Abstract

Economic growth refers to the real growth in Gross Domestic Product (GDP) which provides a
basic measurement of a country’s overall economic performance. However, it fails to include the
environmental cost and degradation while estimating the GDP for the whole economy. The
calculation of environmental cost is known as Green Gross Domestic Product (GGDP). The
green gross domestic product is an index of economic growth with the environmental
consequences of that growth factored into a country's conventional GDP. Green GDP monetizes
the loss of biodiversity, and accounts for costs caused by climate change. Further, the process of
environment accounting involves three steps physical, accounting, and monetary valuation. The
studies focusing on green GDP is still lacking due to inadequate data on several variables.
Therefore, the main objective of this study is to analyse the Green GDP and its determining
factors. We also look into the causal relationship between GDP, consumption of natural resources
(decrease of natural resources stocks) and environmental degradation (environmental harm due
to economic activity). The environmental protection expenditures are considered in line with the
environmentally adjusted net domestic product. The expected outcome of this study is to arrive at
an approximate Green GDP figures.

Keywords: GDP, Green GDP, India, Environment, Natural Resources, Economic Activity

Table of Content

Abstract
Chapter 1: Introduction
• Background
• Literature Review
• Research Gap
• Objective of the study
• Conceptualization of the study
• Research Methodology
 • Limitations
Chapter 2: Review of Literature
Chapter 3: Analysis and Interpretation
Chapter 4: Conclusion and suggestions

Chapter 1

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, from the sustainability perspective,
GDP ignores externalities specially the environmental externalities. In fact, just measures what is
produced are therefore ignoring what is needed to generate that production it also does not
measure the environmental cost.

The idea of Green GDP arose in the early 1990’s in response to the shortcomings of the
traditional GDP to account for the economic costs of natural resources depletion and pollution
damages, which in turn would influence human welfare main purpose of Green GDP accounting
are to provide a correct measure of welfare and to examine sustainable development of economy.
In the recent years, Green GDP accounting has become a significant basis to develop and
implement the sustainable development strategies in the world. One of the most remarkable
attempts to assess the Green GDP was China. They included the cost of water air and solid waste
pollution and different natural resources depletion as well as social and public health cost in their
assessment.

The process of environmental accounting involves three major steps those are physical
accounting, monetary value, and integration with national income and wealth accounts. The
development of production outputs created demand for increased consumption of resources and
vitality and thus increased the anthropogenic pressure on the natural environment,
simultaneously, it could require more financial resources for environmental protection actions
while increasing equity of resource allocation could further amend the environmental condition.
China was probably the only country as for now, which has published official reports on ‘Green
GDP’ on the national level. The ‘ Green GDP’ accounting research project was launched in
China in March 2004. China green national accounting study report was released in September
2006 jointly by the state environmental protection administration of China (SEPA) and the
National Bureau of the statistic of China (NBS). The report was first of its kind of
environmentally adjusted GDP accounting in China. According to the report in 2004 economic
losses due to certain types of environmental pollution caused negative economic losses due to
certain types of environmental pollution caused negative economic effect equal to 3.05% of
country’s GDP.

Economic losses due to pollution of water resources, atmospheric air, solid waste placement and
sporadic incidents of economic activities that lead to environmental pollution were considered in
the reported soil and ground water containing and depletion of natural resources stocks were not
taken into account due to lack of data and lack of sufficiently developed methodology
approaches. The ‘Green GDP’ for China in 2009 was 4% lower than traditional estimated GDP.
The environmental cost of economic growth has grown both in absolute and relative terms in
comparison to the year 2004.

India is currently also in the process of developing a ‘GREEN’ gross domestic product
index.acknowledging that “Green GDP” has its limitation as an indicator of sustainability,
Environment minister Jairam Ramesh in the Government of India, assumes it as a useful tool for
mainstreaming more sustainable environmental policy: we do not need precise numbers. Even a
broad- brush estimate will be a huge step forward to give practical meaning to the concept of “
sustainable development” which all of us swear by in theory ( Ramesh,2014).

