Review of Environment, Energy and Economics - Re3 Trends and Challenges for Environmental-Ecologic Indicators and Assessments
 

 

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Jan
30
2014
 
Trends and Challenges for Environmental-Ecologic Indicators and Assessments
by Francesco Bosello and Lorenza Campagnolo
Environment - Articles
 

Last December, within the framework of the FP7 project E-Frame, FEEM  hosted the Environmental Indicators Workshop organized by FEEM with the support of the University of Siena. The workshop aimed to give an overview of the current state of the art of environmental indicators, presenting drawbacks of the past approaches, strengths of new methodologies and the challenges ahead. It was structured into three thematic sessions. The first focused on the technicalities in constructing environmental indicators with a particular emphasis on the ecological perspective; the second analysed environmental indicators as part of an integrated economic-environmental account and of the natural capital concept. The final session explored environmental indicators in the wider dimension of policy evaluation and policy making.

Keywords: Environmental Ecological Indicators, Sustainable Development

JEL Classification: Q01, Q56, Q57

Suggested citation: Bosello, Francesco and Campagnolo, Lorenza, Trends and Challenges for Environmental-Ecologic Indicators and Assessments (January 30, 2014). Review of Environment, Energy and Economics (Re3), http://dx.doi.org/10.7711/feemre3.2014.01.004

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The background
The 21st century has seen an unprecedented economic and social development and, at the same time, increasing threats for the Earth system and its functioning. Human activity is triggering the planetary limits reducing biodiversity, exerting pressure on natural resource assets, altering the climate equilibrium (Rockström et al., 2009; OECD, 2013). The complexity of the problem advocates the use of synthetic measures to assess the current situation and to fix some boundaries guaranteeing the integrity of the system. The reliability of indicators measuring environmental performance has been improved in the past decades, covering more and more phenomena and improving the measurement tools. Moreover, since the first World Earth summit (1992), it has become evident that economic and social dimensions, causes and effects of environmental performance, have to be part of a comprehensive assessment to guide the future evolution towards a sustainable development path. The recent Inclusive Green Growth initiative offers a recipe in this direction suggesting a paradigm of balanced economic, social and environmental development (GGKP, 2013; Hallegatte et al. 2013). But much more needs to be done.

Integrating top-down and bottom up approaches in measuring environmental sustainability
The first difficulty in measuring state and evolutionary trends characterizing the environmental dimension is its complexity. Depending on the angle of the investigation it may involve a multiplicity of systems/sectors (lithosphere, biosphere, hydrosphere, atmosphere); a multiplicity of services (those provided by the “environment” are traditionally listed into: provision of materials and physical space; absorptive capacity; life support; recreation; those specific to the ecosystem dimension are well known: provisioning, regulating and cultural services) a multiplicity of scales (which span form the “cell” or the site to the global level); a multiplicity of actors/stakeholders (policy makers, businesses, citizens, the research community itself). This complexity becomes even wider when the aim of the analysis is to test effectiveness, efficiency, political feasibility and social acceptability of environmental policies. When this is the case, the environmental dimension cannot be conceived independently of the social, the economic and the institutional domains which enter the analysis in full right. This obviously influences directly not only the indicator choices, but also the tools and methods to declare, classify and mobilize indicators as a function of their (perceived) pertinence to a specific assessment context.

Against this background, the recent environmental and ecological indicator literature presented two parallel trends. On the one hand, many aggregation methodologies, aggregated and composite indicators flourished in a natural attempt to resolve this complexity and convey clear and holistic messages to practitioners, policy makers, stakeholders, but also to be more transparent and reach the general public. In this vein: the ecological footprint (Rees and Wackernagel, 1994; Wackernagel and Rees, 1996, 1997), which is probably the best example of a successful communication device for its widespread use outside the academia, but also the Yale Environmental Performance Index (EPI) or more complex indicators like work-energy or ex-ergy (Jorgensen, 2010).

