TABLE OF CONTENTS

CHAPTER I .................................................................................................................................... 2

INTRODUCTION ....................................................................................................................... 2

CHAPTER II................................................................................................................................... 6

HISTORY.................................................................................................................................... 6

CHAPTER III ................................................................................................................................. 9

GREEN ACCOUNTING ............................................................................................................ 9

CHAPTER IV ............................................................................................................................... 11

IMPORTANCE OF GREEN ECONOMY ............................................................................... 11

CRITICISM OF GREEN GDP ................................................................................................. 12

CHAPTER V ................................................................................................................................ 14

CHINA AND GREEN GDP ..................................................................................................... 14

CHAPTER VI ............................................................................................................................... 17

INDIA AND GREEN GDP....................................................................................................... 17

IMPORTANCE OF GREEN GDP FOR INDIA ...................................................................... 20

CHAPTER VII .............................................................................................................................. 21

CONCLUSION ......................................................................................................................... 21

BIBLIOGRAPHY ..................................................................................................................... 23

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 CHAPTER I
INTRODUCTION

BACKGROUND

Economic growth basically refers to the real growth in Gross Domestic Product (GDP). GDP is
computed as a sum of all final goods and services that produced within a period of time at market
prices. It is measured by adding together a nation’s personal consumption expenditure,
government spending, net exports, and net capital formation 1. Gross domestic product (GDP) is
the monetary value of all the finished goods and services produced within a country's borders in
a specific time period. Though GDP is usually calculated on an annual basis, it can be calculated
on a quarterly basis as well. GDP includes all private and public consumption, government
outlays, investments and exports minus imports that occur within a defined territory. Put simply,
GDP is a broad measurement of a nation’s overall economic activity. But from sustainability
perspective, GDP ignores externalities, specially the environmental externalities. In fact, it just
measures what is produced and therefore ignores what is needed to generate that production. It
also does not measure the economic well-being such as clean air and water.
Since GDP does not measure the sustainability of growth, it could not be a good measure of
social welfare. There is a growing concern that GDP measurement may encourage the natural
resources depletion faster than they can renew themselves1. Another concern about GDP
measurement is the ‘threshold effect’. According to Max-Neef2, GDP increase or economic
growth brings about an improvement in the quality of life up to a point. Beyond this point, more
economic growth may deteriorate the quality of life due to the costs associated with increasing
income inequality, loss of leisure time, and natural capital depletion. These deficiencies could be
prevailed by using accounting price or by measuring the green GDP, which considers the natural
capital depreciation and environmental degradation as well. The green gross domestic
product (green GDP) is an index of economic growth with the environmental consequences of

1
Costanza, R., Hart, M., Posner, S. and Talberth, J.,The pardee papers,4, pp. 46 (2009).
2
Max-Neef, M., Econ. 15:115-118 (1995)

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that growth factored into a country's conventional GDP. Green GDP monetizes the loss
of biodiversity, and accounts for costs caused by climate change. There are other alternatives to
GDP, including Green Net National Product (Green NNP), Index of Sustainable Economic
Welfare (ISEW), Genuine Progress Indicator (GPI), and Genuine Savings (GS). These are also
considered as sustainable development indicators. Applying these methods depends on data
availability and user’s preference.

In particular, natural capital is poorly represented in GDP; resources are not adequately
considered as economic assets.3 Relative to their costs, companies and policy makers also do not
give sufficient weight to the future benefits generated by restorative or protective environmental
projects. As well, the important positive externalities that arise from forests, wetlands and
agriculture are unaccounted for or otherwise hidden because of practical difficulties around
measuring and pricing these assets.4 Similarly, the impact that the depletion of natural resources
or increases in pollution can and do have on the future productive capacity of a nation are
unaccounted for in traditional GDP estimates5.

The need for a more comprehensive macroeconomic indicator is consistent with the conception
of sustainable development as a desirable phenomenon. GDP is mistakenly appropriated as a
primary indicator of well-being, and as a result, it is used heavily in the analysis of political and
economic policy. Green GDP would arguably be a more accurate indicator or measure of societal
well-being. Therefore, the integration of environmental statistics into national accounts, and by
extension, the generation of a Green GDP figure, would improve countries’ abilities to manage
their economies and resources.