It is possible for scientists to estimate green GDP. An exercise has started under the country's
chief statistician Pronab Sen and by 2015, Indias GDP numbers would be adjusted with
economic costs of environmental degradation, Ramesh said at the release of Green India, 2047, a
report by The Energy and Resources Institute.

1.2. Literature Review

Modelling and Forecasting the Malaysian GDP and GREEN GDP (A S Abdul- Rahim and
A W Noraida): Green GDP as a measure of what is valuable about nature excluding goods and
services that are already captured in GDP, the objective of the study was to establish a causal
relationship between Green GDP calculations, CO2 emission, trade openness and urbanization in
Malaysia, the study was focused on the environmental deterioration and natural resources
depletion contributed from co2 and another objective was to forecast the green GDP and
traditional in order to examine the relationship and the impact of the variable. The objective of
this study is to estimate and forecast the GDP and green GDP models by using Autoregressive
distributed lag model (ARDL), data used were annual time series from 1980 to 2010 based on
the forecasted result, Malaysia takes more than 30 years for green GDP to overtake the
traditional GDP.

Green GDP as an indicator of the environmental cost of economic growth in Ukraine

(Oksana Veklych): The study is to present the calculation of environmentally adjusted macro
economics indicators for Ukraine and analyse the environmental cost of economic growth of
Ukraine. The green GDP concept and methodological approaches for adjusting gross domestic
product to account for natural resource depletion and environmental degradation paper also
present the results of calculation of environmentally adjusted net domestic product and “Green
GDP” for Ukraine for the year 2001-2010, Hartwick’s rule approach for environmental adjusted
of macroeconomics indicators and explore some examples of “green GDP”and the
methodological algorithm used for calculation of environmental adjusted macro economics
indicators of Ukraine.

Green GDP and Sustainable development in Malaysia ( Negin vaghefi, Chamhuri siwar and
Sarah Aziz Abdul Ghani Aziz) – 2015: This paper aims to estimate the Green GDP metric for
assessing the sustainable growth path of Malaysia from 1987 to 2011. In the recent years, green
GDP accounting has become the significant basis to develop and implement the sustainable
development strategies in the world. They included the cost of water air and solid waste pollution
and different natural resources depletion as well as social and public health cost based on data
availability considered one or two environmental adjustments for their green GDP accounting,
the most common approach to measure the Green GDP is green gdp= GDP-natural resources
depletion – pollution damage.

1.3 Research Gap:

There are no metrics to distinguish sounds and unsound environmental performance by India’s
State governments. Sustainable development at a State level remains un-measurable, and thus
un-doable. The Central Statistical Organization (CSO) in India is working on a methodology to
systematically incorporate natural resources into national accounts in different states for land,
water, air, & sub-soil assets. However, the CSO approach develops accounts for some states &
for some sectors, and their studies are still in progress.

1.4 Objectives of the study:

This study focus on the two objective mainly.

• To forecast the Green GDP and comparing with Traditional GDP.

• To study the causal relationship between CNR, ED, EPE and their effect on GGDP.

1.5 Conceptualization of the study:

The Green GDP is a measure of what is valuable about nature excluding goods and services that
are already captured in GDP.It can be formulated as,

“Green GDP = GDP-CNR-ED-EPE”

Where,

Green GDP – Environmental Adjusted Gross Domestic Product,

GDP – Gross Domestic Product

CNR- Consumption of Natural Resource (decrease of natural resources stocks)

ED- Environmental Degradation (environmental harm due to economic activity)

EPE- Environmental Protection Expenditures

It should be noted, that in the similar way the environmentally adjusted net domestic product
could be calculated by deducting fixed capital consumption, which is the standard procedure for
the system of national accounts. Taking into account the fact that after decades of research
developing of statistically accurate estimate of “Green GDP” is still challenging, some countries
like Norway and Germany resisted official use of “Green GDP” concept (Rauch et al., 2010).
There is an opinion, that it is not correct for the statistical accountants to take controversial
decisions about the value of environmental assets and to incorporate such decisions, and to some
extent conceal them, in apparently neutral information about the trend in an environmentally
adjusted GDP. Such information should instead be presented by way of analyses whose
assumptions and suppositions are clearly presented and discussed (Alfsen et al., 2007).However
India is one among the country trying to introduce “Green GDP”into national stastical
accounting. India as well plans to introduce a system of green national accounting till 2015.

