Transcript Transport & Mobility Leuven

WP4: Sustainability
indicators
Christophe Heyndrickx
20/07/2015
Title
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Common approaches
• ‘Three pillar’ approach: sustainable development
refers to progress in economic, social and
environmental systems. Each system is crucial and
indicators are interdependent.
• Ecosystem health approach: economic and social
system are subsystems of global environment. Health
of the ecosystem must be enhanced. Human activity
creates pressure on the environment, which needs
adequate response (OECD PSR framework)
• Resources and capital approach: Extend economic
capital with notion of ‘resource’ and ‘social’ capital.
Real economic development increases the total capital
(real or genuine savings framework)
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Goals sustainability
EU Sustainable development framework:
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Environmental protection
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Social equity and cohesion
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Economic prosperity
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Meeting international responsibilities
Russian context
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Unfavorable demographic situation and low labour
mobility
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Large areas in very cold regions (economic coldness)
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Misallocated investments in infrastructure and economic
development under Soviet regime
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Abundant natural resources (gas, crude oil, timber)
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Polluted areas and health problems
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Increasing inequalities in income and regional
development
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Poor institutional development
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Large informal economy
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Sustainability policies
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State strategy on nature protection and sustainable
development (1994): gradual reproduction of the natural
ecosystems to guarantee stability of environment.
State Concept on nature protection and sustainable
development (1996) adopted and published.
The first long-term forecast for 1996-2005.
In the framework of this Federal Strategy two-years action-plans
are processed and put into practice.
Each two-year plans consists of two parts: a list of environmental
and sustainable development programmes and adequate normative
legislative base.
Number of the Federal ecological programmes is about thirty.
The next stage of environmental and sustainable development
programming concerns the estimation of the share of the ecological
parameters in the system of macroeconomic indicators (GNP,GDP).
The federal programming (including the system of ecological
standards) is used as the basis of it in different regions and sectors
of the national economy.
Regional and sectoral authorities implement similar forms of
environmental and sustainable development programming
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Policies?
• Investment in regional infrastructure and
development
• Reducing restrictions on migration (international and
interregional)
• Abatement of polluted lands
• Improving technology of now polluting industries
• Putting emission restrictions and standards on
polluting industries
• Decreasing energy intensity of economy
• Preserving valuable nature areas
• Decreasing share of informal economy
• …
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Indicators
Scientific
Functional
Pragmatic
Measurable and
quantifiable: they
should adequately reflect
the phenomenon
intended to be measured
Relevant: for all
stakeholders involved
Understandable: should be
easily understood by
stakeholders
Meaningful: appropriate to
the needs of the user
Leading: so that they can
provide information to
act on
Feasible: measurable at
reasonable effort and
cost
Clear in value: distinct
indication which direction
is good and which is bad
Possible to influence:
Indicators must measure
parameters that may be
modified
Coverage of the different
aspects of
sustainability:
indicators address
economic, environmental
and social dimensions
Clear in content: measure
in understandable units
that make sense
Comprehensive: the
indicator set should
sufficiently describe all
essential aspects under
study
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Gross domestic product
• Crossing point of consumption – production and investment
• Global ‘turnover’ of the economy
• Fits perfectly within CGE framework
Much criticized for good reasons!
• Does not distinguish “goods” or “bads” : remediary
measures are valued in same ‘currency’ as prevention
• No accounting of informal sector
• External costs are not accounted for
• ‘Gross’ meaning no impact of depreciation
• Does not take into account damages to environment
• Distributional assumptions (poverty and inequality)
 Trying to push GDP as a single metric for development is
very ‘unsustainable’
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Replacing GDP
Single indicator systems, based on similar methodology
and economic data as GDP.
