What is the Concept of Green GNP ?
In the recent years the economists have realized that the costs of producing GDP need to be incorporated in estimating GDP to find the actual welfare of the people. These real costs are of two types. First, in the production process firms pollutes the air and the water which adversely affects the welfare of the people.
Therefore, in estimating the real GDP the costs of pollution of air and water by the firms in the production process of goods must be subtracted to get the real GDP or GNP, which is called Green GDP or Green GNP.
Another important aspect of producing GDP which requires adjustment for calculating green GDP is depletion of natural resources such as oil, forests, coal and natural gas. Conventional national income accounting does not take into account the depletion of natural resources.
In an ideal economic system, the economic costs of environment degradation would be subtracted in the calculation of a firm’s contribution to output and all activities that improve the environment because they provide real economic benefits to the people be added to the output.