December 12, 2020 | Documents

The Gross Domestic Product (GDP) is rightly criticized for not being an accurate measure of economic value added since it does not account for the environmental damages caused by the underlying economic activity.

In this paper, we propose a simple adjusted measure of domestic product which subtracts the monetary value of Greenhouse Gas (GHG) emissions from GDP to obtain a measure of Green Domestic Product (GrDP).

We provide the calculations for Switzerland from 1990 to 2018, a period during which a significant increase in GDP of approximately 60% was compatible with a slight decrease in GHG emissions. This is a noticeable form of decoupling between economic growth and GHG emissions.

Assuming a Social Cost of Carbon (SCC) of CHF 96 per ton, we find that GrDP is between 0.62% and 1.5% lower than GDP in 2018 depending on the methodology used for measuring GHG emissions. During the studied period, the growth rate of GrDP was marginally larger than the GDP growth rate.

From a policy point of view, while the identified decrease in GHG emissions provides a ray of hope, current trends do not appear in line with Switzerland’s commitments to the Paris agreement. More forceful policies and an increased awareness leading to changes in behavior, notably in regard to individual mobility (land and air transportation) are needed.

Jean-Pierre Danthine, EPFL

Clémence Gallopin, UNIL-HEC

Veronica Petrencu, EPFL