Quantifying environmental sustainability using an aggregate index reflecting increasing marginal damage costs

Abstract

In an environmental economics context increasing marginal damage costs are usually assumed, and a methodology for calculating a sustainability index in accordance with this assumption is presented. The aggregate index is constructed from an n-element vector including the values of the (n) subset indicators, and the length of this vector in Euclidian space is perceived as an alternative measurement scale. Increasing values for any of the elements in the vector will influence the total result more than proportionately and hence in accordance with an assumption of increasing marginal damage costs.

Notes

¹Must be adjusted according to whether ‘more is better’ or ‘more is worse’ for the components included to allow further aggregation of the rescaled components.

²The use of angular separation comes from Jaffe (1986), applied in relation to R&D topics, and also used by Anderson (2009) concerning grape varieties.

³The data are from the 2005 version of the ESI, cf. the references. A more recent source is the 2008 Environmental Performance Index (EPI); http://www.epi.yale.edu.

⁴Only data at the five-component level are available from the ESI homepage and therefore the data being used to calculate the results in Tables 1 and 2 are not exactly the same as the data used for the ESI ranking that is based on the 21 indicators.