What Is Green GDP? Understanding Sustainable Economic Accounting

Green GDP Concept

Green GDP is a national economic accounting concept that modifies the conventional GDP, which measures the final output of all resident units at market prices, by accounting for the depletion of natural capital and environmental costs.

Originating from Hicks’s 1946 idea of sustainable income—where development is sustainable only if the total capital stock does not decline—scholars introduced the term “green GDP.” The United Nations Statistics Division formally presented the concept in its 1993 System of Integrated Environmental and Economic Accounting (SEEA) handbook.

In theory, green GDP relates to Net Domestic Product (NDP) rather than gross GDP, but for practical purposes many studies align green GDP with the total GDP figure, using a satellite account for resources and environment to adjust the conventional GDP.

The basic accounting approach separates resources and the environment into a satellite account, then deducts their costs from the standard GDP to obtain green GDP.

Accounting Methods

Two main methods are used to measure green GDP:

Method 1: Incorporate natural resource and environmental cost information into the traditional national accounts, adjusting GDP accordingly. This follows the UN’s SEEA framework, which establishes satellite accounts for natural resources, resource‑and‑pollution flows, and environmental expenses.

Method 2: Apply input‑output analysis to capture the environmental impacts of production. This method treats environmental degradation as a negative effect and includes the resource and pollution costs of environmental protection activities as additional outputs.

The practical significance of green GDP includes guiding sustainable policy, identifying high‑resource‑consumption and high‑pollution sectors or regions, informing regional development and industrial restructuring, and supporting “people‑oriented” environmental protection policies.

Reference: https://baike.baidu.com/item/绿色GDP/761585