A better strategy: using green GDP to measure economic health

Abstract

IntroductionGross Domestic Product (GDP) is the most well-known and widely used measure of a country’s economic health. However, GDP fails to account for the depletion of natural resources and the environmental damage that occurs in the pursuit of economic growth, leading to an incomplete and potentially misleading picture of a nation’s well-being. To address this shortcoming, Green GDP (GGDP) is proposed as a more comprehensive indicator that incorporates environmental factors into the economic assessment. This study builds on extensive literature reviews, internationally accepted GGDP accounting methods, and scholarly research to propose a new GGDP calculation model that better reflects a country’s sustainable development.MethodsThe proposed GGDP model is divided into two main components: natural resource loss and environmental pollution loss. Each component is further broken down into primary factors that are condensed into 13 sub-criteria reflecting a country’s capacity for sustainable development. Principal Component Analysis (PCA) is utilized to identify the most representative factors from these sub-criteria and to analyze the relationships among GGDP, these factors, and global mean temperature. Additionally, the Integrated Environmental Sustainability Index (IESI) is used to develop a global temperature mitigation prediction model, which considers the impacts of epidemics, sea and land temperatures, and variations in climate across different regions.ResultsThe analysis shows a 74% probability that positive GGDP growth correlates with temperature changes over a 50-year period, indicating that economic activities measured by GGDP are linked to climate change. The GGDP model reveals significant differences between global GDP and Green GDP, with the latter growing at a much slower rate. This slower growth of Green GDP is primarily due to the declining share of GDP from natural resource-dependent activities, which has fallen from 90% in the 1970s to 80% in 2020. This trend underscores the increasing gap between traditional economic growth and sustainable development, suggesting that as countries continue to rely on natural resources, their overall ecological efficiency declines, environmental pressures increase, and the potential for long-term sustainable development diminishes.DiscussionThe findings demonstrate that all factors within the GGDP model are proportional to global temperature, underscoring the significant impact that natural resource utilization and pollution emissions have on economic growth and climate change. The study further evaluates global sustainable development by considering both economic and environmental perspectives. Using Brazil as a case study, the model is applied to assess the values of each component within the GGDP framework, providing a comprehensive analysis of the country’s sustainable development challenges and potential solutions. This approach establishes a method for assessing sustainable development that can be adapted for use in other countries, offering a path forward for integrating environmental considerations into economic policies.