Do we need to abandon GDP to meet net zero?

It was a notable second. In September 2019, the then-16-year-old Swedish environment lobbyist Greta Thunberg commanded the notice of the world during a location to the United Nations Climate Action Summit. Reprimanding a fundamental conviction supporting huge wraps of worldwide monetary approach – that the more we produce, the good we are – she said: “We are in the start of a mass eradication, and everything you can discuss is cash and fantasies of everlasting financial development. How could you?”

For the most awesome aspect of a century, following the UN Monetary and Financial Conference at Bretton Woods in the US in 1944, one primary proportion of result – total national output – has been the chief proportion of a country’s financial achievement. From that point onward, modern economies have pursued result, and the resultant movement – quite a bit of it controlled by petroleum products – has left the planet in an environment crisis. Government officials are progressively mindful of the emergency, and as of late have started laying out objectives to bring down discharges.

A few targets, for example, those set in Paris in 2015, plan to totally dispose of or offset ozone harming substance discharges. ‘Net-zero’ targets have been set by states, all things considered, most frequently with an end date of 2050. All over the planet, 13 purviews have placed theirs into law, drove by Sweden, Denmark, France, Hungary, New Zealand and the UK. However, are these endeavors destined assuming that the world neglects to end GDP’s tight grip on standard financial matters?

“The issue with GDP is what it measures and what it neglects to gauge,” says the UK’s first Green Party MP, Caroline Lucas. “It estimates amount yet not quality and expects that monetary development can proceed with ceaselessly, despite the fact that we live on a planet with limited assets. It overlooks esteems like individuals’ wellbeing and prosperity, social union and the strength of the climate,

which for a really long time have been treated as totally extra.” Even more terrible, she says, “Gross domestic product really gauges the obliteration of nature as financial increase”.

Flawed thinking

Using GDP as the basis for economic policy is centred on a fundamentally flawed accounting philosophy, Agarwala says. Because GDP is a measure purely of income, it fails to account for the effect on assets of all kinds – including capital, human infrastructure and social, as well as natural, assets. “A country might cut down a forest because timber was at a premium, but the next year it would have no forest,” he says.

This is a problem felt particularly keenly by developing countries, says Leonardo Garrido, lead economist at The New Climate Economy, a Washington-based project set up to research policies that might both boost the economy and reduce the risks of climate change. “Developing countries rely on primary resources as a means to create value,” says Garrido. “The extent to which they rely on these resources that they then degrade makes it hard to advance.”

Some believe the solution is ‘degrowth’ – if seeking ever-higher GDP leads to destructive consumption, then scaling back consumption will temper climate change, or so the argument goes. Garrido disagrees, pointing to the human gains made during periods of growth. “It is a nice concept,” he says, “but because, in practice, everything is connected, it is hard to think that wellbeing would not suffer.”

Social capital

Agarwala goes a step further, suggesting other measures to value the things GDP misses. He points to the UN’s Inclusive Wealth Index, which measures assets providing human wellbeing, including manufactured, human and natural capital. The Changing Wealth of Nations report by the World Bank does a similar thing, and in 2021 will add a chapter on social capital, comprising measures including trust in institutions, sense of community and neighbourly cooperation. Agarwala says this marks important progress, even if social capital will not be listed in quantitative terms.

In March, the UN adopted its System of Environmental-Economic Accounting framework, which seeks to integrate economic and environmental data and put a value on the benefit that environmental assets bring to humanity. “That is a massive step forward, because now we have a global standard for how natural capital can be accounted for in a consistent way,” Agarwala says.

It will take years, perhaps even decades, for the framework to rival GDP, but that makes it no less exciting, he says. “Once we compile these accounts, economic decisions can be made, based on the full suite of assets that societies have at their disposal,” he says. “And we will be able to track and hold governments to account when they behave unsustainably.”

Alternative approaches

• United Nations ‘Inclusive Wealth Index’

A biennial report measuring the ‘social value’ of a country’s natural, human and produced capital assets. It aims to represent the trade-offs between different conservation and development policies. It so far suggests that the decline of natural capital since 1990 has been more than offset by growth in human and physical capital.

• World Bank ‘The Changing Wealth of Nations’

A 2018 report measuring 141 countries’ produced, natural and human capital, as well as their net foreign assets. It was designed to help governments “plan for a more sustainable future”. But it was always aimed at being used alongside GDP and encouraging economic growth.

• System of Environmental-Economic Accounting

Adopted by the UN Statistical Commission in March, the SEEA is aimed at drawing attention to the impact of economic activity on the environment. It is built on five ‘core accounts’, which measure the area, condition, contribution, value and stocks of ecosystems. At least 34 countries are compiling these statistics on an experimental basis.

• Gross National Happiness Index

Pioneered in Bhutan (see Viewpoint, p48), GNH provides a snapshot of a population’s wellbeing. Versions have been adopted in bIn Victoria, Canada; São Paulo, Brazil; and Seattle, US.

• ‘Doughnut economics’

First published in a report by economist Kate Raworth in 2012 and developed further in her 2017 book, ‘doughnut economics’ is based on two concentric circles. The first is the ‘social foundation’ – containing human needs, such as water, housing, equality, peace and education. The second is the ‘ecological ceiling’ – representing the boundaries of the planet’s ability to support life, such as pollution, ocean acidification and ozone layer depletion. It aims to replace GDP, substituting the focus on ‘growth’ with the concept of ‘thriving’