Acknowledging that “Green GDP” has its limitations as an indicator of sustainability, Jairam
Ramesh, Minister of Environment and Forests in the Government of India, assumes it as a useful
tool for mainstreaming more sustainable environmental policy: “We do not need precise
numbers. Even a broad-brush estimate will be a huge step forward to give practical meaning to
the concept of “sustainable development” which all of us swear by in theory” Therefore, current
development path of India’s economy could hardly be called sustainable as economic growth is
accompanied by inefficient consumption of resources, depletion of natural capital and
environmental pollution. Thus, an integrated environmental economic information and
management system is highly important for India for proper analysis of natural capital role in
national economy development.

1.6 Research Methodology

In order to conduct the study we are relied on deductive method to arrive at logical reasoning.
Following the general procedure described in Section 1 and using available statistical data we
have calculated the environmentally adjusted macroeconomic indicators for India. Thus, the first
approach of “Green GDP” and environmentally adjusted NDP calculation methodology foresees
the estimation of the value of natural capital reduction. Given the limited sources of statistical
data and taking into account the degree of importance of various natural resources in the
economy of India, the consumption of natural capital was estimated based on the economic data
of mining industry, which includes the following economic activities: net forest depletion,
emission of co2(carbon di oxide); environmental protection; energy depletion, Expenditure on
forest. The first model referred to the green Gross Domestic Product (GGDP) as dependent
variable and the other model has traditional Gross Domestic Product (GDP) as the dependent
variable.

The present study is a quantitative research and based on secondary data. The data is collected
from World Bank and Indian statistics’ organisation for the period of 1994-2014. The tests
applied for this study to analyse the objective are Unit root test (Augmented Dickey-Fuller test),
VAR Lag Order Selection Criteria method, Breusch-Godfrey Serial Correlation LM Test,
Heteroskedasticity Test: White and The Engle-Granger Two-Step Modelling Method (EGM).

Method 1:

GGDP= a+b1x1+b2x2+b3x3

Where model variables are:

X1 is for the carbon di oxide (co2)

X2 is for the cost occurred by engery depletion

X3 is for the cost occurred mineral depletion

X4is for the cost occurred by net forest depletion

X5 is the amount spent on environmental protection.

X1 is for carbon dioxide emissions (CO2) in metric tons per capita, X 2 cost occured from the
energy depletion as a portion of GDP, X3 cost occurred by the minearals depletion in terms of %
to the GDP, X4 is for the cost occurred by the net forest depletion % to the GDP and X 5 is the
amount spent on environmental protection. The computation for green GDP (GGDP) for this
research study was derived based on the methodological framework suggested by Liu and Guo
(2005) that focused on the environmental aspect of sustainable development.

The computation for green GDP (GGDP) for this research study was derived based on the
methodological frame work that focused on the environmental aspect of sustainable
development.

1.7 Limitations of the study:

There are very few studies conducted on green GDP, moreover most of the countries are not
concentrating on green GDP. The present methodology is applied in other very few countries, but
when it comes to India it may differ because of the accessibility of variables are differ from one
country to another. Only China has applied green GDP from 2004-05. Only available information
is used as variable for the study, which is derived from the website of world bank. For the
calculation part the study, proxy variables are used.

Chapter: 2

Review of Literature

The studies on Green Gross Domestic Product are very minimal. China has only one country
which started taking into account of Green GDP. The experience of the countries were studied by
several researchers for the purpose of future growth of the economy.

Veklych O. and Shlapak M. (2003), explains the Green GDP in the article “Green GDP: An
Indicator of Environmental Cost of Economic Growth in Ukraine”. The article gives the after
effects of the ecological change of the conventional macroeconomic pointers for Ukraine
considering consumption of common capital, natural corruption because of climatic
contamination and administrative uses on natural insurance. This paper estimates ecologically
balanced total national output and earth balanced net household item for Ukraine for the period
2001-2010. The results demonstrated that the thought of consumption of natural resources will
lead to the permanent reduction of the NDP of Ukraine during the period of 2001-2010.

