Economy 4.0

Alternative Indicator: Green GDP

Emilie Mutert Dec 3, 2010

The Green Gross Domestic Product is an economic growth index that quantifies and calculates the environmental consequences of that growth.

What is it?

China’s the only major nation that’s used Green Gross Domestic Product to measure its economic viability. Chinese premier Wen Jiabao announced in 2004 that the Green GDP would replace the traditional GDP as a financial productivity measure. Published back 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 percent of the nation’s economy.

What does it measure?

Green GDP monetizes the effects of the loss of biodiversity and the costs of climate change.

How do they get there?

Like other alternative indicators, such as the Sustainable Development Index or the Genuine Progress Indicator, the Green GDP quantifies the costs of pollution, climate change, waste and other factors likely to cause costly damages in the future.

What can it tell us (really)?

This is just another way to try to quantify and measure the monetary impact of the environmental damage caused by a country’s economic growth. The idea is that, while the economy might look like it’s growing now, the damages caused by that growth will inevitably drag it downward in the future. The preciseness of the Green GDP’s measurement methods is debatable; after all, since the future costs are not actually known, those calculations are based on speculation – well-informed speculation, but still. What it really gives us is another way of looking at economic growth, putting it in perspective alongside its potential future economic consequences.

But nobody’s perfect

Now that you’ve read all this, we’ll let you know that no one uses Green GDP as an economic indicator anymore. Chinese officials put a stop to that back in 2007, after it was found that the Green GDP caused their economic growth rate to drop to unattractively low levels, nearly zero in some provinces. The government thereby withdrew its support for the index and went back to the old school Gross Domestic Product.

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