Green GDP: Aligning economic progress with environmental conservation

Green GDP is an economic indicator that adjusts traditional Gross Domestic Product (GDP) by incorporating environmental factors. It accounts for the economic costs of environmental degradation, resource depletion, and pollution, presenting a more sustainable measure of a nation’s economic performance. Read here to learn more.

Chhattisgarh has unveiled an innovative approach to integrating its rich forest ecosystem services into its economic framework by introducing the concept of Green Gross Domestic Product (Green GDP).

This pioneering move underscores the state’s commitment to aligning economic progress with environmental conservation.

Chhattisgarh’s Green GDP Initiative: Linking Forest Ecosystem Services to Economic Growth

• Recognition of Forest Contributions
  • Incorporates ecosystem services such as clean air, water conservation, biodiversity preservation, and carbon sequestration into the state’s economic planning.
  • Aims to highlight the often-overlooked environmental benefits forests provide, ensuring they are valued in developmental policies.
• Forest Coverage and Livelihood
  • Chhattisgarh boasts 44% forest cover, among the highest in India.
  • Forests support rural livelihoods through products like tendu leaves, lac, honey, and medicinal plants.
  • These resources form the backbone of the rural economy, particularly for tribal communities.
• Carbon Sequestration and Climate Action
  • Forests play a pivotal role in absorbing carbon dioxide and mitigating climate change.
  • Linking carbon sequestration potential to economic metrics strengthens climate accountability.
• Economic Development with Environmental Integrity
  • The initiative ensures economic growth aligns with ecological preservation, safeguarding natural resources for future generations.

Green Gross Domestic Product (Green GDP)

• Adjustment for Environmental Costs:
  • Deducts the costs of environmental damage, such as deforestation, air and water pollution, and climate change impacts.
  • Subtracts the depletion of natural resources like fossil fuels, minerals, and forests.
• Focus on Sustainability:
  • Promotes sustainable economic growth by highlighting the trade-offs between economic activities and environmental well-being.
• Alternative to Traditional GDP:
  • Addresses the limitations of traditional GDP, which does not consider the negative externalities of economic activities.

Methodology for Calculating Green GDP

1. Start with Traditional GDP:
   • The total monetary value of goods and services produced in a country within a specific period.
2. Subtract Environmental Costs:
   • Costs of resource depletion (e.g., reduced reserves of minerals and fossil fuels).
   • Costs of environmental degradation (e.g., air, water, and soil pollution).
   • Costs of restoring ecosystems damaged by human activities.
3. Add Environmental Gains (if applicable):
   • Value of ecosystem restoration or reforestation efforts.
   • Economic benefits of adopting clean energy and green technologies.

Benefits of Linking Ecosystem Services to Green GDP

• Enhanced Environmental Valuation: Quantifies the environmental contributions of forests, elevating their importance in policy-making.
• Informed Economic Planning: Promotes sustainable development by integrating ecological metrics into economic frameworks.
• Rural and Tribal Empowerment: Supports livelihoods by recognizing and enhancing the value of non-timber forest products.
• Climate and Biodiversity Benefits: Strengthens climate mitigation strategies by valuing forests’ carbon sequestration capabilities.
  • Protects biodiversity, which is crucial for ecological balance and long-term sustainability.

Green National Accounts

Growing environmental concerns have shifted the focus toward incorporating ecological health and sustainability into conventional economic measures like GDP.

Green national accounts aim to reflect the relationship between economic activity and environmental degradation by accounting for the stock of natural resources, their depletion, and environmental impacts.

Green national accounts are an extension of traditional national accounts that integrate environmental and natural resource considerations.

• They track the stock of environmental wealth such as forests, water, minerals, biodiversity, and their rate of use or depletion.
• Developed as a framework for assessing sustainable development and long-term economic health.

Key Components:

1. Natural Capital Accounting: Quantifies the stock of natural resources and ecosystem services (e.g., clean water, air, and biodiversity).
2. Environmental Degradation Costs: Estimates the economic cost of pollution, deforestation, and loss of biodiversity.
3. Adjusted Net Savings (ANS): Subtracts resource depletion and environmental degradation from gross national savings to reflect sustainability.
4. Green GDP: Adjusts traditional GDP by accounting for environmental damage and resource depletion.

