Gross Environment Product (GEP) is the total value of final ecosystem services supplied to human well-being in a region annually and can be measured in terms of biophysical value and monetary value. It indicates the overall health of the environment, as the GEP measures prime indicators such as forest cover, soil erosion, air quality and dissolved oxygen in river water.

Need for GEP accounting in GDP calculation:

• Economic growth alone cannot represent true economic development: Economic growth may adversely impact human well-being if it is accompanied by growing inequity and environmental degradation. Resource depletion during industrial growth impacts rural growth disproportionately, as the rural economy largely depends on natural resources.
  • GEP thus forms a balanced development approach where ecology is given equal space. Accounting GEP into GDP will give a true measure of the nation’s growth towards sustainable development.
• Shortcomings of traditional systems: The traditional System of National Accounts (SNA) like GDP/GNP does not account for the value of natural resources and ecosystem services, like the provisioning services (food, wood etc.) and regulating services (water purification, carbon sequestration etc.).
  • Also, the value of environmental/resource degradation taking place during the developmental process are not taken into account.
• Framing adequate policies: GEP helps in understanding the impact of anthropological pressure on our ecosystem and natural resources. This will enable us to make policies that will balance ecology and economy.

Despite its significance, there are several issues in capturing GEP, including:

• Knowledge gap: There is lack of data and an existent challenge to assign a monetary value to ecosystem services. Assigning monetary value to ecosystem services is possible only to a limited extent.
  • For example, the Pipal tree in India is revered as a holy tree and religious ceremonies are conducted under its shade. Here, economic valuation of the tree cannot encompass the complexity and the ecological, socio-cultural and institutional heterogeneity of a particular area.
• Policy gap: There is lack of recognition of ecosystem services in economic decision-making, development planning and resource allocation. Value of ecosystem services is either ignored or not understood adequately.
• Institutional failure: Insufficient ‘Compensation for Ecosystem Services’ (CES) is provided by the government to the stakeholders. CES involves recognising and compensating people who manage the land that contribute to the long-term security of ecosystem functions. A prominent CES mechanism is ‘Payments for Ecosystem Services’ (PES).

Therefore, there is an urgent need to incorporate environmental assets in GDP calculation by collecting data on various types of natural capitals like forests, groundwater etc. and converting them into monetary terms. Most recently, Uttarakhand has shown the way by becoming the first state in India to take into account the Gross Environment Product (GEP) while calculating its Gross Domestic Product (GDP).