On the other hand, upon recognition that aggregating environmental sustainability in just one index can be misleading and furthermore always involves subjectivity in defining and weighting its different components, an increasing number of new indicators was produced addressing specific aspects of environmental sustainability rather than environmental sustainability as a whole. This is witnessed since the early ‘90s not only by a real booming of “footprint indicators” like e.g. the water footprint, the material footprint (Wiedmann et al., 2013), the ecosystem service footprint, but also by the increasing complexity of existing composite indicators which are constantly enriched by new components [Note 1].

Composing the dichotomy between top-down or aggregated measures of environmental sustainability, and bottom-up, specific indicators, remains thus the first and partially unresolved challenge for environmental indicators. This is particularly important considering that this separation reflects and affects that between science and policy. Indeed the closer an indicator is to raw data - differently said, the highest its degree of specificity - the closer it is to what it measures and its degree of interpretability. This higher exactness, so important for scientifically sound analyses, is however inversely proportional to its ability to offer a comprehensive measure of environmental sustainability. This last however is what is mostly sought by policy making, in other words one of the most important requisites to make the indicator policy relevant. 

Different strategies are being followed to address this issue. Aggregate environmental and ecological indicators are seldom used in isolation, but are usually supported by the information provided by larger indicator sets and richer analyses. Composite indicators are increasingly transparent in the description of their single components, their weighting, aggregation processes and sources. Interestingly, the opportunity offered by recent development in communication technology, and in capability and flexibility of computer software, also allowed a higher interaction between indicators developers and users, extremely useful to increase the transparency and acceptability of complex environmental sustainability assessments. This led for instance to the development of increasingly sophisticated decision support systems or deliberation support tools. These go beyond the concept of an end user “at the end of the pipe”, to actively involve relevant stakeholders in each phase of the environmental indicators based decision process: from the pertinence of the indicator proposed to the weights associated to each of these, to the targets to be pursued or the scenarios to be considered.

All this said, ultimately, great care has to be used in deciding when it is reasonable to resort to aggregation and through which methodologies. For instance aggregate indicators of environmental or ecological sustainability seem much more viable when the scale of the investigation remains limited (say e.g. a community or the urban level or the problem well circumscribed), they are more problematic when conducted at the country or global level. This is reflected also by the fact that there are many examples of aggregate indicators actively informing policy decision at the local level and very few at the country level. Probably more widely accepted or established methods and criteria for indicator aggregation still need to be developed.

Ex ante indicator based assessments of environmental performances
Another area that environmental/ecological indicator research can expand to improve its policy relevance is that of ex-ante, long-term assessment of environmental sustainability. The problem here is not that existing indicators are not fit to the purpose. In fact there are many examples where both ecological and environmental indicators have been used to assess potential future effects of given policies. The criticality relies on the uncertainty of the characteristics of the future reference scenarios and on the availability of future data, the former increasing and the latter decreasing, with the time span of the investigation. This area is thus one in which mutual benefit can derive from the cooperation of indicator developers with economic ecological modelling researchers who have a long expertise in the analysis of long-term scenarios.

Monetization
The issue of monetization, strictly linked to the aggregation problem, is another challenge for indicators of environmental sustainability. Money is, at least apparently, an information rich and unifying metric. Nonetheless, even abstracting from ethical considerations, it is a poor indicator of state and trends related to many environmental/ecological aspects like for instance biodiversity/ecosystem life support services. These are for the most part out of market transactions and thus there are no prices offering a support to assess changes in scarcity. Standard approach in environmental economics is to measure changes in ecosystem and their services using revealed preferences (production function, hedonic pricing, transportation cost, averting behaviour) or stated preference (contingent valuation, choice experiment) techniques. But these methodologies ultimately translate again a non use value into a money assessment. The ecological perspective is quite different. The basic idea remains to measure “ecosystem integrity”. According to Kay (1993) “An ecosystem has integrity if it retains its complexity and capacity for self-organization (arguably its health) and sufficient diversity, within its structures and functions, to maintain the ecosystem's self-organizing complexity through time“. But the indicators chosen are meta-economic like biotop heterogeneity, species abundances, biotic water flows, exergy capture etc. The economic and ecologic approach thus tends to measure different things and to convey different information. These are clearly complementary rather than substitute, it thus seems particularly appropriate to foster  communication across the two disciplines and to embed ecological approaches into the beyond GDP debate.