RESEARCH QUESTION

Following are the research questions:

3
Policy recommendations, “International Human Dimensions Programme on Global Environmental Change”, 2012.
4
Wealth Accounting and theValuation of Ecosystem Services, available at
http://www.wavespartnership.org/natural-capital-accounting?active=1
5
Ibid.

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  What is the concept of Green GDP system?
 What is the need of using Green GDP system?
 Is it a true indicator of social welfare, if it is then why is it not popular?
 Should it be used in place of current evaluating system of GDP?

OBJECTIVE

This research paper aims at following objectives:

 To study and understand the concept of Green GDP system.

 To study Green GDP with reference to INDIA.

RESEARCH METHODOLOGY
The researcher is following a doctrinal approach towards the topic. Doctrinal method will be
descriptive in nature and will comprise the collection of data through various secondary sources
such. Sources will also comprise the literature in form of news articles, research papers, Journal
articles etc.

CONCLUSION

The need for a more comprehensive macroeconomic indicator is consistent with the conception
of sustainable development as a desirable phenomenon. GDP is mistakenly appropriated as a
primary indicator of well-being, and as a result, it is used heavily in the analysis of political and
economic policy. Green GDP would arguably be a more accurate indicator or measure of societal
well-being. Therefore, the integration of environmental statistics into national accounts, and by
extension, the generation of a Green GDP figure, would improve countries’ abilities to manage
their economies and resources.

CHAPTERISATION

 Chapter I

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 Introduction
 Chapter II
History
 Chapter III
Green Accounting
 Chapter IV
Importance of Green Economy
Criticism of Green GDP
 Chapter V
China and Green GDP
 Chapter VI
India and Green GDP
Importance of Green GDP for India
 Chapter VII
Conclusion
Bibliography

REFERENCES

 http://www.wavespartnership.org/natural-capital-accounting?active=1
 http://www.arthapedia.in/index.php?title=Green_GDP
 What should be accounted in Green GDP,
http://www.rff.org/files/sharepoint/WorkImages/Download/RFF-DP-06-24.pdf
 Construction of Green GDP Accounting System,
https://www.researchgate.net/publication/272049549_Construction_of_Green_GDP_Acc
ounting_System

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 CHAPTER II

HISTORY

In 1972, William Nordhaus and James Tobin introduced the first model to measure the annual
real consumption of households, called the Measure of Economic Welfare (MEW). 6 MEW
adjusts GDP to include the value of leisure time, unpaid work and environmental damages. They
also defined a sustainable MEW (MEW-S) value, and their work was the precursor to more
sophisticated measures of sustainable development. Repetto further explored the impact that the
failure of resource-based economies to account for the depreciation of their natural capital could
have, especially by distorting evaluations of macroeconomic relationships and
performance.[8] He and his colleagues developed the concept of depreciation accounting, which
factors environmental depreciation into “aggregate measures of economic performance.”

In “Natural Resources, National Accounting and Economic Depreciation,” John Hartwick

presents an accounting methodology to find NNP inclusive of the depletion of natural resource
stock by representing the use of natural resources as “economic depreciation magnitudes.”7

This method of accounting, which makes adjustments to the existing national account indicators,
found traction in the System of Integrated Economic and Environmental Accounts (SEEA),
published by the United Nations as an appendix to the 1993 SNA. The report offered five
approaches, or versions, to developing environmental accounts. Over the years, the SEEA has
been expanded and revised in view of the increased sophistication of accounting methodologies
and technology. This revision will be explored in greater detail in the “Global Initiatives”
section. Ultimately, the importance of the SEEA with respect to the Green GDP is that it is
possible to create full-sequence accounts from which aggregates such as Green GDP can be
derived and compared internationally, and many countries have begun this process.

6
William Nordhaus and James Tobin, “Is Growth Obsolete?”, National Bureau of Economic Research, 1972.
7
John Hartwick, “Natural Resources, National Accounting and Economic Depreciation”, Queen’s University, 1990.

