Chua Chiu Ting (60555)
International Economics
1. What is “green” GDP?
Green GDP is an attempt by economists to measure the growth of an economy compared to the harm production does to the environment. The method to calculate the green GDP are done by subtracting the costs of environmental and ecological damage done in a specific period of time from the gross domestic product, or GDP, from that time. As a result, the damage done to the environment as a whole is factored into the equation to give a clearer picture of the consequences of growing an economy but green GDP can be difficult to measure because of the problems inherent in trying to quantify the costs of ecological and environmental damage.
Environmental concerns have come to the forefront of nearly every aspect of life, as people become increasingly concerned with depleted natural resources and polluted environments. These concerns are often not taken into consideration when measuring the strength of an economy. The gross domestic product, which is a measurement of both the consumption and production within a country, isn’t meant to encompass these environmental issues. As a result, green GDP has been at the forefront of efforts to marry economic and environmental concerns.
China’s environment ministry is to consider whether the performance of provincial officials should take account of Green GDP. The government started researching the feasibility of implementing Green GDP measures 11 years ago. But the idea withered on the vine as the central government devolved more decisions on environmental planning to the provinces, who in a rush to meet ambitious targets gave to the nod to hugely-polluting projects. But the closure of highly energy-intensive installations could mean big job losses and slash economic growth in many provinces – at least in the short term – which partly explains why the government has been reluctant to implement green GDP so far.
Over a decade ago, the State Environmental Protection Agency (now the MEP) and the National Bureau of Statistics started to research whether environmental factors should be included in GDP calculations.According to Pan Yue, who was deputy head of SEPA, one of the aims of the idea of Green GDP was “to encourage officials to consider the environment when making policy decisions.”
The experiment initially got some support. In October 2004, after being designated a trial area for calculations of Green GDP, the province of Zhejiang expressed deep interest, and several month later trial work got underway. At that time, Xi Jinping, who was then party secretary of Zhejiang, acknowledged that economic growth had come at a major environmental cost.
One environmental expert, who preferred to remain anonymous, said that the restarting of Green GDP research shows the Chinese government has admitted this is the correct approach – despite the wrong turning on the way.
2. How is differ from conventional GDP calculation?
The Gross domestic Product (GDP) is the market value of all final goods and services produced within a country in a given period of time. The GDP is the officially recognized totals. The following equation is used to calculate the GDP:
GDP = private consumption + gross investment + government investment + government spending + (exports – imports).
For the gross domestic product, “gross” means that the GDP measures production regardless of the various uses to which the product can be put. Production can be used for immediate consumption, for investment into fixed assets or inventories, or for replacing fixed assets that have depreciated. “Domestic” means that the measurement of GDP contains only products from within its borders.
But the Green GDP is by subtracting the costs of environmental damage from the overall GDP of a nation. These costs can come in terms of the resources that have been depleted by production, which can include minerals, land, forests, and water, among others. As a result, companies that use production techniques that sustain the environment will be more beneficial to this measurement.
In addition, the green GDP also takes into account any monetary damage done to the environment in terms of pollution. These can be difficult to put into hard numbers, which makes doing this exercise more of an approximation that an exact calculation. Pollution from production may not show up in an environment for years, and putting a price tag on the amount may be just a rough estimation. Still, the numbers give economists and environmentalists something concrete to use when demonstrating the negative effects of consumption and production.