Assessing the effects of environmental policies
As anticipated, also indicator based assessments of environmental policies are problematic and this depends again on their multidimensionality. Policy effects materialize at different levels: in the perception of actors, in changing agents’ behaviour, in producing the desired environmental outcome. Accordingly, even quantifying apparently simple attributes like policy stringency or effectiveness may require a multiplicity of methods and measures depending on the context: “perception surveys”, shadow cost estimates, environmental performance based measures etc. The same can be said when policy costs need to be assessed. In principle there are clear indicators of costs: direct and indirect effects on productivity growth, effects on competitiveness and in terms of additional administrative burden. The use of composite indicators seems thus particularly appropriate. In practice, each of the aspects mentioned pose very difficult problems of data availability to substantiate the indicators and their interpretability.

Data Challenges
Furthermore, data-driven challenges affect environmental indicators and their informative content. In general, there is a common need in environmental and ecological economics to improve data quality and consistency of indicators, to harmonize their definitions and measurement methods. But this has also a particular relevance for statisticians and statistical offices themselves. For instance, in recent years an increasing number of Multi Regional Input Output (MRIO) databases has been made available. These are global databases used in multi country multi sector General Equilibrium Models, like the GTAP database (Narayanan and Walmsley, 2008; Narayanan et al., 2012), or the OECD-WTO TiVA database (2013), or developed within Sixth or Seventh Framework Programmes (FP6, FP7) research projects like the FP6 EXIOPOL , or the FP7 CREEA  and WIOD . The great advantages of these data bases are to provide internally consistent records of inter and intra country exchanges of inputs, goods and services, with a high sectoral detail. This offers a great potential for the computation of country-level indicators of environmental performance like the carbon or the material footprint, but also energy efficiency and intensity. Paradoxically however, this abundance can be a problem when non negligible differences across databases are observed. The sources of inconsistencies are many: different raw data across databases due to different data access, different methodologies applied to recording some data types, different methodologies used to resolve data asymmetries. In particular, major inconsistencies are observed in the treatment of international trade, import-export flows and when the methodologies applied to MRIO databases are replicated at the national level using national accounts. It is obvious that if (footprint) indicators are highly sensitive to the statistical methodologies used, then the comparability of different national measures is very weak. One potential solution is offered by Single-country National Accounts Consistent (SNAC) footprint indicators. This methodology consists in adjusting the MRIO database, especially international trade data, to conform to the national and environmental accounts. It has been successfully applied to the Netherlands to calculate the adjusted carbon footprint. The method is generic in the sense that other countries can re-use the procedure to adapt MRIO to their own official statistics. In general an effort is required to uniform statistical methodologies through co-operation between statistical offices, between MRIO developers and statistical offices, between statistical offices, MRIO developers and ecological and environmental economists which develop new indicators.

Summary and conclusions
In summary, both environmental and ecological indicators are useful investigation and interpretation tools to assess environmental sustainability and the effect on this of human pressures among which environmental policies. There are also important success stories of environmental indicators (e.g. the ecological footprint or of the EPI) able to communicate the problem of environmental sustainability outside the academia and to be vocal in the policy debate at the global level. Nonetheless, environmental and ecological indicators are more influential on the policy decision process at the local level.

