Green GDP

Growing environmental concerns have resulted in

the demand for green national accounts that highlight
the stock of environmental wealth, and its use and
depletion by a society in its conventional national
accounts
Green GDP should account for both environmentally
beneficial and harmful products and their social value
It also proposes a classification of products based on
their environmental impact and a method of data
collection and analysis using the Supply and Use
tables of the Ministry of Statistics and Programme
Implementation
 What are
Green GDP
and Green GREEN GDP AND GREEN
NATIONAL ACCOUNT ARE
GREEN GDP: GREEN
GDP IS AN INDICATOR
GREEN NATIONAL
ACCOUNT: GREEN

National CONCEPTS THAT TRY TO

MEASURE THE ECONOMIC
PERFORMANCE OF A
COUNTRY WHILE
THAT SUBTRACTS
THE COST OF NATURAL
RESOURCE DEPLETION
AND ENVIRONMENTAL
NATIONAL ACCOUNT IS A
FRAMEWORK THAT
INTEGRATES
ENVIRONMENTAL

Account? CONSIDERING THE

ENVIRONMENTAL COSTS
AND BENEFITS
DEGRADATION FROM THE
CONVENTIONAL GDP OF A
COUNTRY
CONSIDERATIONS INTO
NATIONAL ACCOUNTING
FRAMEWORKS
What are some Examples of
Environmental Costs and Benefits?

Environmental benefits, on the

Environmental costs refer to the other hand, are the positive
negative impacts of economic outcomes of economic activities
activities on the environment, for the environment, including
such as pollution, resource ecosystem services , biodiversity
depletion, habitat destruction, conservation, renewable energy
climate change, and waste adoption, sustainable agriculture
generation practices, and conservation and
restoration efforts
What is the Significance
of Green GDP?
Environmental Valuation: Green GDP incorporates the
valuation of natural resources and ecosystem services,
which are typically externalities in traditional GDP
calculations

Sustainability: Green GDP aligns with the concept

of Sustainable Development Goals by explicitly considering
environmental factors in economic assessments

Policy Relevance: By providing a comprehensive picture of

economic performance, including the environmental
dimension, green GDP helps policymakers prioritize and
allocate resources effectively

Resource Management: Green GDP highlights the depletion

of natural resources and encourages their sustainable
management
What are the Challenges in
Implementing Green GDP?
Data Availability and
Reliability: Calculating green Value Assignments: Valuing
GDP is hard due to unreliable environmental goods and
data on environmental costs, services in monetary terms is a
benefits, and natural resource contentious issue
value

Complexity and
Indicators: Green GDP is a Policy Implementation and
tough indicator to calculate Trade-offs: Green GDP is useful,
because it includes social, but it can be hard to turn it into
economic, and environmental policies
factors
What should
be the Way
Forward for DEVELOPING AND
ADOPTING A COMMON
IMPROVING THE
AVAILABILITY AND QUALITY
PROMOTING THE
AWARENESS AND

Implementin FRAMEWORK AND

METHODOLOGY FOR
MEASURING AND VALUING
ENVIRONMENTAL COSTS
OF DATA ON
ENVIRONMENTAL
INDICATORS, SUCH AS
EMISSIONS, RESOURCE
UNDERSTANDING OF
GREEN GDP AMONG
POLICY
MAKERS, BUSINESSES,

g Green AND BENEFITS, BASED ON

THE BEST AVAILABLE
SCIENTIFIC AND
ECONOMIC KNOWLEDGE
USE, ECOSYSTEM
SERVICES, ETC., AND
ENSURING THEIR
CONSISTENCY AND
AND THE PUBLIC, AND
HIGHLIGHTING ITS
ADVANTAGES OVER
CONVENTIONAL GDP AS A

GDP?
COMPARABILITY ACROSS MEASURE OF ECONOMIC
COUNTRIES PERFORMANCE AND
SOCIAL WELL-BEING
What should be the Way Forward
for Implementing Green GDP?

