetary value is necessary. A common procedure to evaluate, proposed by United Nations in its System of Integrated Environmental and Economic Accounting handbook, applies following steps:
If current values of resources are non-existent or non-explicit, the next option is to value the resource based upon the present value of expected net returns from future commercial use. That is, the sum of present values for future expected income minus expected future expenditures (the cash flow CF), for each future time point (t), is termed the net present value (NPV).
Official source
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