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Several reports and initiatives after the SEEA-1993 have explored the possibility of expanding or
changing the scope of environmentally-adjusted macroeconomic indicators. As the popularity of
green GDP and other environmentally adjusted macroeconomic indicators grows, their
construction will increasingly draw on this continuously developing body of research, especially
with respect to the methodology associated with valuing non-market capital (e.g., services from
natural capital which exist outside of traditional market settings).

In 1993, the Bureau of Economic Analysis, the official bookkeeper of the U.S. economy, began
responding to concerns that the GDP needed retooling. The agency began working on a green
accounting system called Integrated Environmental and Economic Accounts. These initial results
released in 1994 showed that GDP numbers were overstating the impact of mining companies to
the nation's economic wealth. Mining companies didn't like those results, and in 1995 Alan B.
Mollohan, a Democratic House Representative from West Virginia's coal country, sponsored an
amendment to the 1995 Appropriations Bill that stopped the Bureau of Economic Analysis from
working on revising the GDP and that's where things stand today.

Costanza, (1997) estimated the current economic value of 17 ecosystem services for 16
biomes. The value of the entire biosphere, most of which exists outside of the market, is
estimated conservatively to be between $16–54 trillion per year. By comparison, global GNP is
approximately $18 trillion per year. The size of this figure demonstrates the significance of
ecosystem services on human welfare and income generation, and the importance of identifying
and recognizing this value. The valuation techniques used by the authors were often based on
estimations of individuals’ “willingness-to-pay” for ecosystem services.

Kunte et al. (1998) use their paper "Estimating National Wealth: Methodology and Results" to
demonstrate that expanding the national accounts to include natural capital is a “practical [and
necessary] exercise.” They estimate the total wealth of nations by including different
components of wealth in their calculations, including natural capital. They place values on
natural capital by using the concept of economic rent. “Economic rent is the return on a
commodity in excess of the minimum required to bring forth its services. Rental value is
therefore the difference between the market price and cost of production / extraction.” Following
this, and by adjusting calculations for (un)sustainable use patterns, they are able to determine the
stock of natural capital in a country that more accurately reflects its wealth.

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Nature’s Numbers: Expanding the National Economic Accounts to Include the Environment,
written by William Nordhaus and Edward Kokkelenberg and published in 1999, examined
whether or not to broaden the U.S. National Income and Product Accounts (NIPA) to include
natural resources and the environment. The panel, which addressed this question, concluded that
extending the NIPA and developing supplemental environmental accounts should be a high
priority goals for the U.S., because these would provide useful data on a variety of economic
issues and government trends, which entailed both replenishing and extractive activities. One of
the major findings of the report is that it is fundamentally necessary for green adjustments to
account for instances when natural capital is discovered or replenished, along with general
depletive activities.

In 2004, Wen Jiabao, the Chinese premier, announced that the green GDP index would replace
the Chinese GDP index itself as a performance measure for government and party officials at the
highest levels. The first green GDP accounting report, for 2004, was published in September
2006. It showed that the financial loss caused by pollution was 511.8 billion yuan ($66.3 billion),
or 3.05 percent of the nation's economy.

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 CHAPTER III

GREEN ACCOUNTING

In the previous section it was argued that accounting for depreciation is essential for sustainable
development, provided that it includes both natural capital and human made assets. In order to
solve this problem another system called ‘Environmentally Adjusted Sustainable
National Income Accounting’ or Green Accounting has been developed. In this system some cost
factors are deducted from the conventional GDP.

