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State of Ontario's Forests - Indicator Report
Criterion 5
Providing a Stable Flow of Economic and Social Benefits from Ontario’s Forests
Element
Monitoring & Supporting Value Added Products & Services
3
Indicator 1
Indicator Condition
State
Trend
Data
Green GDP Related to Forest-resource-based Management Activities

To provide for a continuous and predictable flow of economic and social benefits from Ontario’s forests,
Ontario monitors green Gross Domestic Product (GDP) related to forest-resource-based management
activities as part of monitoring and supporting value-added products and services.

Ontario’s GDP as currently measured does not consider the degradation or reduction of natural capital.
Green GDP is represented by making a charge against the current GDP to represent the cost of
restoring natural capital. Any activity that adds to natural capital or improves it should be added to
GDP. Green GDP measure provides a summary of the interaction of the economy and the
environment.

The MNR’s existing Socio Economic Impact Model (SEIM) for forest management planning is used to
calculate green GDP.

Estimates of green GDP associated with selected forest management plans indicate green GDP has
remained relatively stable since the last SOFR reporting period.
Forest Management Plan example GDP estimates.
2005 1
Total GDP
$54,000,000
$40,019,868
Green Cost
$3,200,000
$2,118,111
Green GDP
$50,800,000
$37,901,757
94.20%
94.70%
% of GDP
1
2
2009 2
Based on the estimates from the 2005-2025 Smooth Rock Fall Forest Management Plan (FMP).
Based on estimates from the 2009-2019 Magpie Forest Forest Management Plan (FMP).
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State of Ontario's Forests - Indicator Report
5.3.1
Green GDP Related to Forest-resource-based Management Activities
Background

Natural resources and environmental quality are important assets that must be preserved in a healthy
economy. Gross domestic product (GDP) as currently measured does not consider the degradation or
reduction of natural capital.

Natural capital refers to the natural resources and ecosystem processes that make all economic activity
possible. The industrial system uses the other three forms of capital (human, financial and manufacturing) to
transform natural capital into the material goods of our daily lives (e.g., cars, highways, cities, bridges,
houses, food, medicine, hospitals, and schools). During the production of these material goods, natural
capital may be reduced or become degraded.

Restoring natural capital involves the use of resources. These mitigation costs must be subtracted from
ordinary measures of GDP to reflect what is now commonly known as the green GDP. In other words, the
latter measure is a quantitative indicator of sustainable GDP.

The issue is to generate a GDP measure that leaves the valuation of natural capital invariant. Any
degradation or draw-down of natural capital should be valued (as is physical capital) and subtracted from
ordinary GDP. Any activity that adds to natural capital or improves it, should be added to GDP much the
same way new investment in physical capital is added to ordinary GDP.

A working definition of green GDP is ordinary GDP, minus mitigation costs and the depletion of natural
capital, plus any environmental benefits realized, summed over the accounting period.

Currently, the MNR’s existing Socio Economic Impact Model (SEIM) for forest management planning is used
to calculate green GDP based on mitigation costs (e.g., artificial regeneration), but not natural capital
depletion. Minor changes were made to SEIM since the 2006 SOFR to reflect changes to the structure of
Ontario’s economy.
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State of Ontario's Forests - Indicator Report
5.3.1
Green GDP Related to Forest-resource-based Management Activities
Discussion
The state was ranked as fair.

The implementation of the forest management plan is expected to result in a substantial gross domestic
product. While the green GDP is not a small fraction of the GDP, a considerable mitigation cost is required to
restore the natural capital.
The trend was ranked as no change.

Green GDP as a percentage of GDP (94.7%) has remained relatively stable since the 2006 SOFR report
term (94.2%). The estimated green GDP in one 2009-2019 forest management plan 1 was 94.7% of GDP.
This means that the long-term management direction results in a provincial increase in gross domestic
(provincial) product of $40 million per year. If a mitigation charge is taken against GDP for restoring the
natural capital, the GDP estimate will decrease by $2.1 million. The Green GDP value that results is $37.9
million, or 94.7% of ordinary GDP.

Utilizing all forest management plan (FMP) data as opposed to using a representative FMP would show
patterns and distribution of green GDP within the province and allow a Green GDP provincial value to be
calculated.
The data was considered to be inadequate.

1
The SEIM-calculated green GDP is ordinary GDP minus mitigation. Ideally green GDP should be based on
mitigation costs, natural capital depletion costs, and green benefits. Currently this is not possible to readily
model. As our information base improves, SEIM should be modified to deduct natural capital depletion and
add green benefits to the green GDP calculation.
Magpie Forest 2009-2019 Forest Management Plan.
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State of Ontario's Forests - Indicator Report
5.3.1
Green GDP Related to Forest-resource-based Management Activities
Data
Table 5.3.1a: Forest management plan green GDP estimates.
2005 1
2009 2
Total GDP
$54,000,000
$40,019,868
Green Cost
$3,200,000
$2,118,111
Green GDP
$50,800,000
$37,901,757
94.20%
94.70%
% of GDP
1
2
Based on the estimates from the Smooth Rock Falls 2005-2025 FMP.
Based on estimates from the Magpie Forest 2009-2019 FMP.
Methods

Input values were taken from the Magpie Forest 2009-2019 Forest Management Plan.

Gross domestic product values were derived by compiling the input values in SEIM version 9.03. Please
refer to the SEIM Technical Manual for additional information on the methodology for determining green
GDP.

This indicator will be updated on a five-year basis.
Other Reading

Econometric Research Limited. 2000. Socio Economic impact Model Technical Manual. Unpublished
manual. 34 p.

Econometric Research Limited. 2010. Socio Economic Impact Model User's Guide. Unpublished guide. 72 p.

Econometric Research Limited website (http://econometricresearchlimited.com/)
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State of Ontario's Forests - Indicator Report
5.3.1
Green GDP Related to Forest-resource-based Management Activities
Author

John Stephens
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