User:Mannerheimren/Green gross domestic product

Formula
The environmental and related social costs to develop the economy are taken into consideration when calculating the green GDP, which can be expressed as:

Green GDP = GDP – Environmental Costs – Social Costs

where the environmental cost typically qualifies :


 * Depletion value of natural resources, e.g. oil, coal, natural gas, wood and metals;
 * Degradation cost of ecological environment, e.g. underground water pollution, topsoil erosion and extinction of wildlife;
 * Restoration cost of natural resources, e.g. waste recycling, wetland restoration and afforestation;

and the social costs typically include:


 * Poverty caused by degradation of environment, e.g. shortage of natural resources after exploitation;
 * Extra healthcare expenditure coming with degradation of ecological environment;

Above calculations can also be applied to net domestic product (NDP), which deducts the depreciation of produced capital from GDP.

Valuation Methodology
It should be noticed that since the indicators of environment are generally expressed in national accounts, the conversion of the resource activity into a monetary value is necessary. A common procedure to evaluate proposed by United Nations in its System of Integrated Environmental and Economic Accounting handbook applies following steps : If current values of resources are non-existent or non-explicit, the next option is to value the resource based upon the present value of expected net returns from future commercial use. That is, the sum of present values for future expected income minus expected future expenditures (the cash flow CF), for each future time point (t) is termed the net present value(NPV).

Green GDP in China
As one of the fastest-growing countries in the world, China noticed the Green GDP as early as 1997. City authorities had conducted a survey based on Beijing’s GDP; the result showed that around 75% of the total GDP was constituted by Green GDP, and the rest of the 25% flowed away as pollution. Other cities also started the same calculation; for example, green GDP in Yaan reported 80% of the total GDP, while Datong reported only 60%.

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. China’s State Environmental Protection Agency(SEPA), together with the National Bureau of Statistics(NBS), the Chinese Academy for Environmental Planning(CAEP), and units from Renmin University, investigated national-wide of the Green GDP. The major environmental impacts in China were from air, water, and solid waste pollution. 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.

As an experiment in national accounting, the Green GDP effort collapsed in failure in 2007, when it became clear that the adjustment for environmental damage had reduced the growth rate to politically unacceptable levels, nearly zero in some provinces. In the face of mounting evidence that environmental damage and resource depletion was far more costly than anticipated, the government withdrew its support for the Green GDP methodology and suppressed the 2005 report, which had been due out in March, 2007. The failure of Green GDP in China is connected to the incongruity between central authorities and local government. Beijing was aware of the environmental costs of fast-growing GDP, and encouraged for cleaner or more efficient production. However, many local officials had direct connections with local businesses, and they focused more on economic growth than damage by pollution. Another reason for the failure was due to the cost of data collection. It took both money and time to collect data and set them into databases. The Chinese government had a hard time collecting comprehensive environmental cost data. Only pollution and emission costs (air emissions, surface water pollution discards to land, and environmental accidents) were counted in, while social costs and natural resources depletion were missing.

Lang and Li (2009) use their paper “ China’s “Green GDP” Experiment and the Struggle for Ecological Modernisation” to conclude that the attempt to implement Green GDP was a signal that the Chinese government was interested in environmental impacts. Unfortunately, the fast-growing economy was more prioritized than environmental accounting, and the failure of the experiment was inevitable.

Independent estimates of the cost to China of environmental degradation and resource depletion have for the last decade ranged from 8 to 12 percentage points of GDP growth. These estimates support the idea that, by this measure at least, the growth of the Chinese economy is close to zero.