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The GEP will replace the GDP in the world economies

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By Giulia Faleri

· 5 min read

Thanks to the GEP, the GDP is completed and extended with all the environmental assets, by restoring dignity to the Earth.

The GEP was also tested in Qinghai Province, in China, by the team of researchers who devised the GEP concept, led by Zhiyun Ouyang, Director of the Environmental Research Center of the China Academy of Sciences. This place has a wonderful nature and is located at over 3000 meters above sea level. It is also called "the Water Tower of Asia", as from there there are many of the rivers that bring this precious liquid throughout the territory.

The GEP allows governments of institutions to not underestimate the compromises between the different positions to be taken for the conservation of natural resources. GDP, in fact, widely used by decision-makers around the world, summarizes the value of all goods and services purchased and sold in a country during a certain period. But GDP does not take into account how nature affects the economy and the whole human well-being.

This omission is "critical" and disadvantageous. It is necessary to study ecosystem services in different areas of the globe and make concrete proposals for sustainability that integrate the economy with the ecology and society.

Indeed, ecosystem products and services are essential for human survival and for the development. The Gross Ecosystem Product (GEP) targets specific indicators to measure their total economic value. The GEP indicates the total value of ecosystem goods and services provided to human well-being in a region each year and can be measured in terms of biophysical value and monetary value. Ecosystems that can be measured include natural ecosystems such as: forests, grasslands, wetlands, deserts, fresh and ocean waters but also man-made systems that rely on natural processes such as: agricultural land, pastures, aquaculture farms, green areas urban.

In China, the researchers were able not only to put Qinghai Province's ecosystems on the balance sheet, but also to show that only a third of the economic value generated by the province's ecosystems is provided to its residents, while the rest is exported to other provinces of China and other countries of the world. This brings out the importance of the connection between humans and nature not only within a place, but also in near and far places on the planet.

A report produced in collaboration with PricewaterhouseCoopers (PwC) was presented at the World Economic Forum (WEF) in Davos last January, by indicating that half of the world's GDP depends on nature and by warning companies about their significant "hidden dependences" to nature. Their supply chain could be much more at risk of being disrupted than expected. Moreover, the WEF's annual "Global Risk Report" highlighted how the risk of biodiversity loss is an indicator of the 750 experts and decision-makers who contributed to its drafting among the greatest risks that may occur (4th place) and among those of greatest impact (3rd place) in terms of well-being for humanity.

In fact, the exploitation of resources and biodiversity also entails very high procurement costs which causes higher prices for final products and services. We should also add the costs of externalities (environmental and health damage), thus by creating a vicious circle that triggers economic crises. The solution is to generate profits to create social and environmental value, by adopting sustainable business models that measure and minimize the impact on natural and social capital. This means to prevent economic crises and pandemics such as Covid-19, as well as creating jobs and reducing inequalities.

The "Wealth of Nations" has always been measured by GDP, outlined by Adam Smith. This has led to a society that produces and consumes far more than it has at its disposal. Now there is another parameter: the GEP (Gross Ecosystem Product), which admits Nature, by recognizing its value (also economic).

Extracting, producing, selling and producing waste: this linear economic model increases a nation's GDP, its productive power and, of course, the consequences that come from it. Yet this logic has brought the planet into a situation of dangerous imbalance. It is not possible to have infinite growth in a world where resources are finite. The way we produce and consume must be adapted to the biophysical cycles of the Earth and respect their balance.

The fact that the GDP dealt with money, has had - over time - its negative effects: it is still the value most considered and monitored by nations but it has never taken into account the well-being of people.

One of the most beautiful confirmations of this theory comes from the famous "Easterline paradox" or paradox of happiness.

A very simple concept, introduced in 1974 by Easterlin, a professor of economics at the University of Southern California and a member of the National Academy of Sciences, according to which people's happiness depends just for a little part by the economic conditions.

There are three aspects of happiness linked to the economic model:

  • hedonic treadmill: hedonic happiness, which is seen in relation to the theory of adaptation: you have a need, you consume and satisfy the need, but then you adapt and you have a new need;
  • satisfaction treadmill: the level of happiness is linked to the achievement of goals and the consequence, but the goals are higher and higher and the happiness farther away;
  • positional treadmill: the gain of a position or a social role.

So one thing is certain: we need to start to rethink our impact on the planet. We must stop believing that sustainability is synonymous with renunciation or degrowth. It is exactly the opposite.

Having a sustainable way of producing and consuming, in harmony with the resources of the planet, allows us to progress as a species, be healthy and economically safe. Otherwise, we would be just a passage through the many geological eras.

Future Thought Leaders is a democratic space presenting the thoughts and opinions of rising Energy & Sustainability writers, their opinions do not necessarily represent those of Illuminem.

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About the author

Giulia Faleri is Cofounder at the Italian startup Vezua, the omnichannel sustainability marketplace. She is also a board member of the Italian holding 76 Investimenti. She is a young changemaker of Ashoka network for the EU GEN-C Project promoted by Horizon EU and Agenzia Italiana Giovani. She’s among the youngest female entrepreneurs and is now working in Dubai as UAE Partnership Facilitator for Companies and UAE Investments Advisor.

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