The Green GDP (GGDP) = Traditional GDP- Environmental /Ecological Cost

Environmental/Ecological costs are consisting of the following components:

A. Defensive expenditure in the environmental damage;

B. Clean up costs: The expenditure on restoration of the resources environment to reduce the
damage already done by economic activity;

C. Depreciation of natural capital Loss in environmental resources;

D. Maintenance Cost: Expenses for maintaining environmental resources;

Or, it can be calculated as following:

GGDP= Total output of the industrial sectors - Damages to resources and environment+ Total
new value created by environmental protection organizations

A typical figure showing the classification of environmental accounting at all levels is given
bellow:

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 CHAPTER IV
IMPORTANCE OF GREEN ECONOMY

The transition to ‘green economy’ has many benefit and the social benefits. It provides ‘ real
opportunities for environmental sustainability and increased welfare’ in the society. This concept
is gaining widespread acceptance as means of getting the economy to right track. Decades of
creating new wealth through a brown economy model have not substantially addressed social
marginalization and the resource depletion. It has been seen a way to reach sustainable
development and the means to get out from the vicious cycle of poverty.

“ The greening of the economies is not generally to drag on the growth but rather a new engine
to growth; that it is a net generator of the decent jobs, and also a vital strategy for the
elimination of the persistent poverty”8

Greening of the economy has multiple effects on the poverty reduction in various sectors of
economy including agriculture, forestry, renewable energy, fisheries, waste management,
manufacturing etc. Sustainable and profitable growth can be obtained in these sectors in long run
by green approach. Hence Green economy which has on one hand incorporates all concepts of
and recommendations for a sustainable development, and on the other hand is a feasible for an
agrarian economy. It is the most viable and implemental development path for any developed,
developing or under developed country.

8
UNEP, 2011.

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CRITICISM OF GREEN GDP

In general, conventional accounting practices are less biased than Green accounting
practices. Although the Green GDP does include uncounted losses and avoids the problem of
overestimating our wealth, it fails to account for the potential benefits of entrepreneurship and
innovation. For example, the World Bank claims that in order to be Green, we need to take into
account the fossil fuel consumption. In reality, burning fossil fuels over the past 150 years has
caused a rise in technological innovation in telecommunications, computers and etc. These
technological booms enrich the future, but are not counted. Moreover, the depletion of fossil fuel
has induced research into diverse methodology such as horizontal fracturing that has
dramatically increased the availability of natural gas while driving down its cost. In practice,
Green Accounting suggests conservation of forest resource because this would entail losing a
valuable resource. At the same time, deforestation leads to agriculture and industry.
The GDP, while not perfect, is strongly correlated with highly prized real-world outcomes. A
country with higher GDP generally has higher life expectancy, lower child mortality rates, more
democracy, better education, greater life satisfaction, less corruption and often a cleaner
environment.
Governments do not want to give the impression that economic growth and development has
stalled, either to their constituents or to the international economic community. Accounting for
environmental degradation may lead to a significantly lower GDP that makes many developing
countries reluctant to measure environmental impacts. The Chinese example, the preeminent
experiment in Green GDP, has served to reinforce this fear. Green GDP Accounting brings up
some sort of trade-off between growth and sustainability.
When firms are able to buy permits to pollute, there is an incentive for the firm to lie in
order to keep its emissions within its allotted limits, which would reduce the accuracy of a Green

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GDP measurement. Putting a price on the right to pollute may also stall Green innovation that
may be beneficial to development – it may be more economically beneficial for a polluter to buy
up more pollution credits than to implement new technologies or change existing techniques.
A second objection may be found in the Report by the Commission on the Measurement of
Economic Performance and Social Progress, when Stiglitz, Sen and Fitoussi remark that:
“there is a more fundamental problem with green GDP, which also applies to Nordhaus and
Tobin’s SMEW and to the ISEW/GNI indices. None of these measures characterize
sustainability per se. Green GDP just charges GDP for the depletion of or damage to
environmental resources. This is only one part of the answer to the question of sustainability.”9

9
Joseph Stiglitz, Amartya Sen and Jean-Paul Fitoussi, “Report by the Commission on the Measurement of
Economic Performance and Social Progress”, “Commission on the Measurement of Economic Performance and
Social Progress”, 2008.

