International experiences with "green GDP"

There are currently debates in many countries on whether or not to adjust or correct the measure of gross domestic product (GDP) for deterioration of the state of the environment and depletion of natural resources. The surge in interest for developing such a "green GDP" can perhaps be traced back to the World Commission on Economy and Development's report "Our common future" (WCED, 1987) and the follow-up conference in Rio de Janeiro in 1992, (UNCED). Also the process of revising the system of national accounts (SNA) and the emergence of a "blue book" on System for Economic and Environmental Accounting (SEEA) (UN, 2003) have played an important role in motivating these debates.

This report is an effort to summarise international experiences and current status with regard to the development of a "green GDP". The context is an ongoing debate in China on how to measure performance at the national and local level in a way that not only gives incentives for economic development, but also take due notice and care of the impact on the environment and the natural resources of the unprecedented economic development taking place in parts of China.

The report is a joint product from three institutions: The National Bureau of Statistics of China (NBS), the State Environmental Protection Administration of China (SEPA) and Statistics Norway, and has been made possible by financial support from the Royal Norwegian Embassy in Beijing. During a six month period, the institutions have developed their respective parts of this report, with Statistics Norway being responsible for chapters 1-4 describing some background, Norwegian and international experiences and status with regard to green accounting and the development of a "green GDP", NBS being responsible for chapter 5 on experiences in China, and SEPA being responsible for chapter 6 on Policy recommendations. NBS and SEPA jointly hosted a successful international seminar on green accounting and green GDP followed by a two-day training course on SEEA in Beijing in February 2006.

The main conclusion of the report is that the notion of green GDP as a single, corrected measure of the value added in an economy, while attractive as a theoretical concept, is too complex and uncertain in practice to be able to guide policy making. International experience indicates instead that natural resource and environmental accounting along the lines of the SEEA is the norm and represents best practice today.

This still leaves the question unanswered: How do you construct performance measures at the local, regional and national level that encourage economic development, while at the same time takes due account of natural resource and environmental degradation? Tentative answers from Norway and some other countries points to sustainable development indicators (SDI) based on the concept of comprehensive national wealth as a possible solution. An indicator set for sustainable development should ideally reflect the status and development over time of the total resource base of the economy, encompassing real (produced) capital, natural and environmental resources as well as human capital. A small indicator set (less than e.g. 20 indicators) should be developed both at regional as well as the national level. Time series of such indicators should show how the resource base is managed, i.e. whether short-term economic gains are had at the expense of the human, natural resource or environmental capital of the region.

Acknowledgement: Funding for this project and report was provided by the Royal Norwegian Embassy in Beijing.