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The Way to Green GDP

What is Green GDP? Currently, different definitions exist. Basically, it is an adjustment of traditional GDP, deducting resource and environmental costs in economic activities.


Although specialists hold different opinions on just what Green GDP is, they do agree on two things about it, said Ma Zhong, deputy director of the Environment and Natural Resources School of Renmin University of China. First, it provides us with another perspective on GDP, and one that can improve environmental protection and rational resource utilization. Second, sustainable development is the emphasis of Green GDP, and this involves not only our generation, but also all future generations.


The emphasis on natural resources and the environment in Green GDP does not diminish the importance of economic development. What it speaks to is reasonable economic development on the premise of resource and environmental protection, said Ma.


China is gradually developing a Green GDP statistical system with Chinese characteristics. However, there are some obstacles. For instance, how do we judge whether a factory discharges sewage in accordance with the regulation? Can we strictly enforce the regulation when we detect a violator? Issues like these can be resolved with relative ease.


What remains difficult is calculating resource and environmental costs, according to Ma. Ecological or health damage caused by industrial pollution may take years to appear. It is impossible to pinpoint the year in which there are no environmental costs incurred as a result of pollution. There are situations in which an enterprise's pollution does no harm locally, but damages more distant areas. Pollution may be aggravated or ameliorated by natural influences such as wind or rain.


Indeterminate factors such as these make the calculation of Green GDP difficult, if not impossible. Yet we must quantify these factors as accurately as possible to make the Green GDP system work.


There are two preliminary steps that must be taken before accomplishing this, Ma noted.


"We need to define our 'family property': that is, the available pollution capacity in our air and water. As long as discharge of pollutants does not exceed this capacity, there will be no environmental degradation. Once we know this capacity, we can calculate the maximum permissible pollutant discharge, which would serve as the basis for government regulation.


"Then we need to put a price tag on resources and the environment by clarifying the ownership of property rights. For example, after defining property rights to land, forest, or water, it will have a specific value through lease or trade.


"The government may then slice the maximum permissible discharge into a certain number of pieces, that is, rights to discharge pollutants. These rights could be sold, auctioned or otherwise allotted. A market for pollution discharge rights may be established so that these rights could be traded legally. The market, in turn, will determine the price of the environment."


Clarifying ownership of property rights is closely linked to the marketization of the economy. "This means that we could expect our GDP to become greener and greener as improvements to the economic system continue and the resource and environment market are built," he said.


It can be useful to study other countries' experiences in implementing Green GDP programs.


Norway has been calculating the costs of resources and environment since 1978. Resources and environmental pollution included in its calculations are mainly mineral, biological, fluid (water power), land, environmental resources and air pollution, and two water pollutants (nitrogen and phosphorous). A comprehensive statistical system has been established that includes energy, existing fishes and forests, air emissions, wastewater (mainly domestic sewage and polluted water from farming), recycling and environmental expenditure. This lays a solid foundation for a Green GDP statistical system.


Now let's look at a developing country. Mexico began its GDP program in 1990. Its calculation covers all types of land resources, water, air, soil, forests and oil. The indices and data obtained on the amount of these natural resources and changes that take place in them are then transformed into indices in terms of currency.


(China.org.cn by Ni Xiaoqiang, June 1, 2004)

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