Major challenges :

  • A still unresolved issue pertains to the dichotomy between scientific exactness, informative content and precision that are higher the closer environmental indicators are to raw data, and their ability to convey easily interpretable messages on overall environmental sustainability, which requires elaboration and aggregation of indicators. A viable strategy is to use aggregation methodologies together with specific indicators and to increase their transparency also actively involving stakeholders in each step of the decision/evaluation process.
  • A very similar problem is related to monetization. Money metric can be a useful unit of measure, but cannot capture many aspects of environmental sustainability. Ecological indicators in this case can provide a useful support. Ecological concepts could/should be thus fruitfully included in the beyond GDP debate.
  • Environmental policy assessment remains a complex exercise as aspects like policy stringency and policy costs are difficult to capture. Different methodologies have to be applied and the challenge is to derive a coherent picture from all the different information. 
  • An under developed research area and of unexpressed potential is that of the use of environmental indicators for long-term assessment. This would require more interaction between indicators developers and ecological/environmental economics modellers, used to scenario analyses.
  • Finally, great benefits in terms of, informative capacity, robustness of result, and ultimately credibility and policy influence of environmental indicators would be gained by fostering communication across different disciplines especially environmental economics, ecological economics and statistics. There is indeed a basic need to uniform terminologies, concepts and statistical methodologies. This last aspect also  calls for stricter linkages across different statistical offices, databases and indicator developers.

Notes

[Note 1] An enlightening example is the recent addition in the EPI of a “trend” component allowing the capturing of the improvement of a country's environmental performance and not only its “level” and the next-future development of water quality - wastewater management and environmental governance components. 

References

GGKP (2013), Moving towards a Common Approach on Green Growth Indicator. A Green Growth Knowledge Platform Scoping Paper, GREEN GROWTH KNOWLEDGE PLATFORM

Hallegatte, S., Heal G., Fay, M, and D. Treguer (2013) From Growth to Green Growth. A Framework, World Bank Policy Research Working Paper 5872

Hoekstra A.Y., Chapagain A.K., Aldaya M.M. and Mekonnen M.M. (2012), The water footprint assessment manual: setting the global standard, Earthscan, ISBN: 978-1-84971-279-8.

Jørgensen S.E. (2010). Eco-exergy as ecological indicator. In: Jørgensen, S.E., Xu, F., Costanza, R. (Eds.), Handbook of Ecological Indicators for Assessment of Ecosystem Health.  2nd ed. CRC, Baton Rouge, Florida, pp. 77–89.

Kay, J.J. (1993). On the nature of ecological integrity: some closing comments. In: Woodley, S., Kay, J. & G. Francis (eds.): Ecological integrity and the management of ecosystems. University of Waterloo and Canadian Park service, Ottawa, 201-214.

Narayanan G.B., Aguiar A. and McDougall R. (2012), Global Trade, Assistance, and Production: The GTAP 8 Data Base, Center for Global Trade Analysis, Purdue University.

Narayanan G.B. and Walmsley T.L. (2008), Global Trade, Assistance, and Production: The GTAP 7 Data Base, Center for Global Trade Analysis, Purdue University.

OECD (2013), Environment at a Glance 2013: OECD Indicators, OECD Publishing

Rees W. and Wackernagel M. (1994), Ecological footprints and appropriated carrying capacity: Measuring the natural capital requirements of the human economy, in Jansson A. et al.. Investing in Natural Capital: The Ecological Economics Approach to Sustainability. Washington D.C.:Island Press. ISBN 1-55963-316-6

Wackernagel M. and Rees W. (1996), Our Ecological Footprint: Reducing Human Impact on the Earth. Gabriola Island, BC: New Society Publishers. ISBN 0-86571-312-X.

Wackernagel M. and Rees W. (1997), Perceptual and structural barriers to investing in natural capital: Economics from an ecological footprint perspective, Ecological Economics, 20: 3-24.

Wiedmann T.O., Schandl H., Lenzen M., Moran D., Suh S., West J. and Kanemoto K. (2013), The Material Footprint of Nations, PNAS, doi: 10.1073/pnas.1220362110



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Francesco Bosello, associate researcher, Fondazione Eni Enrico Mattei

Lorenza Campagnolo, junior researcher, Fondazione Eni Enrico Mattei
   
 
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