Forest Foundations of the Genuine Progress Indicator (GPI):Macroeconomic Policy & Planning for the Vermont Landscape

Principal Investigator: Jon D. Erickson Affiliation/Institution: University of Vermont

Email: jon.erickson@uvm.eduMailing address: 204D Aiken, Rubenstein School, UVM, Burlington, VT 05405

Collaborators and Affiliations: Colin Beier (SUNY ESF), Andrea Colnes (EAN), Lauren-Glenn Davitian (Common Good VT), Jamey Fidel (VNRC), Kate

McCarthy (VNRC), Jeb Spaulding (State of VT), Peter Victor (York University)Completion date: December 31, 2016

Outcomes: Extension of Vermont GPI to 50 states; Advancement offorest component to GPI in Vermont forest policy and planning.

Funding support for this project was provided by the Northeastern States Research Cooperative (NSRC), a partnership of Northern Forest states (New Hampshire, Vermont,

Maine, and New York), in coordination with the USDA Forest Service.http://www.nsrcforest.org

Project SummaryVermont is leading the nation in the development, adoption, and implementation of newindicators that guide genuine economic progress, where the benefits of economicactivity outweigh the costs. A central policy challenge is that benefits are often privatelycaptured, market-based, and short-term, and thus relatively easy to count and guidedecisions. However, many of the costs of economic activity are often borne by thegeneral public, non-market, and long-term. In the case of forest land use change, themarket benefits of forestry and land conservation are not typically weighed against thenon-market costs of loss of ecosystem services, depletion of renewable resourcestocks, and longer-term impacts on forest productivity. To move towards full costaccounting and more informed policy making, the Genuine Progress Indicator (GPI)was developed at the national scale to measure the long-term, net benefits of economicactivity, including forest land use and management. This project worked to advance theGPI at state scales by: Developing and extending a Vermont GPI to other states;advancing the forest-related sub-indicators within the GPI; and building economicarguments for forest land conservation with the Vermont forest policy community. Thefirst goal led to updates to the Vermont GPI, a detailed study for Massachusetts, andthe estimation and analysis of the first 50-state GPI study. Research to advance theforest-related components included development of a dynamic simulation of GPI and ameta-analysis and application of forest ecosystems services assessments to Vermont.The third goad developed through a complementary initiative with the Vermont Agencyof Natural Resources on the "Economics of Conservation” which supported state policydevelopment on forest fragmentation.

Source: Thompson et al., 2013 (Harvard Forest)

Background and Justification1. Vermont and other Northern Forest states are witnessing the first downturn in forest land cover since the recovery that began in the mid-1800s. The change is happening in part through fragmentation, affecting the functioning and delivery of economic benefits from forest landscapes. To fully assess these benefits, policy-makers need new macroeconomic indicators that account for both the

costs and benefits of forest land conversion and degradation.

Background and Justification2. Vermont is leading the nation in the development, adoption, and

implementation of new indicators that guide genuine economic progress, including the GPI and its recent incorporation into economic planning.

Vermont 2020 MissionImprove the economic well-being and qualityof life of Vermonters while maintaining ournatural resources and community values.

Overarching Goal… not only grow jobs and wages andincrease our Gross Domestic Product, butalso to improve the Genuine ProgressIndicator – a measure that takes intoaccount economic, social and natural assetsand impacts – by 5% over baseline over thenext five years.

Background and Justification3. Building on VT legislation and ongoing work of UVM’s Gund Institute, the GPI

is ripe for policy analysis, expansion to other states, and improvements to the methodology, particularly with assessment and valuation of forest land change.

Land Use ChangeSub-Indicators:

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Methods1. Estimation of GPI for Vermont, with extension to and comparison with all

U.S. states, with particular focus on Northern Forest States & land use change.

50-state estimate of the Genuine Progress Indicator, 2012

Sample of studies of forest ecosystem services since Pearce (2001)

Methods2. New methods evaluated for forest land component of GPI, building on

ecosystem service studies, long-term forest inventory data, & spatial analysis of forest function & landscape level connectivity.

Sample of SpatiallyExplicit Forest Characteristics

(Nature Conservancy)

Methods3. Development of dynamic simulation model of VT GPI with historical database

and scenario analysis capability to 2030.

Main Results1. Updated Vermont GPI accounts for 1960 through 2015.2. Extension of VT GPI method to detailed Massachusetts

study and first-of-kind 50-state estimate.3. Evaluation of strengths and weaknesses of GPI 1.0 to

inform next generation of GPI accounting (v. 2.0).4. Detailed analysis of forest land sub-indicator and

development of revised methodological recommendations to State & GPI community of practice.

5. Incorporation of value of forest land conservation and sustainable management of working lands into state agency planning, strategy, and fragmentation policy.

