What Is Green GDP?

Jim B.

Green GDP is an attempt by economists to measure the growth of an economy compared to the harm production does to the environment. This is 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 some 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. Unfortunately, green GDP can be difficult to measure because of the problems inherent in trying to quantify the costs of ecological and environmental damage.

The air pollution produced by a factory subtracts from the value of its production, according to green GDP calculations.
The air pollution produced by a factory subtracts from the value of its production, according to green GDP calculations.

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.

The basic gist of the problem the green GDP calculation is trying to solve is what exactly the price of economic growth is in terms of the quality of life within that area. For example, a factory that maintains an excellent production schedule will definitely add to the GDP in the country in which it is located. If that factory excessively pollutes the air in the process, the economic growth it has spurred is somewhat negated by the environmental damage it has done.

One way that green GDP attempts to tackle is this problem 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.

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Discussion Comments

@simrin-- Calculation of environmental damage is tricky but I don't think this takes away from the value of green GDP.

Environmental damage is generally calculated by giving a value to a resource based on its availability. The more a resource with limited availability is used in an economy-- the higher the cost of environmental damage. So the calculation is basically geared toward availability and sustainability of natural resources.

I think that green GDP is far superior and realistic than regular GDP because it gives us a truer picture of what we are facing in terms of resources. It also encourages us to look for alternative resources that are actually sustainable. Green GDP encourages us to take responsibility for our actions and think about our future.


@simrin-- I agree with you. I'm sure that there are types of environmental damage that we're not even aware of yet. Green GDP is partly based on future consequences and no one knows what they are.


I think green GDP is a great idea. The only problem I have with it is how environmental damage is calculated. Like the article said, there can't be an exact calculation for it.

But how do economists approximate these costs? What is considered for it and is it a realistic calculation?

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