Encouraging the participation

Addressing the trade-offs and
and collaboration of various
conflicts that may arise from
stakeholders, such as
pursuing green GDP goals, such
governments, international
as balancing economic growth
organizations, civil society,
and environmental protection,
academia, and the private
ensuring equity and justice
sector, in the design and
among different groups and
implementation of green GDP
regions
policies and initiatives
Which Countries Use
Green GDP?
China: China planned to publish Green GDP statistics in 2004
but stopped after facing political and methodological
challenges following a preliminary report that showed
reduced GDP growth due to environmental costs

USA: The USA has developed a comprehensive system of

environmental-economic accounts that provide various
indicators of the interactions between the economy and the
environment, environmental expenditures, and
environmental taxes

Europe: The US has environmental-economic accounts but no

green GDP measure
Which Countries Use Green GDP?

Sweden: Sweden is one of the top

performing countries in the Global
Green Economy Index, which
India: Green GDP is not officially
measures the green economy
measured or reported in India, but
performance of 130 countries
some attempts have been made
based on four dimensions:
to estimate it by various
leadership and climate change,
researchers and institutions
efficiency sectors, markets and
investment, and environment and
natural capital
What is Global Green
Economy Index?
The Global Green Economy Index is published by Dual Citizen, a consultancy
firm that specializes in data-driven solutions for sustainability

The GGEI is a measure of the green economy performance of 160 countries and
how experts

According to the latest report from 2022, India ranks 60 out of 160 countries

The GGEI covers four dimensions

Climate Change & Social Equity

Sector Decarbonization

Markets & Investment

Environmental Health

The GGEI aims to provide a comprehensive and transparent measure of country

sustainability performance and to inform policy making and investment decisions
 Value-added or product method

 The value added method is one of the three methods to

determine national income. The other two methods are the
expenditure method and income method.

 It is also known as product method or output method, and its

primary objective is to calculate the national income by taking the
value added to a product during the various stages of
production into account.
Steps to Compute National Income
Step 1: Identification and classification of producing units
Identify all the producing units in the domestic economy and classify
them into the primary, secondary, and tertiary sector.
Step 2: Estimation of gross value added of each sector
Gross value added (GVA) = Value of output – Intermediate
consumption
Step 3: Estimation of GDP
Then add GVA of all the three sectors, i.e., primary, secondary, and
tertiary, to get the GDP of the economy.
Step 4: Estimation of national income
Finally, to determine the national income (NNPfc) from GDPMP,
– Net factor income from abroad (NFIA) is added,
– Depreciation is subtracted, and
– Net indirect taxes are also deducted
The formula is as follows:
NNPFC = GDPMP – Depreciation + Net factor income from abroad –
Indirect taxes + subsidies
A farmer grows a bushel of wheat and sells
it to a miller for $1.00. The miller turns the
wheat into flour and then sells the flour to
a baker for $3.00. The baker uses the flour
to make bread and sells the bread to an
engineer for $6.00. The engineer eats the
bread. What is the value added by each
person? What is GDP?
$3.0 $6.0
$1.0
0 0
0
Expenditure Method
According to this method, GDP is computed as the
sum of consumption expenditure, investment,
government purchases of goods and services and
net exports

Investment includes addition or accumulation of

physical capital such as new buildings, business
plants and machinery as well as change in
inventories

In this sense, investment in human resources in the

form of education and training should be thought of
to be a part of investment expenditures

