Development of green indicators , Public Economics

Development of Green Indicators

This approach is to construct a green GDP or some other economic index to replace the conventional GDP or NDP. Two approaches have been adopted for this. In the Pollution expenditure accounting approach efforts have been made to construct entirely new indicators of well-being. This has been achieved by altering the conventional aggregates by subtracting out pollution expenditures from the GDP, adding the factors like negative effects of urbanization, etc. Some of the examples of this approach are the measure of economic welfare indicator by Nordhaus and Tobin, the net national welfare indicator developed for Japan and the index of sustainable economic welfare.

The Physical accounting approach does not involve replacement of conventional gross income aggregates but involves modifying the conventional measures of net product. Such approach has been provided by Repetto and others (Repetto et al.. 1 989). Essentially, their idea is to depreciate natural assets such as forests, mineral stocks, fish stocks and soils in order that man-made capital and natural capital receive equal treatment in the computation of net income. The main criticism of the approach is that while various indexes may indicate that society is worse off than might be suggested by the conventional GDP, they give the policy maker a little indication of what to do about it.