Study Advocates New Framework to Measure Sustainable Economic Growth

As the global economy grapples with a transition away from fossil fuels and faces the compounded challenges of pandemic recovery, geopolitical unrest, and disrupted trade networks, researchers are calling for a new integrated approach to assess sustainable economic growth. A groundbreaking study published in *Communications Earth & Environment* emphasizes the need to incorporate global stocks and flows of natural capital into traditional economic metrics. The research team analyzed monetary damages from particulate matter (PM2.5) and greenhouse gas (CO2) emissions across 165 countries, spanning two decades from 1998 to 2018. Their findings suggest that shifting focus from physical environmental metrics to monetary damage assessments can better inform policy decisions shaping the future of growth and development.

The study, led by Professor Nicholas Muller of Carnegie Mellon University’s Tepper School of Business, introduces the concept of environmentally adjusted value added (EVA) as an enhancement to traditional gross domestic product (GDP). By deducting the gross external damages (GED) from pollution—such as premature mortality risks from PM2.5 exposure and long-term climate impacts of CO2 emissions—EVA provides a more comprehensive measure of national economic output. The data revealed that while global pollution intensity declined from the late 1990s until the Great Recession, it began to rise again, driven primarily by economic activity in China and India. The study further highlights that traditional GDP metrics fail to account for external environmental costs, limiting policymakers’ ability to pursue truly sustainable growth strategies.

Despite its innovative approach, the study acknowledges critical gaps, such as the exclusion of biodiversity losses, ecosystem services, and water pollution. However, the authors underline that PM2.5 and CO2 damages alone represent a significant share of economic output in many nations, including the United States. Aniruddh Mohan, a co-author from Princeton University, cautioned that rising damages from pollution are likely to outpace economic growth in the coming years, underscoring the urgency for robust, data-driven frameworks. “Our results highlight the limitations of conventional national income accounts and the necessity for metrics that integrate environmental externalities to guide societies during times of disruption,” Mohan said.

This study marks a pivotal step toward redefining how economies balance growth with environmental stewardship. By quantifying the monetary costs of environmental degradation, the research provides a vital tool for policymakers aiming to navigate the complex interplay between economic development and sustainability in the 21st century.