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'Green GDP' Reflects Reality

To take into account the scarcity of natural resources in economic development, a new concept, "green GDP," should be introduced while compiling statistics.

The gross domestic product is an important indicator of a country's macroeconomic scale during a certain period. It has been a popular system to ascertain the value of a nation's economy. The GDP system, which basically took shape in 1953, is the result of painstaking efforts by economists and statisticians over the past 300 years.

Under the sponsorship of the United Nations, the system was given two important improvements in 1968 and 1993 respectively to solve some technical flaws. Today, it has evolved into a unified standard to assess a country's economic development level.

The process of economic growth, however, is also a process involving the increased consumption of natural resources, environmental pollution and ecological degradation. What the statistics of the GDP show, however, involve only the total economic output without the costs in terms of environment and ecology.

So far there is not a statistical system in the world that gives an accurate and clear assessment of the environmental costs associated with economic activities.

The current GDP statistics system, excluding environmental and ecological factors, cannot paint a comprehensive and real picture of a country's economy. Some figures can even seem ridiculous at times, since environmental pollution and ecological degradation can also lead to increased GDP figures.

Once a flood occurs, for example, a dam should be built, which will boost investment and the income of contractors. GDP figures, consequently, will be increased.

Take another example. Environmental pollution will cause more illness among citizens, meaning losses in a number of areas. However, it also stimulates the development of the medical industry, which will also lead to an increased GDP.

China boasts fast economic growth over the past two decades. But behind the "growth" were enormous environmental costs.

Furthermore, the current GDP statistics cannot reflect the income gap and the unfair distribution of social wealth.

The GDP system, therefore, is plagued by a series of obvious flaws, which despite fierce criticism have failed to be improved.

Since the middle of last century, with the development of the environmental protection movement and the concept of sustainable development coming into being, some economists and statisticians have tried to include environmental factors into the statistics of domestic economic development, which is green GDP.

It is an adjustment of conventional GDP statistics, involving the GDP deducting the environmental costs in the economic activities.

Experts from home and abroad have put great efforts into building a green GDP system. Though great achievements have been achieved, it is far from reaching a consensus. Some countries have introduced green GDP on a trial basis, but a unified statistics mode involving green GDP has not been formed yet.

The implementation of green GDP, firstly, faces some technical difficulties.

The value of products and labour can be decided when they enter the market. Their value is reflected by market prices. But how would the value of environmental factors, which do not come into the market at all, be reflected?

When a forest is damaged, for example, many animals living within it will become extinct. How does one place a value on such a loss?

Experts put forward some modes of estimates.

While we cannot decide on the losses associated with a polluted river, we can calculate the investments needed to treat it.

The environmental costs of a concrete project can also be estimated in market prices. In Yunnan Province, for example, chemical plants and exploitation of farmland have caused serious pollution in Dianchi Lake. If efforts are made to clean the lake, the costs would be 10 times the profits created by the farmers and chemical producers.

Estimated in this way, it should be concluded that the economic activities around the lake have produced great losses, not counting the losses of extinct fish and plants in the lake and the climate change in the nearby area.

These modes of estimates have their own merits and flaws. They are to be further improved in practice.

The introduction of green GDP is also expected to meet an ideological obstacle.

Green GDP means a significant ideological breakthrough and brand new perspective in development, which is based upon the concept of co-ordinated and sustainable development. The criteria to assess a region's development will be changed when the green GDP system is introduced. The system to assess the achievements and work performance of local officials will also be changed.

Pure economic growth used to be the only criterion to value a region's economic performance. The green GDP, however, will give a comprehensive evaluation of economic growth, social progress and environmental protection.

A region's GDP figures will surely be reduced when the environmental costs are deducted, which may be difficult for local officials to accept.

Despite technical and ideological obstacles, the new system of green GDP should still be introduced. Experiments should be started in some areas and in some projects. Otherwise, our country's real development level will not be reflected, and a sustainable and balanced development will not be achieved.

The author is deputy director of the State Environment Protection Administration.

(China Daily April 21, 2004)

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