March 28, 2012 / 3:15 PM / in 6 years

True economic measure includes natural assets: scientists

LONDON (Reuters) - Traditional measures showing strong economic growth in Brazil and India over nearly two decades fail to take account of the depletion of their natural resources, scientists and economists at a climate conference said on Wednesday.

Scientists and environment groups have been pressuring governments to include the value of their countries’ natural resources - and use or loss of them - into future measurements of economic activity, rather than relying solely on the gross domestic product calculation.

Between 1990 and 2008, the wealth of Brazil and India measured by GDP rose 34 percent and 120 percent respectively, but this measurement is flawed, economists at the “Planet Under Pressure” conference in London argued.

Natural capital, or the sum of a country’s assets ranging from forests to fossil fuels and minerals, declined 46 percent in Brazil and 31 percent in India, they said.

“The work on Brazil and India illustrates why GDP is inadequate and misleading as an index of economic progress from a long-term perspective,” said Anantha Duraiappah, the executive director of the United Nations University’s International Human Dimensions Programme (UNU-IHDP).

When measures of natural, human and manufactured capital are put together, Brazil’s “inclusive wealth” rose by 3 percent and India’s rose by 9 percent over that time, he said.

The idea of an expanded indicator known as GDP+ to include GDP and natural capital will be on the agenda of a global conference held in Rio de Janeiro in June to try define sustainable development goals.


Duraiappah said his research team and the U.N. Environment Programme (UNEP) will present a report at the Rio summit showing the “inclusive wealth” of 20 countries, which represent 72 percent of world’s GDP and 56 percent of global population.

The UK has already set up a Natural Capital Committee to advise the government on the state of its natural assets.

Britain also said last month it would urge businesses and governments at the Rio conference to start measuring the use or loss of water, agriculture, forests and other natural resources.

Businesses also need to measure and report on the sustainability of their corporate activities, said Yvo de Boer, special global adviser to consultancy KPMG and former U.N. climate chief.

“If companies had to pay for the full environmental costs of their activities, they would have lost $0.41 out of every $1 earned in 2010,” he said.

“The external environmental costs of 11 key industry sectors rose by almost 50 percent between 2002 and 2010, from $566 billion to $854 billion.”

Editing by Alessandra Rizzo

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