Hamilton K and Lutz E (1996), explains green national accounts in article “Green National
Accounts: Policy Uses and Empirical Experience” and focused on the policy uses of resources
and experience with the resources, and have explained the environmental accounts with the
perceptive of different countries which includes, Australia, Canada, Costa Rica, Finland, France,
Germany, Indonesia, India, Japan, Mexico, Netherlands, New Zealand, Norway, Philippines,
Sweden, Thailand, United Kingdom, United States America, etc. And the study revealed that the
growth and adoption of environment accounting is different from different countries and there
will be no uniform procedure for across the countries. Many developed countries rigid models
that allow joining of resources and natural data into large scale financial matters investigation.
 Chapter 3

Analysis and Interpretation

Table 3.1 Data for the study for the time series of 1994-2014 (in billions)

Net CO2
Energy Mineral forest Expenditure emissions
depletion depletion depletion on forest (in (metric
(in (in (in Billion) tons per GDP(in GGDP(in
Year Billion) Billion) Billion) capita) Billion) Billion)
13478.8
1990 162.30 18.28 299.81 133.10 0.71 9 12864.68
13671.7
1991 149.58 22.05 359.81 134.95 0.74 1 13004.58
14405.0
1992 122.09 19.43 370.29 142.27 0.77 3 13750.18
15223.4
1993 106.00 17.49 398.42 150.61 0.78 3 14550.12
16196.9
1994 118.96 13.88 307.13 160.33 0.81 4 15595.84
17377.4
1995 160.55 14.73 358.30 172.01 0.84 0 16670.97
18763.1
1996 187.14 17.27 328.92 185.94 0.90 9 18043.02
19570.3
1997 174.44 18.02 310.75 194.32 0.92 1 18871.85
20878.2
1998 107.21 36.89 317.28 207.31 0.92 7 20208.66
22549.4
1999 137.76 29.33 363.96 223.86 0.96 2 21793.56
23484.8
2000 277.59 36.74 333.60 232.47 0.98 1 22603.43
2001 272.81 35.78 341.17 245.36 0.97 24749.6 23853.53
 2
25709.3
2002 228.57 36.92 406.39 255.20 0.97 5 24781.31
27757.4
2003 291.58 42.39 402.36 275.51 0.99 9 26744.66
29714.6
2004 442.47 59.76 309.17 294.91 1.02 4 28607.30
32530.7
2005 502.33 154.28 292.39 322.82 1.07 3 31257.85
35643.6
2006 579.94 231.72 434.89 353.48 1.12 4 34042.49
38966.3
2007 576.21 446.90 502.78 387.95 1.19 6 37051.33
41586.7
2008 1064.44 605.14 529.56 413.33 1.31 6 38972.98
45160.7
2009 537.02 282.46 496.59 448.83 1.43 1 43394.38
49185.3
2010 723.80 466.48 781.60 486.39 1.40 3 46725.66
52475.3
2011 941.67 419.87 790.02 520.12 1.48 0 49802.15
56255.0
2012 849.64 240.18 743.08 553.84 1.60 4 53866.69
59912.3
2013 796.72 273.64 708.86 587.57 1.59 3 57543.94
63569.6
2014 634.22 188.41 1006.77 621.30 1.58 3 61117.33

Figure 3.1 Chart of The data

Table: 3.2 GGDP Percentage to GDP

 Expenditure
Energy Mineral Net forest on forest CO2 Total
Year depletion depletion depletion Emissions Percentage

