Gross Ecosystem Product (GEP) – A step in the right direction?
Updated: Jul 2, 2020
In this guest blog, ANDREW NEILL and Dr CATHERINE FARRELL, of the School of Natural Science, Trinity College Dublin, explain why its vital for the future wellbeing of the planet that we move away from the standard metrics and embrace the Gross Ecosystem Product (GEP)...
Accurate metrics are vital for informed decision-making. Gross domestic product (GDP) is of course the most well-known and highly-regarded metric used today. Frequently cited by politicians, economists and statisticians, the term is commonplace in popular media. GDP refers to the single, aggregate monetary value of all goods and services produced in a given time (usually per year). A very good example of its prevalence is the impact of the COVID-19 pandemic and the scramble to predict how many percentage points GDP may contract due to lockdown measures (OECD, Irish Times).
GDP possesses many of the qualities that we look for in a good metric: it has well-established routine data collection leading to a straightforward calculation, it is easily communicated as a single number or as a percentage change, and it holds significant leverage as a metric in decision making. And yet GDP is flawed - it completely ignores the contributions of nature to economic activity and human well-being. At the same time, it takes no account of the environmental costs (think pollution, over-exploitation and general ecological degradation) of our consumption of these essential contributions. And still, GDP remains widely used.
The Covid-19 crisis has sharpened the focus of many as to how - fundamentally - we rely on nature, and how impacts on nature, directly and indirectly, affect our well-being. Thankfully, there has been a steady emergence of work and research in the past decades to explore how we might go 'Beyond GDP' (see here) and develop more integrated statistics that can help guide us into sustainable development (See previous blogposts by McGrath on IFNC website, etc.).
Gross Ecosystem Product: Putting the Ecological alongside GDP
One interesting new metric outlined here is that of Gross Ecosystem Product or GEP. A recently published paper (see below) outlines how GEP attempts to address the valuable environmental contributions sourced from nature towards human wellbeing alongside a case study application of the approach to the Qinghai province in China (Ouyang et al., 2020). But first let’s look at what GEP is.
How is Gross Ecosystem Product calculated?
People benefit from, and may assign value to, many things that are not captured by GDP. Many of these benefits are sourced from ecological systems and their functioning. These benefits are termed ecosystem services and contribute benefits to people that can then be valued in some way. GEP attempts to construct a single, aggregate value of all of these valuable ecological contributions to wellbeing. It is a mirror to GDP, summing all contributions into a single wealth indicator for a given period of time, that can be communicated and understood in a straightforward way.
But, the construction of GEP is not straightforward. Just like the intricate interconnections within a country’s economy, ecosystem services are the product of interconnected and complex relationships within the environment and its subsequent functioning. Examples of these valuable contributions to wellbeing include the provision of clean water and food security, the regulation of soil and water quality, disaster resilience, human health improvements such as mental health, and culturally important landscapes and scenery. One of the major challenges of GEP is appropriately valuing services, identifying all services that are supplied simultaneously, and avoiding any double counting.
It should be noted that these challenges are common across the board when trying to translate nature into economic parlance and equate to one of the jarring points for many ecologists when attempting to squeeze nature into accounting systems.
Qinghai, China – A first GEP case study
Qinghai is a particularly interesting region in North West China. It is a biodiversity hotspot, acting as the source of three regionally vital rivers, the Mekong, Yellow, and Yangtze rivers, lending it the title of the “water-tower of Asia” (see map below).
The researchers set out with the ambitious task of constructing the calculation of GEP for the region between 2000 and 2015. This study was facilitated by extensive data collection in China and previous work using InVEST modelling of ecosystem services. The tabulated ecosystem services delivered from nature in Qinghai were then valued using market prices where appropriate, and market proxies otherwise such as travel times and avoided costs (See Table. 1 from the published paper).
The paper presented two key findings from the GEP of Qinghai:
1. The value of GEP rivalled the scale of GDP for the region. In 2000, GEP was much greater than GDP (81.5 vs. 26 billion Yuan), while in 2015, both had increased with GEP equal to 75% of GDP (185.4 vs. 242 billion Yuan).
These figures show that the value of nature is immense and should feature prominently in decision making, on equal footing to economic considerations. Both GDP and GEP have increased since 2000, indicating that successful investment in both economic and environmental assets can contribute to the overall growth and development of the region. However, the increase in GDP has been much greater, suggesting that investment has been targeted asymmetrically towards conventional economic assets.
2. A significant share (70% in 2015) of GEP value was distributed outside Qinghai. While the ecosystem functions were sourced within Qinghai, the benefits were received by people elsewhere in China, making the region a net ecosystem service exporter.
The lesson here is that the management of the local environment in Qinghai will have significant downstream impacts, raising the questions of environmental responsibility and justice. The authors go on to suggest that this may be a mechanism for eco-based payments for local people who facilitate ecosystem service provision, but do not directly receive those benefits.
What does GEP tell us? And what does it not tell us?
Building upon decades of research in the fields of environmental science and ecological economics, the tools to untangle the complexity of ecosystem services are improving all the time. Efforts to produce national accounts of environmental assets, or natural capital, their spatial extent and quality, are also useful in calculating GEP (An example of this kind of project is INCASE currently being conducted in Ireland). Statistical modelling, remote sensing, field data collection, GIS mapping and cost-benefit analysis can all contribute to more robust calculations of GEP.
The construction of a GEP for Qinghai province is however a significant step forwards when considering the contribution of nature to society’s wealth and sustainable development that respects people, planet and profit. The study demonstrates just how valuable the services provided from nature can be, and the potential to invest in natural assets to sustain those flows into the future. However, there are also some drawbacks that the authors outline in their discussion.
Firstly, GEP and GDP can’t be directly summed as an aggregate value as they have significant overlap e.g. food provision, that would lead to double counting. Secondly, not all ecosystem services are included in this analysis and so may underestimate the total value of GEP. Part of the appeal of GEP is it’s parallel to GDP as a single, aggregate measure but many would argue that this detracts from the complexity of ecosystems and promotes some form of ‘substitutionality’ in nature’s assets – also referred to as weak sustainability.
At the same time, elevating the value of ecosystems as a complementary measure alongside economic tools brings environmental issues to the table in a way that has been lacking. By presenting the case that GEP is as large, if not larger, than GDP, the approach could leverage decision-makers to consider nature on an equal footing to economic growth.
As the authors argue, this is the first GEP calculation to be conducted and the GEP metric will be refined and improved as our understanding grows. While untangling the complexity of natural systems to build GEP may appear like a mammoth undertaking, it is worth remembering that GDP did not emerge overnight and took years of refinement before emerging as it is today, warts and all. GEP is surely one of the new steps forward, in the right direction.
Reference article: Using gross ecosystem product (GEP) to value nature in decision making. By Zhiyun Ouyang, Changsu Song, Hua Zheng, Stephen Polasky, Yi Xiao, Ian J. Bateman, Jianguo Liu, Mary Ruckelshaus, Faqi Shi, Yang Xiao, Weihua Xu, Ziying Zou, and Gretchen C. Daily