Rethinking Economic Success in the Face of Climate Crisis

In 1934, American economist Simon Kuznets presented a groundbreaking paper to Congress advocating for a new way of measuring economic performance. His metric, which would come to be known as gross domestic product (GDP), was a breakthrough in understanding the economic impact of the Great Depression. However, Kuznets himself saw the limitations of GDP, warning that "the welfare of a nation can scarcely be inferred from a measure of national income." Today, as the world struggles with the climate crisis, our attachment to GDP is looking like a problem. In a single-minded pursuit of GDP growth, humanity is inadvertently feeding several environmental crises that threaten to make most of us poorer, sicker, and more miserable. Climate change alone could slice 20 per cent off global GDP by 2100. ## The Flaws of GDP GDP has become a one-number-that-rules-them-all barometer of economic progress, but it has significant oversights. With every forest we clear cut and every ounce of fossil fuel we burn, GDP rises, but through those actions, we are whittling away at the natural world, which supplies us with food, water, medicine, clean air, and countless other essentials. By focusing only on GDP, we're ignoring what's happening to the natural assets on which our prosperity ultimately depends. The answer to this dilemma lies in looking beyond GDP. We must start considering a broader range of indicators when making policy decisions. From an environmental perspective, that means measuring and valuing natural assets like forests, water, soil, biodiversity, and clean air. By assigning a value to nature, decision-makers can better understand the economic consequences of, say, strip-mining a mountain top or letting plastic waste overwhelm a river. ## A New Approach: Costa Rica's Example The idea of looking beyond GDP isn't only a theoretical debate. Countries and communities around the world have started to make economic decisions based on their natural assets. A prime example is Costa Rica, a biodiversity hotspot where a years-long effort to conserve land and seascapes has led to a boom in tourism. That in part helped elevate the country into the club of high-income nations. This kind of environmentally focused economic decision making can pay huge dividends. By stabilizing the climate, ending pollution, and halting the loss of the natural world, humanity could save millions of lives a year and create US$20 trillion in economic benefits annually by 2070, found the Global Environment Outlook 7, a 2025 report from the United Nations Environment Programme (UNEP). As deadly heat blankets our cities, species slip into extinction, and the planet struggles with rising toxicity and pollution, it's clear that we can do better at measuring what matters. And that means updating and expanding how we measure economic progress.