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 CHAPTER V
CHINA AND GREEN GDP

China was the first country to use the Green GDP system. Green GDP accounting is closely
related to the basic situation of a country. China as a developing country is at the stage of rapid
economic development. It has wide territory, huge population and is relatively lack in natural
resources. At the same time, the soaring development of economy has resulted in rapid growth of
exploitation and utilization of natural resources. The rapid economic development in China thus
mainly depends on the competition of resource, competition of environment and competition of
investment. At the back of this phenomenon of “Three Competitions” lie one-sided chase of
GDP growth rate and ignorance of resource and eco-environmental costs. This has brought about
negative effects and, in particular, serious “after-effect” as a result of destruction of resources
and environment. In order to radically improve the old extensive economic development pattern,
the Government of China first proposed “a human-centered, comprehensive, coordinated and
sustainable development view” and the new development strategy of “five syntheses and
coordination”. President Hu Jingtao pointed out that “we should study the method for green
national economic accounting, explore an assessment system that integrates resource
consumption, environmental loss and environmental benefit into economic - 2 - development
level, so as to establish and maintain the balance of human beings and the nature”. This requires
integration of resource and environmental costs into national economic accounting system, so as
to radically change the achievement view of party leaders and administration leaders, promote
the change of extensive growth patterns to intensive patterns with low consumption, low
emission and low input, and thus truly carrying out the scientific development view in all the
levels and fields of economic construction. Therefore, the establishment of green GDP
accounting system in China fully embodies the political willing of top leaders of Central
Government of China.

The Green GDP for 2004 was published in September 2006 which calculated the loss for the
year at 511 billion yuan ($66 billion) or 3.05% of growth. Within that figure it was calculated

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that water (286 billion yuan) and air (216 billion yuan) pollution were the most significant costs,
followed by solid wastes and pollution accidents at 5 billion yuan.

On its publication SEPA director Pan Yue announced that “This marks only the beginning of our
efforts in a Green GDP calculation”. But of course it was the first and only year that Green GDP
was calculated, its results of near zero (or worse) growth in many areas considered too politically
damaging by China’s authorities.

However, the expectation at the time from many such as the World Bank was that Green GDP
accounting would show a loss of GDP of between 8-12%, far higher than the actual estimate.
Much of this larger estimate owed to large water shortages, air and water pollution,
desertification and ecological losses.

And indeed, the SEPA admitted it was a conservative estimate, as it only included environmental
pollution costs (such as healthcare for air pollution – direct and relatively easy to measure). A
more accurate estimate would also have included not only the costs of environmental pollution
but the ecological damage done and the costs of natural resource depletion as well. As a result
problems such as soil contamination, desertification, depletion of fish stocks and wildlife etc. had
all been excluded from the estimate. Further accounting issues meant that even those items
included in the measure were often underestimated or not fully included due to what was
described as issues with “localization of departments, limits of technologies, and the limitation of
basic data”.

The estimation of Green GDP also suffered further challenges. Such practices are relatively few
and far between and most countries have declined to attempt to make them. Any true measure of
Green GDP would have to make estimates of goods such as forests which have no obvious
market value. Compounding statistical issues is the nature of the Chinese political system. While
some regions certainly stood to benefit from the calculation, seeing in it an opportunity to
demand greater subsidies from the central government as their environment has been depleted.
However, many more local officials objected to the scrutiny that Green GDP would put on them
and as a result of pressure they placed on the central government the detailed regional
breakdowns were not published.

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Future Green GDP results were to attempt to correct for some of these deficiencies and as such it
is perhaps not so surprising that the authorities ultimately decided to kill the project before more
accurate, and more politically damaging estimates could be made of the true extent of
environmental damage in China.

The elimination of Green GDP was a significant step back for the Chinese government’s attempt
at environmental preservation and it exposes wider issues facing China’s attempts to repair its
environment. One such issue is that any attempt to set targets or evaluate local official
performance within the context of the environment is bound to meet strong resistance. At the
same time, any attempt to do so is likely to be met with the challenge of insufficient data, issues
of computing value and the statistical manipulation that China is notorious for.

What has been made apparent however, is that even with the very low estimates of the Green
GDP report, Chinese are at best experiencing a modest improvement in their overall welfare and
at the worst may, despite rising GDP, be seeing a fall in their welfare over time. While Green
GDP was unpalatable to many Chinese officials, it does suggest that China’s current growth
strategy may actually be doing more harm than good today and in the future.