6. Design of GPI dynamic simulation model and scenario analysis.

VT “progress recession” persists• GPI peaked in 2007, then hit 11-

year low in 2013.• Since 2000, the gap between

GSP and GPI was at it’s lowest in percentage terms in 2005 (41.8%).

• Gap between GSP and GPI was at 52.9% in 2013, the highest gap since 1960 (beginning of estimate).

• Among environmental factors, nonrenewable energy depletion and carbon pollution charges were highest.

• Forest land change has turned negative in recent years.

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Main Results

0

5

10

15

20

25

30

35

20002001200220032004200520062007200820092010201120122013

Total VT Gross State Product vs. Genuine Progress Indicator (Billion 2013$)

GSP

GPI

• Key Economic Drivers– Income Inequality Deduction (17.5% of GSP and é’ing)– Underemployment Deduction (1.9% of GSP and ê’ing)

• Key Social Drivers– Commuting Deduction (9.8% of GSP and é’ing)– Volunteering Addition (1.3% of GSP and ê’ing)– Education Addition (10.8% of GSP and é’ing)

• Key Environmental Drivers– Nonrenewable Energy Deduction (11.6% of GSP & é’ing)– Carbon Pollution Deduction (3.3% of GSP and é’ing)– Forest Land Change Deduction (1.0% of GSP and è’ing)

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Main Results

GSP = Gross State Product

Main Results

Among Northern Forest states:• VT & ME with high GPI relative

to GSP state ranking.• NY & NH with high GPI, but in

line with GSP state ranking.• VT, NH & ME all in middle 1/3

of states for environmental indicators.

• NY in top 1/3 of states for environmental indicators.

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Main ResultsState per capita GPI relative

to GSP position

Sustainability Pillars Traffic Light PerformanceGreen=High, Yellow=Middle, Red=Low

Main ResultsRoman & Erickson, 2015

Main Results

Implications and applicationsin the Northern Forest region

1. Vermont was the first state in the nation to pass GPI into law and is in a position to lead further adoption in the Northern Forest region.

2. The first 50-state study can help generate broader interest in GPI as a measure of macroeconomic health providing economic arguments for forest land conservation and sustainable management of working landscapes.

3. The economic case for forest land conservation can help counterbalance the arguments for forest land development, leading to land use regulation and incentives that can slow ongoing forest fragmentation and improve the long term survival of forest-based industries.

Future directions• Near-term

– The results of the 50-state GPI study will be published in Ecological Economics in May 2018.

– An additional paper from the 50-state study is currently being revised for submission to Ecological Economics.

• Short-term– Eduardo Rodriguez to finish his Ph.D. dissertation by August

2018, including results of the forest ecosystem services assessment and related work on forest recovery and succession.

– Eric Zencey will be releasing the next Vermont GPI study in March 2018, including benchmark analysis of the Vermont Comprehensive Economic Development Strategy.

• Long-term– Gund Institute to sign MOU with State of Vermont to

continue supporting GPI updates and extension to other Northern Forest States.

List of products• Research Reports

– Roman, J. and J.D. Erickson, “Economics of Conservation in Vermont,” Vermont Agency of Natural Resources, June 2015.

– Erickson, J.D., Zencey, E. and Z. Zimmerman, “The Bay's State's Genuine Economy: a Report on the Massachusetts Genuine Progress Indicator, 1960-2012,” Gund Institute for Ecological Economics and DEMOS, Nov. 12, 2014.

• Databases– Vermont GPI update for 2012 – 2016– Massachusetts GPI for 1970-2012– U.S. national GPI update for 2012 and 2013– 50-state GPI estimate for 2012 (year with full data)

• Workshops– “Walmart to Walden Pond: A Workshop on the Economic Incentive for Conservation,”

Vermont Agency of Natural Resources, Oct. 30. 2014.– “Genuine Progress Indicator Briefing,” United Nations Statistics Division, New York, NY,

May 30, 2014.– “GPI 2.0 Practitioner’s Workshop,” Gund Institute for Ecological Economics, Burlington,

VT, Apr. 8-9, 2014.– “A Genuine Talk on Progress,” Convened by Donella Meadows Institute, Vermont

Statehouse, Montpelier, VT, Feb. 19, 2014.– “Vermont GPI Workshop,” Vermont Forest Roundtable, Dec. 2013.

List of products• Conference Presentations

– Rodriguez, E. and J.D. Erickson, “GPI in the Woods – How can Vermont's Genuine Progress Indicator reflect a more accurate value of forests?” Biennial Conference of the International Society for Ecological Economics, Washington, DC June 26-29, 2016.

– Rodriguez, E. and J.D. Erickson, “A Socio-Ecological Synthesis of Forest Management in Vermont,” Joint Meeting of the U.S. & Canadian Societies for Ecological Economics, Vancouver, BC, Oct. 1-4, 2015.