Challenges and Considerations

• Valuation Complexity: Quantifying ecosystem services like biodiversity or water purification can be challenging.
• Conflict Between Development and Conservation: Balancing infrastructure development with forest preservation requires robust policy frameworks.
• Community Participation: Ensuring that forest-dependent communities are central to planning and benefit-sharing is crucial.

India’s Efforts Towards Green GDP

India, a rapidly developing economy, faces the dual challenge of economic growth and environmental sustainability. Recognizing the importance of balancing these goals, India has initiated steps toward adopting a Green GDP.

1. National Accounts on Environmental Sustainability: The Ministry of Statistics and Programme Implementation (MoSPI) adopted the SEEA framework to incorporate natural resource accounting. Efforts are underway to measure ecosystem services and environmental costs.
2. Climate Action: India’s Nationally Determined Contributions (NDCs) under the Paris Agreement include ambitious targets for reducing carbon intensity and expanding renewable energy capacity.
3. Forest Wealth Accounting: India conducted forest wealth accounting to estimate the economic value of its forest ecosystems, including carbon sequestration and biodiversity conservation.
4. Pollution Control and Resource Efficiency: Initiatives like the National Resource Efficiency Policy (NREP) and Perform, Achieve, and Trade (PAT) scheme aim to improve resource use and reduce emissions.
5. Sustainable Development Goals (SDGs): Aligning economic policies with SDGs, focusing on clean energy, responsible consumption, and climate action.
6. Environmental Protection through Legislation
   • The Compensatory Afforestation Fund Management and Planning Authority (CAMPA) aims to mitigate deforestation by funding afforestation projects.
   • Implementing Extended Producer Responsibility (EPR) for plastic waste and e-waste management.
7. Green Bonds and Financing: India is a leading issuer of green bonds, raising funds for renewable energy and sustainable infrastructure projects.
8. Research and Collaboration: Collaboration with organizations like UNEP and the World Bank to enhance capacity-building in environmental accounting.

Global Perspectives on Green GDP

1. China
   • Introduced Green GDP accounting in 2004 to track environmental costs alongside economic growth.
   • Published a Green GDP report in 2006, estimating environmental degradation costs at 3% of GDP. The effort faced resistance due to its potential impact on regional economic performance but highlighted environmental accounting.
2. European Union (EU)
   • Adopted the System of Environmental-Economic Accounting (SEEA) to align GDP with ecological sustainability.
   • Promotes the “Beyond GDP” initiative to develop alternative indicators like the Genuine Progress Indicator (GPI) and the Inclusive Wealth Index.
3. United Nations
   • Developed the SEEA framework to assist countries in integrating environmental concerns into their national accounting systems.
4. USA
   • In some states, the GPI is used as a complementary measure to GDP. The GPI includes adjustments for income distribution, environmental costs, and social factors.
5. Nordic Countries
   • Implement holistic approaches to measure national well-being, including environmental sustainability and social equity.
   • Sweden is one of the top-performing countries in the Global Green Economy Index, which measures the green economy performance of 130 countries based on four dimensions: leadership and climate change, efficiency sectors, markets and investment, and environment and natural capital.
   • Sweden has also developed a dashboard of indicators to monitor its progress towards green growth.

Conclusion

Chhattisgarh’s initiative aligns with India’s broader goals of promoting sustainable development, combating climate change, and achieving its Nationally Determined Contributions (NDCs) under the Paris Agreement.

By formalizing the inclusion of ecosystem services in economic planning, the state sets a precedent for other regions to adopt environmentally inclusive growth strategies.

This innovative model can serve as a roadmap for integrating natural capital into economic systems, creating a balance between environmental stewardship and economic progress.

Frequently Asked Questions (FAQs)

Q. What is meant by Green GDP?

Ans: The Green Gross Domestic Product, or Green GDP for short, is an indicator of economic growth with environmental factors taken into consideration along with the standard GDP of a country. Green GDP factors biodiversity losses and costs attributed to climate change.

Q. Which state in India has Green GDP 1st?

Ans: Chhattisgarh first state to link the forest ecosystem with Green GDP. Such an initiative will allow for a comprehensive valuation of forests with an emphasis on their economic and environmental benefits.

Related articles:

• Green growth: India’s strategy for Green Economy
• Indian economy: Growth, development and Employment

-Article by Swathi Satish