Going Beyond GDP: The Swiss Green Domestic Product

Abstract

What is new?

We propose a novel indicator, the Green Domestic Product (GrDP) to remedy some of the shortcomings of GDP. The GrDP extends the scope of the GDP to integrate the depletion of natural, social, and human capital. Concretely, GrDP is defined as GDP minus the external costs associated with the production of goods and services, including the impacts of the emissions of greenhouse gases (GHG), air pollutants, and heavy metals.

Why does it matter?

Our decisions are influenced by what we know and by what we measure. Flawed measurements can lead to distorted decisions. By considering the economic, environmental, and social dimensions, GrDP allows us to make more informed and sustainable policy decisions, and to move beyond the dichotomy between promoting economic growth and protecting the environment.

What do we learn?

In Switzerland, the gap between GrDP and GDP is narrowing, the economy is growing while air pollution is decreasing. Still, external costs remain significant, about CHF 25.3 billion or 3.5% of GDP in 2019. Air pollutants and GHG both have important environmental and social impacts. However, while economic growth and air pollutant emissions are successfully decoupling, decarbonisation remains too slow. There are opportunities for the future: many decarbonisation levers have significant co-benefits by also reducing air pollutant emissions and thus enhancing GrDP growth.