– Fox, M.J., Bamford, K., Castle, J., Clarke, D., Helling, A., O'Connor, B., Spencer, P., Swain, J. and J.D. Erickson, “Genuine Development in the States: a Comparative Analysis of 50 State Economies Using the Genuine Progress Indicator,” 13th Biennial Conference of the International Society for Ecological Economics, Reykjavik, Iceland, Aug. 13-15, 2014.

• Testimony– “Vermont Genuine Progress Indicator: 2013 Update,” House Committee on Natural

Resources and Energy, Vermont General Assembly, Mar. 18, 2015.– “Vermont Genuine Progress Indicator: 2013 Update,” Senate Committee on

Government Operations, Vermont General Assembly, Jan. 29, 2015.– “Vermont Genuine Progress Indicator: 2012 Update,” Senate Committee on

Government Operations, Vermont General Assembly, Jan. 7, 2014.

• Press– “Most U.S. States face ‘Progress Recession’,” UVM Communications, Jan. 26, 2018.– “How’s Vermont Doing? Economic Indicators and What They Tell Us,” Vermont Edition,

Vermont Public Radio, Aug. 31, 2015.– “Study Finds Mass. Economy Actually Lagging,” Boston Globe, Feb. 5, 2015.– “Other States to Join Vermont to Develop Genuine Progress Indicator,” Vermont Public

Radio, Oct. 18, 2013.

List of products• Invited Presentations (J.D. Erickson)

– Keynote Speaker, “We the Planet: Building an Ecological Economy in the Age of Humans,” Iowa Environmental Council, 2016 Annual Conference, Oct. 6, 2016.

– “Policy Choices for a Genuine Vermont Economy,” Legislative Briefing, State House, Montpelier, Dec. 1, 2015.

– “Community Conservation and the Value of Town Forests,” Community Conservation Summit: Celebrating 100 years of Vermont Town Forests, Randolph, VT, Nov. 7, 2015.

– “Setting Course Towards a Genuine Economy,” Society, Culture, Thought Colloquium Series, Bennington College, VT, May 11, 2015.

– “Economics of Conservation,” Vermont Housing and Conservation Board, Mar. 11, 2015.– Plenary Panel, “The White Elephant: Counting Externalities,” w/ Janet Milne, Renewable

Energy Vermont, Oct. 17, 2014.– “Massachusetts Genuine Progress Indicator: Findings and Recommendations,”

Roundtable Discussion on Genuine Progress Indicator, Massachusetts Budget and Policy Center, Boston, MA, May 19, 2014.

– Keynote Speaker, “Metrics and Milestones for Charting Progress in the Genuine Economy,” Annual Meeting of the VT Chapter of the Risk Management Association, Montpelier, VT, May 22, 2014.

– “Toward a Genuine Economy: Field Notes from the Green Mountain State,” Memorial University of Newfoundland, Corner Brook, Newfoundland, Mar. 18, 2014.

– “Charting Progress in the Genuine Economy,” Vermont Leadership Institute, Grafton, VT, Mar. 14, 2014.

– Keynote Speaker, “Bold is Beautiful: Metrics and Milestones for Charting Progress in the Genuine Economy,” Annual Meeting of the Addison County Economic Development Corporation, Dec. 5, 2013.

– “Beyond GDP: Measuring and Moving Towards Genuine Economic Progress,” Economic Analysis and Research Network (EARN) 2013 Conference, Philadelphia, PA, Oct. 8, 2013.

List of products• Papers

– Fox, M.J.V. and J.D. Erickson, “Genuine Economic Progress in the States: a 50-State Study and Comparative Assessment,” Ecological Economics 147, 29-35, 2018.

– Fox, M.J. and J.D. Erickson, “Design and Policy Relevance of the Genuine Progress Indicator: Lessons Learned from GPI 1.0,” under revision for submission to Ecological Economics.

– Rodriguez, E. and J.D. Erickson, “GPI in the Woods: Towards a More Accurate Estimate of Forest Value in the Genuine Progress Indicator,” working paper.

• Ph.D. Dissertations– Mairi-Jane Fox, “Designing for Economic Success: A 50-State Analysis of the Genuine

Progress Indicator,” Natural Resources, UVM, Feb. 2017.– Eduardo Rodriguez, “Changing Forests: Modeling Future Forest Succession, Timber

Harvesting and Ecosystem Services Tradeoffs in Vermont,” Natural Resources, UVM, expected completion by August 2018.

• Leveraged Grants– “The Economics of Conservation,” Vermont Agency of Natural Resources, 2013-2015,

$35,719 (+ $10,909 match). – “Mobilizing the Genuine Progress Indicator Across the States,” Gund Institute

Collaborative Research Grant, 2014-2015, $9,500.– “Massachusetts GPI Study,” Demos consulting contract, Gund Institute

Income/Expense Unit.