However, the expenditure on private education is

considered as private consumption expenditure
while public expenditure on education is a part of
government expenditure
• Government expenditure includes purchases of goods
and services by government such as defense
expenditure, creation and maintenance of
infrastructure, salaries of government employees etc
 Income and Expenditure Statements(Amount
in Rs)
Tomato Inc Ketchup Inc
Wages paid 15,000 Wages paid 10,000
Taxes paid 5,000 Taxes paid 2,000
Cost of inputs
Sales Revenue 35,000 (tomatoes) 25,000
from final sales 10,000 Sales Revenue 40,000

from Tomato Inc 20,000

 Income method
• GDP is the sum of all factor earnings made
from current production of goods and
services including profits earned by
producers and taxes paid to government
• By this method, GDP is computed as sum
of compensation of employees, corporate
profits, proprietor’s income, rental income
of household, current surplus of
government sector units and net interest
• Compensation of employees is the income
of workers consisting of wages, salaries,
other employee benefits and employer’s
contribution to pension schemes and
other social security schemes
 Income method
• Corporate profits are residual incomes
earned by corporations after making
payment of wages, interest, rents and other
cost. These corporate profits are then
utilized for tax, dividend payments and
finally kept as retained earnings.

• The proprietor’s income is the earnings of

unincorporated self-employed. The rental
income includes income earned by
landowners, royalty income by authors or
artists.
Concept of Nominal & Real GDP
Consider once again the economy that produces only and . In this economy
GDP is the sum of the value of all the apples produced and the value of all the oranges
produced.

That is,
GDP = (Price of × Quantity of ) + (Price of × Quantity of
)
Economists call the value of goods and services measured at current prices
nominal GDP.

If all prices doubled without any change in quantities, nominal GDP

would double.

A better measure of economic well-being would tally

Real GDP
the economy’s output of goods and services without
being influenced by changes in prices.
 Some aggregates related to National Income
GNP at Market Prices
To convert gross domestic product into national product, we must add the total income
from abroad in to a nation.

GNP at Market Prices = GDP at Market Prices + Net Income from Abroad.

GNP at Factor
Cost
GNP at factor cost is the sum of the money GNP at Factor Cost = GNP at Market
value of the income produced by and accruing Prices – Indirect Taxes + Subsidies.
to the various factors of production in one
year in a country.
 Net National Product (NNP): NNP is sum total of output on
consumption goods and investment goods. But this process of
production uses certain amount of fixed capital and the fixed
equipment wears out with time, or other components are damaged or
destroyed, and still others are rendered obsolete through technological
changes. NNP = GNP—Depreciation.
 NNP at Market Prices: Net National Product at market prices is the sum total of final goods and
services evaluated at market price in a country. value of final goods and services evaluated at
market prices in a country.

NNP at Market Prices = GNP at Market Prices—Depreciation

 NNP at Factor Cost: Net National Product at factor cost is the total output evaluated at factor
prices. It includes income earned by factors of production through participation in the
production process such as wages and salaries, rents, profits, etc. It is also called National
Income.

NNP at Factor Cost/ National Income = NNP at Market Prices – Indirect taxes+
Subsidies
 GDP is not a perfect indicator of economic welfare
because it doesn't account for many important aspects
of society, such as

 Non-monetary activities: GDP doesn't account for non-monetary

activities like volunteer work, childcare, and housework.

 Income inequality: GDP doesn't account for changes in income

inequality.

 Environmental quality: GDP doesn't account for environmental quality.

 Health and education: GDP doesn't account for levels of health and
education.
 Leisure: GDP doesn't account for leisure time.

 Welfare: GDP doesn't account for the welfare component of

society. For example, the production of guns, drugs, and
luxury goods increases GDP, but it doesn't add to the
welfare of most people.

 Human capital: GDP doesn't account for changes in human

capital.

 Income circulation: GDP doesn't account for how income

circulates among individuals, which can affect personal and
social well-being.
 Consider how each of the following events is likely to
affect real GDP
 A hurricane in Florida forces Disney World to shut down for a month.

 The discovery of a new, easy-to-grow strain of wheat increases

farm harvests.
 Firms throughout the economy experience falling demand, causing them to
lay off workers.
 Congress passes new environmental laws that prohibit firms from using
production methods that emit large quantities of pollution.

 Fathers around the country reduce their workweeks to spend more time with
their children.