1990 1.20 0.14 2.22 0.99 0.04 4.59

1991 1.09 0.17 2.63 0.99 0.04 4.92
1992 0.85 0.14 2.57 0.99 0.04 4.59
1993 0.70 0.12 2.62 0.99 0.04 4.46
1994 0.73 0.09 1.90 0.99 0.04 3.75
1995 0.92 0.09 2.06 0.99 0.04 4.11
1996 1.00 0.10 1.75 0.99 0.05 3.88
1997 0.89 0.10 1.59 0.99 0.05 3.61
1998 0.51 0.18 1.52 0.99 0.05 3.25
1999 0.61 0.13 1.61 0.99 0.05 3.40
2000 1.18 0.16 1.42 0.99 0.05 3.80
2001 1.10 0.15 1.38 0.99 0.05 3.67
2002 0.89 0.15 1.58 0.99 0.05 3.66
2003 1.05 0.16 1.45 0.99 0.05 3.70
2004 1.49 0.21 1.04 0.99 0.05 3.78
2005 1.54 0.49 0.90 0.99 0.05 3.98
2006 1.63 0.68 1.22 0.99 0.06 4.58
2007 1.48 1.21 1.29 1.00 0.06 5.03
2008 2.56 1.55 1.27 0.99 0.07 6.44
2009 1.19 0.65 1.10 0.99 0.07 4.00
2010 1.47 1.00 1.59 0.99 0.07 5.12
2011 1.79 0.84 1.51 0.99 0.07 5.21
2012 1.51 0.45 1.32 0.98 0.08 4.34
2013 1.33 0.48 1.18 0.98 0.08 4.05
2014 1.00 0.31 1.58 0.98 0.08 3.95

Figure 3.2 GGDP Percentage to GDP

Table 4.3 Testing Unit-Root Using Augmented Dickey-Fuller Test

Variables Level First Difference Decision

Intercep Trend None Intercept Trend and None about
t and Intercept Order of
Intercept Integration
LN(CO2 ) -0.05 -2.84 -0.75 -3.66 -3.25 -0.85 I(1)
(0.94) (0.20) (0.37) (0.01)*** (0.10)* (0.33)
LN(Energy_Depl) -0.93 -3.09 0.74 -4.78 -4.59 -5.17 I(1)
(0.75) (0.13) (0.86) (0.001)*** (0.007)** (0.00)***
*
LN(Mineral_Depl) -0.85 -1.46 0.88 -4.34 -4.23 -4.23 I(1)
(0.78) (0.81) (0.89) (0.002)*** (0.01)*** (0.00)***
LN(Forest_Depl) -0.26 -1.52 1.07 -1.33 -5.95 -0.89 I(1)
(0.91) (0.78) (0.91) (0.59) (0.00)*** (0.31)
LN(exp_forest) 1.80 -2.64 18.08 -4.23 -3.93 -0.21 I(1)
(0.99) (0.26) (0.99) (0.00)*** (0.02)** (0.59)
LN(GGDP) 1.98 -2.46 16.71 -5.19 -5.28 -0.17 I(1)
(0.99) (0.33) (1.00) (0.00)*** (0.00)*** (0.61)

VAR Lag Order Selection Criteria

d(ggdp) c d(energy_depletion__in_bil) d(mineral_depletion__in_bi) d(net_forest_depletion__in)

d(co2_emissions__metric_to) d(expenditure_on_forest__i)

 Lag LogL LR FPE AIC SC HQ

0  200.8534 NA   8.17e-16 -17.71395  -17.41639* -17.64385

1  245.3028   60.61281*  4.35e-16 -18.48208 -16.39918 -17.99141
2  292.7017  38.78091   3.87e-16*  -19.51834* -15.65010  -18.60710*

 * indicates lag order selected by the criterion

 LR: sequential modified LR test statistic (each test at 5% level)
 FPE: Final prediction error
 AIC: Akaike information criterion
 SC: Schwarz information criterion
 HQ: Hannan-Quinn information criterion

Note: Lag 2 is selected.

Hypothesis of the study:

The study developed two hypothesis to analyse the auto-correlation and heteroskedasticity
problem of the data. They are,

H1= There is no auto-correlation

H2= There is no heteroskedasticity problem

Breusch-Godfrey Serial Correlation LM Test:

F-statistic 0.240654     Prob. F(1,17) 0.6300

Obs*R-squared 0.335004     Prob. Chi-Square(1)0.5627

H1= There is no auto-correlation

Breusch-Godfrey Serial Correlation LM Test used to test hypothesis of auto-correlation. And the
test reveals that there is no auto correlation, so here we accept null hypothesis hence the
probability of this test is more than 0.05 (i.e. 0.6300).

