Market News

 February 20, 2012
Environmental factors must be included in GDP, say scientists

 Countries must move beyond tracking economic growth using measures of gross domestic product (GDP) and incorporate environmental and social dimensions into a new measure of wealth if they are to avoid an escalating series of climate, biodiversity and poverty crises.

That is the view of 20 former winners of the Blue Planet Prize, sometimes dubbed the "Nobel Prize for the environment", in a new paper to be presented to government ministers at a meeting of the UN Environment Programme (UNEP) in Nairobi, Kenya, later today.

The group will also call for the removal of fossil fuel subsidies, worth an estimated $409bn a year globally, as well as the end of support for traditional transportation and agricultural methods that do not account for their environmental costs.

"The immense environmental, social and economic risks we face as a world from our current path will be much harder to manage if we are unable to measure key aspects of the problem," the paper says.

"Green taxes and the elimination of subsidies should ensure that the natural resources needed to directly protect poor people are available rather than via subsidies that often only benefit the better off."

The call comes after UK environment minister Caroline Spelman last week said the country will work to secure an assurance that all businesses and governments begin work to incorporate natural capital into their accounting practices, a metric she called GDP+, at the Rio+20 conference later this year.

Similarly, former US vice-president Al Gore argued last week that ignoring the social costs of oil, coal and gas would be an even bigger mistake than the over-valuing of sub-prime mortgages, which plunged much of the world into financial crisis.

The scientists also recommend that creating markets for biodiversity and ecosystem services would help break the link between consumption and environmental destruction.

They warn that without action, the costs of climate change, already projected at five per cent or more of global GDP, could one day exceed global economic output.

"The current system is broken," said Bob Watson, chief scientific adviser to the UK Department for Environment, Food and Rural Affairs (Defra), in a statement. "It is driving humanity to a future that is... warmer than our species has ever known, and is eliminating the ecology that we depend on for our health, wealth and senses of self.

"We cannot assume that technological fixes will come fast enough. Instead we need human solutions. The good news is that they exist but decision makers must be bold and forward thinking to seize them."

Green campaigners have long argued that measuring economic activity using GDP often fuels environmental destruction, noting that investment in the clean up operations required after an oil spill will often result in a boost to GDP.

In related news, the UN announced last week that over 10,000 organisations, including 7,000 businesses, have pledged to make sustainability principles part of their strategy and operations, under its voluntary Global Compact initiative.

It reported that while over 3,000 organisations have been expelled from the programme since it launched in 2005, the initiative is still on target to sign up 20,000 business participants by 2020.