That said, studies (and here for some results from the Index of Sustainable Welfare) into the
developed world’s environmental track record (and other factors), pioneered by William
Nordhaus and James Tobin in their 1973 paper, suggest that our own welfare may not be doing
so much better when we factor in issues such as the environment into calculations of our GDP.
While these measures are in themselves contentious and do not solely focus on the environment
– the basic point is the same and as such, perhaps China’s reluctance to use Green GDP
shouldn’t come as too much of a surprise.

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 CHAPTER VI
INDIA AND GREEN GDP

Like all emerging and growing economies, India is facing a catch-22 situation: On the one hand,
there is pressure to maintain GDP growth as this is the perceived foundation upon which the
future economic security of its growing population is based, but conversely, India must also take
into consideration the costs of development and not self-cannibalise its rich natural capital
wealth and jeopardise the very future of the people it is trying to secure.

Over-reliance on GDP as a measure of economic health can be misleading. As noted long ago by
Robert F. Kennedy: “it measures everything, in short, except that which makes life worthwhile.”

ENVIRONMENTAL LOSS

GDP measures the value of output produced within a country over a certain time period.
However, any depreciation measurements used, will account only for manmade capital and not
the negative impact of growth on valuable natural capital, such as water, land, forests,
biodiversity and the resulting negative effects on human health and welfare.

For India, there is much to lose if action is not taken to preserve its natural environment. Its wide
range of climate, geography and culture make it unique amongst biodiversity rich nations.

Biodiversity is an incredibly valuable asset. It is the underlying foundation of the earth’s

ecosystems, the variety and abundance of species that inhabit them and the variability and
diversity of genetic material found within them.

It provides numerous benefits, from food and fuel, to services such as freshwater, soil fertility,
flood control, pollination of crops and carbon sequestration by forests that are crucial to both
environmental and human well-being. To this end, biodiversity loss does not only mean the loss
of species, but also the loss of ecosystem functioning.

Although India’s economic growth is to be encouraged, the double-digit GDP fixation is

threatening India’s biodiversity and ironically, its long-term growth and security.

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For example, despite India having set in place a remarkable Protected Areas network (4.8 per
cent of the total geographical area of the country), it continues to be challenged by the loss of
natural habitats. Over the course of the last fifty years, India has lost over half its forests, 40 per
cent of its mangroves and a significant part of its wetlands. At least 40 species of plants and
animals have become extinct with several hundred more endangered.

Livelihoods have been lost, poverty increased, food security threatened and health risks raised.
Today, annual economic costs of air pollution, contaminated water, soil degradation, and
deforestation are estimated to be close to 10 per cent of India’s GDP.

GREEN ACCOUNTING

Better macroeconomic and societal indicators are needed to reflect the contribution of
biodiversity and ecosystem services to human well-being.

One approach that is gaining momentum across the globe is “green accounting” whereby
national accounts are adjusted to include the value of nature´s goods and services.

Mr Jairam Ramesh, the former environment minister, advocated greening India’s national
accounts by 2015 and encouraged policy makers to recognise the trade-off between pursuing
high growth economic policies against the extensive impact they could have on India’s natural
capital.

One organisation that is already leading the way is the Green Indian States Trust (GIST) which,
in 2003 unleashed a series of environmentally adjusted accounts under the Green Accounting for
Indian States Project. According to their results, the loss of forest ecological services (i.e. soil
erosion prevention, flood control and ground water augmentation) over three years (2001-03)
due to declining dense forests was estimated at an astounding 1.1 per cent of GDP.

Breaking it down by States, they showed that for native forest-rich states such as Arunachal
Pradesh, Assam, Himachal Pradesh, Jammu and Kashmir and Mizoram, the loss of these services
was significantly high as a proportion of their net state domestic product (NSDP) — an estimated
6 per cent. For instance, if we look at Assam where forest cover decreased by 0.28 million
hectares over three years, the value of effective flood control alone was at a loss of Rs. 800
million.

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Following up on the initial study, GIST performed another round of accounting for the period
2003-2007 and the results speak loudly. Although the FSI claims an increase in overall forest
cover in India, native dense forest cover is still declining rapidly.