Heteroskedasticity Test: White

F-statistic 2.497114     Prob. F(20,3) 0.2458

Obs*R-squared 22.64003    Prob. Chi-Square(20) 0.3068
Scaled explained SS 7.759743    Prob. Chi-Square(20) 0.9933
H2= There is no heteroskedasticity problem

Heteroskedasticity Test: White is used to test hypothesis of heteroskedasticity problem of the

data, and the test that there is no heteroskedasticity problem. So here we accept null hypothesis
hence the probability is more than 0.05 (i.e. 0.2458).

The Engle-Granger Two-Step Modelling Method (EGM)

Among a number of alternative methods, the EGM, originally suggested by Engle and
Granger (1987), has received a great deal of attention in recent years. One of its benefits is
that the long-run equilibrium relationship (i.e. the co-integrating regression) can be modelled
by a straightforward regression involving the levels of the variables.

FIRST STEP, all dynamics are ignored and the co-integrating regression is estimated by the
OLS. Let us now write the long-run (co-integrating) regression:
Ct = bYt + ut (1)
Where both Ct and Yt are non-stationary variables and integrated of order one (i.e. C t ~ I(1)
and Yt ~I(1)). In order for Ct and Yt to be co-integrated, the necessary condition is that the
estimated residuals from Eq. (1) should be stationary (i.e. u t ~ I(0)). Since the variables in Eq.
(1) are non-stationary (which causes the famous ‘spurious regression problem’!), one should
place little faith in the standard error estimates (and thus t-statistics) in the co-integrating
regression. Therefore, little importance can be attributed to the standard statistical tests on R 2
or t-statistics of the estimated coefficients unless a correction procedure is employed to
eliminate the bias. Different types of corrections are reported by Engle and Yoo (1991), Park
and Phillips (1988), Phillips and Hansen (1990) and West (1988).

SECOND STEP involves estimating a short-run model with an error-correction mechanism

(ECM) by the OLS. According to the Granger Representation Theorem (GRT), if a number of
variables, such as Ct and Yt, are co-integrated, then there will exist an ECM relating these
variables and vice versa. Conditional on finding co-integration between Ct and Yt, the estimate
of b from the first step long-run regression (1) may then be imposed on the following sort-run
model with the remaining parameters being consistently estimated by the OLS. In other
words, we retrieve the estimate of b from Eq. (1), and insert it in place of b in the error-
correction term (Ct-bYt) in the following short-run equation:
 DCt = a1DYt + a2(C-bY)t-1 + et (2)
Where D represents first-differences and et is the error term. Alternatively, in practice, since
Ct-bYt = ut, one can substitute the estimated residuals from Eq. (1) in place of the error-
correction term, as the two will be identical. Note that the estimated coefficient a2 in the
short-run Eq. (2) should have a negative sign and be statistically significant. Note also that, to
avoid an explosive process, the coefficient should take a value between -1 and 0. According to
the GRT, negative and statistically significant a2 is a necessary condition for the variables in
hand to be co-integrated. In practice, this is regarded as a convincing evidence and
confirmation for the existence of co-integration found in the first step. It is also important to
note that, in the second step of the EGM, there is no danger of estimating a spurious
regression because of the stationary of the variables ensured. Combinations of the two steps
then provides a model incorporating both the static long-run and the dynamic short-run
components.

To summarize the EGM, estimate Eq. (1) by the OLS and test for stationary of the error terms
in the first step. In the second step, if the null hypothesis of no integration is rejected, estimate
Eq. (2) by replacing b by its previously computed OLS estimate b in the error-correction term
(Ct-bYt) or simply substituting the estimated residuals (u t) in place of (Ct-bYt). In practice,
most practitioners seem to prefer the latter one due to its simplicity. In the second step, all
variables and the residuals are supposed to be stationary provided the model properly
specified.

Dependent Variable: D(GGDP)

Method: Least Squares
Date: 02/18/18 Time: 20:17
Sample (adjusted): 1991 2014
Included observations: 24 after adjustments

Variable Coefficient Std. Error t-Statistic Prob.  

