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PRI's Environmental News Magazine

Grasping the Goal of a Green GDP

Air Date: Week of June 10, 1994

After much planning, the US Commerce Department has taken the first step towards measuring the Gross Domestic Product with an environmental perspective. It's issued a valuation of non-renewable resources such as coal, petroleum and minerals. But greening the GDP has a long way to go — economists still can't seem to agree on the purpose or relevance of the project, let alone how it should be measured. Dale Willman reports.

Transcript

CURWOOD: The economic health of nations is usually measured by its gross national or domestic product: the total value of goods and services produced. But in recent years, some have argued that GNP and GDP give us a skewed view of economic growth and health, because they don't include the value of environmental resources, or the cost of their depletion or degradation. Now the Clinton Administration is taking the first steps in making the GDP greener. The Commerce Department's Bureau of Economic Analysis has released its first annual accounting of the value of nonrenewable resources. Things like coal, petroleum, and minerals. The figures will be used as a benchmark to help measure how well we're conserving US national wealth. And they're part of a 3-part process which will eventually measure the value of renewable resources, such as timber and fish. And of intangibles like clean air and clean water. Dale Willman reports from Washington.

WILLMAN: The first stage's figures were contained in what the Department calls its Integrated Economic and Environmental Satellite Accounts. The figures hover alongside the GDP, but are not actually factored into the quarterly estimate. Dr. Carol Carson is the BEA director. She says the new data confirm that mineral resources are an important if small part of the nation's productivity.

CARSON: It shows, for example, that mineral resources, if added to business equipment structures and inventories, would amount to an additional 3 to 7%.

WILLMAN: That's 3 to 7% added to the nation's private capital stock, which would increase the GDP only slightly. In the long term it's hoped that this whole process will begin to establish a baseline of information. This baseline can then be used in the future to help score our success or failure at environmental stewardship. For instance, if the figures for 2010 are drastically below those established now, it should be a warning signal of environmental degradation. But many economists say that beyond that narrow scope, the usefulness of the figures plummets dramatically.

DARMSTADTER: I think you'll find very little implication or very little practical use that will be made of this in the United States.

WILLMAN: Joel Darmstadter is a Senior Fellow at Resources for the Future, a nonprofit think tank in Washington, DC. The US has such a diverse economy, he says, that including the value and depletion of environmental resources in the nation's gross domestic product would still have just a slight effect on the overall numbers. Those really benefiting from such accounting practices, says Darmstadter, will be the lesser developed countries.

DARMSTADTER: For a country such as Costa Rica, which is disproportionately dependent on the production and export of natural resources in its gross domestic product, why an adjustment may be a much larger proportionate, have a much larger proportionate effect on its gross domestic product than in the United States: perhaps 10 or 15 or 20%.

WILLMAN: The US and Costa Rica are just 2 of a growing number of nations to begin collecting this information. So most economists seem to agree that the collection of these environmental figures, along with the country's GDP is, overall, a good thing. But the disagreement comes when you ask how those figures should be calculated. Salah El Serafy, a consultant with the World Bank, says that looking at the commodity price of these resources allows the numbers to be affected by the radical price swings often found in those markets.

SERAFY: It makes you think you are rich or you are poor, and it introduces volatility, which national income accounting should not be dealing with.

WILLMAN: Instead, says Serafy, he would like to see a system that just looks at the yearly change in the supply of the resources, and not the complete stocks. this smaller value, he says, would reduce the potential volatility of the numbers and make them more useful. But Carol Carson of the Commerce Department says they don't expect these figures to be the ultimate answer for everyone, and she says she welcomes input from others. Meanwhile, if more funding is made available, Carson is ready to more on to the second of the 3 stages, coming up with a similar set of measurements for renewable resources. The third step involves placing a value on intangibles. Many economists, though, say that's next to impossible. Even if a value can be agreed upon for clean air, how do you price a sunset over Yosemite National Park. For Living on Earth, this is Dale Willman in Washington.

 

 

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