According to GIST´s latest results, the North-Eastern states continue to be most affected,
particularly Arunachal Pradesh and Mizoram where the loss of forest ecological services is more
than 12 per cent of their NSDP.10

10
India: Green growth is necessary and affordable for India, says new World Bank Report, available at
http://www.worldbank.org/en/news/press-release/2013/07/17/india-green-growth-necessary-and-affordable-for-
india-says-new-world-bank-report.

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IMPORTANCE OF GREEN GDP FOR INDIA

Firstly, a major portion of the population still depends on the environment for livelihood
opportunities. Tribal folks, farmers and forest dwellers make a substantive portion of population
whose lives depend on the health of the environment.
Secondly, widespread diseases and illnesses have persisted in India due to sub-standard
living conditions. An indicator better than the GDP is needed in order to curb the spread of
diseases and to alleviate the living conditions of millions,.
Thirdly, the Indian agricultural sector relies heavily on the monsoon, making it vulnerable to
climatic change. Most people in the north depend on the health of the glaciers for their water
supply. India’s large coastline leaves it susceptible to tsunamis and sea-level rising. All this is
especially problematic because India’s wealth of natural forest resource is yet to be fully
exploited. If that were done, there would be drastic climatic changes that would damage the
country beyond recognition.

Lastly, the rising population brings up the question of sustainability. With a predicted
population of 1.7 billion in 2050, India needs a more accurate indicator of progress if it wants to
provide sustainable welfare for its people

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 CHAPTER VII

CONCLUSION

Failure to account for the financial value of nature’s natural resources & ecological services
unknowingly worsens the degradation and retards development of poor nations. The savings and
growth rates are not accurate if they do not acknowledge the depreciation for environment’s
services and natural services, especially in countries where commerce depends heavily on natural
resources e.g. the Countries of the Middle East. Once accounted for the net wealth generation
may even be negative. In most countries there exists a huge gap between apparent wealth
creation and true wealth creation. The biggest problem arises in developing countries where the
adjustments to national accounts are relatively larger. A good Green GDP measure would
provide excellent sustainable development indicators.
The Environmental Kuznets Curve Hypothesis (EKCH) states that economic growth brings an
initial period of environmental degradation, followed by a period of environmental improvement.
It basically says that initially economies can grow at a cost to the environment but after reaching
a level of development, must dedicate themselves to their environment inorder to ensure further
development. It is at this moment when measures such as the Green GDP are instrumental in
aiding economic development.
Not every country has begun to collect valuable data on its environment. Some have been
partially able to collect emission values and pollution levels. The United States has been
criticized for its hypocritical stand on Green Accounting. Although it has been on the forefront of
research, it only published Green Accounts in 1996, which were not given further priority by the
government. In recent times, countries such as Sweden, Norway, Germany and Japan are
pioneers in Green Accounting. Not only have they brought forward methods of valuation and
accounting frameworks but also they have also actively maintained historical records on their
progress. China’s failed experiment serves only a reminder to the complexities of the venture.
The world will wait on India to keep up its promise, till then Green theory and practices keep
developing.

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The Traditional GDP today remains the forefront of economic measurement. It is a yardstick of
growth, progress and human welfare. However, it only accounts for the allocation of market
resources and neglects non-market benefits of nature. The Green GDP covers this theoretical gap
and provides us with a more comprehensive and thorough measurement of output, income and
expenditure. The Green GDP is the logical step forward in a world where sustainability and
controlled industrialization are desired. Even so, the Green GDP is not perfect and the UN SEEA
is only an anticipation of a full-fledged, all-covering and complete picture of an economy’s
output, expenditure and income. Further, research should be conducted in the world’s leading
economies to pave the way for a new generation of sustainably developed nations. We conclude
by placing our confidence in the Green GDP over the Traditional GDP measurement.

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UNSD; Statistics Denmark, 2007

2. Boyd. J, The Non-Market benefits of Nature, 2006

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6. Nordous. W and Tobin. J,Is Growth Obsolete? , 1972

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