C -0.001304 0.002808 -0.464321 0.6480

D(ENERGY_DEPLETION__IN_BIL) -0.012418 0.002661 -4.667273 0.0002
D(MINERAL_DEPLETION__IN_BI) -0.009980 0.002294 -4.350605 0.0004
D(NET_FOREST_DEPLETION__IN) -0.016824 0.004621 -3.640653 0.0019
D(CO2_EMISSIONS__METRIC_TO) -0.025240 0.029048 -0.868916 0.0063
D(EXPENDITURE_ON_FOREST__I)1.084188 0.046928 23.10317 0.0000

R-squared 0.973380     Mean dependent var 0.064930

Adjusted R-squared 0.965985     S.D. dependent var 0.020093
S.E. of regression 0.003706     Akaike info criterion -8.145491
Sum squared resid 0.000247     Schwarz criterion -7.850977
Log likelihood 103.7459     Hannan-Quinn criter. -8.067356
F-statistic 131.6358     Durbin-Watson stat 2.079208
Prob(F-statistic) 0.000000

GGDP=-0.012ENE - 0.01MIN - 0.03CO2 + 1.08EXP

Step 1 of the ECM for this study explains that there is a long term relationship for the Green
GDP where the probability of the all the variables (i.e. energy depletion, mineral depletion, net
forest depletion, CO2 emission matrix in tons and expenditure on forest) is less than 0.05.

Null Hypothesis: RESID01 has a unit root

Exogenous: Constant
Lag Length: 0 (Automatic - based on SIC, max lag=5)

t-Statistic   Prob.*

Augmented Dickey-Fuller test statistic -5.108279  0.0004

Test critical values: 1% level -3.752946
5% level -2.998064
10% level -2.638752

*MacKinnon (1996) one-sided p-values.

Dependent Variable: D(GGDP)
Method: Least Squares
Date: 02/18/18 Time: 21:03
Sample (adjusted): 1992 2014
Included observations: 23 after adjustments

Variable Coefficient Std. Error t-Statistic Prob.  

C -0.004674 0.004247 -1.100749 0.2873

D(CO2_EMISSIONS__METRIC_TO) -0.053954 0.039072 -1.380892 0.1863
D(ENERGY_DEPLETION__IN_BIL) -0.011524 0.002836 -4.062720 0.0009
D(EXPENDITURE_ON_FOREST__I) 1.149527 0.076537 15.01930 0.0000
D(MINERAL_DEPLETION__IN_BI) -0.011268 0.002640 -4.267354 0.0006
D(NET_FOREST_DEPLETION__IN) -0.017922 0.005272 -3.399442 0.0037
RESID01(-1) -0.207243 0.295072 -0.702347 0.4926

R-squared 0.963255     Mean dependent var 0.067282

Adjusted R-squared 0.949476     S.D. dependent var 0.016829
S.E. of regression 0.003783     Akaike info criterion -8.070970
Sum squared resid 0.000229     Schwarz criterion -7.725385
Log likelihood 99.81616     Hannan-Quinn criter. -7.984057
F-statistic 69.90563     Durbin-Watson stat 2.032301
Prob(F-statistic) 0.000000

Source: E-views Version 8

Step 2 of the ECM for this study explains that there is a no short term relationship for the Green
GDP where the probability of the all the variables (i.e. energy depletion, mineral depletion, net
forest depletion, CO2 emission matrix in tons and expenditure on forest) is less than 0.05. Hence
the short term relationship has no significant impact on Green GDP.
 Chapter 4
Conclusion and Suggestions:
The present study attempts to analyse and forecast Green GDP and compared the green GDP
growth with the traditional GDP and to study the short term and long term relationships between
Consumption Natural Resources (CNR), Environmental Degradation (ED), Environmental
Protection Expenditure (EPE) and their effect on Green GDP. And the study reveals that the gap
between Green GDP and traditional GDP is increasing year by year. And Green GDP has no
short term relationship with CNR, ED and EPE and has a long term relationship with it. The
study suggests that the proper data must be maintained for the Green GDP which provides
transparency in the data for users. The government of India should concentrate on Green GDP
hence only GDP may not be considered as growth of the country because the countries climatic
situations of the country. And government should provide the information and should keep the
transparency of the information regarding GDP as well as Green GDP.