• ISEW = Personal/household consumption expenditure adjustment for income inequality + services from domestic
labour - costs of environmental degradation - defensive
private expenditures + non-defensive public expenditures +
economic adjustments - depreciation of natural capital
• GPI = Personal/household consumption expenditures +
value of household work + value of volunteer contribution
work - crime factor - environmental degradation factor
(resource depletion, ozone depletion, pollution ... ) - family
breakdown factor - overextended worker stress factor exploding consumer debt - inequality of distribution of
wealth and income
• Genuine savings: Recalculates national savings by
accounting for depreciation of produced assets, depletion of
natural resources, the value of global environmental
pollution (including loss of welfare in the form of human
sickness and health), and investments in human capital
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Alternatives to GDP
Single indicators operating on a different basis than
GDP
• Ecological footprint (EF): environmental sustainability of
production, seen as the amount of ‘resources’ used by
respective consumer. Output in terms of ‘land’
• Happy Planet Index (HPI): The indicator shows the
ecological efficiency with which the well-being is delivered.
• Human Development Index (HDI): composite index in
three basic dimensions of human development (life
expectancy, enrolment ratio and GDP) (UNDP, 2004)
• Environmental Sustainability Index (ESI): Large
composite indicator building on 5 dimensions - comprising
in total 21 underlying indicators (Esty et al., 2005)
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Indicator systems
• EU Sustainable Development Strategy (SDS):
Ten themes, reflecting the seven key challenges, prosperity
and governance. Hierarchically divided in ‘lead indicators’
(1), ‘priority indicators’(2), ‘explanatory indicators’ (3)
• Pressure-state-response model: OECD framework to
map human pressure on development, state of the
environment and response of policy makers.
• Barometer of sustainability: Indicator framework to map
human development and state of environment on 2-D set.
Indicators are scored according to performance in linear set
(0-100). Total score is aggregated to A) human B)
environmental development
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(S)CGE modelling and SIA (1)
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Böhringer, Christoph and Andreas Löschel (2006), Computable
General Equilibrium Models for Sustainability Impact Assessment,
Ecological Economics 60 (1), 49-64
Scrieciu S. (2006), How useful are CGE models for sustainability
impact assessment ?
George C., Kirkpatrick C. (2007) Impact assessment and
sustainable development: European practice and experience
Feruguson L., McGregor Peter G. et al. (2005) Incorporating
sustainability indicators into a computable general equilibrium
model of the scottish economy, Economic Systems Research,
Volume 17, Issue 2 June 2005 , pages 103 - 140
Wing Sue Ian (2004) Computable general equilibrium models and
their use in economy wide policy analysis, MIT technical note on
EPPA model
…
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(S)CGE modelling and SIA (2)
• Strong basis in ‘neoclassical’ modelling and microeconomics.
• Basis in modelling economy, quite weak in social subsystem
and very limited in environmental system
• Small CGE models: at least 30-40 variables
• Large scale and regional CGE models: thousands of
variables
• Without assessment framework: “flying blind” (Prescott R.,
Halen D., 2002)
• Sustainability indicators that can be integrated in CGE
modelling are quite limited and often linked to economic
subsystem
• Examples of CGE models used for sustainability
assessment: GEM-E-3, EPPA, WorldScan, MONASH, GTAP
• In general, there is no specific model, which fits all
requirements for comprehensive SIA, but rather a package
of models or methods depending on the policy measure or
issue to be assessed and the availability of data (Böhringer
C., Löschel, 2006)
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Indicators in SCGE models (1)
• Quite ‘narrow’ set of indicators
• No coverage of ‘descriptive’ indicators, need for link with
variables of model
• Almost full coverage of long term macro-economic
indicators: GDP, Consumption, Income, Savings,
Investment, Price changes,…
• Social and environmental indicators need link with
other databases (not within SAM data)
• Social indicators: introduce multiple households,
unemployment, skill levels, income distribution,
employment in informal sector, etc..
• Environmental indicators: introduce database of emissions,
energy inputs, land use, waste, abatement costs, etc.
• Consistency of SAM and additional data  hard task!
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Indicators in SCGE models (2)
Without additional data on environment and society:
• Environment:
– energy use (value) in terms of GDP
– share of industry in total production or GDP
– energy intensity of goods traded on market
(import/export)
– export/import of minerals and natural resources
(primary goods)
• Social:
– interregional inequality of income, consumption and
other variables (Gini index, Atkinson index or similar)
– unemployment and regional inequality in unemployment
rates (if unemployment is modelled)
– Herfindahl index on shares of employment within
industry
– Equivalent variation (utility) by region
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Economic indicators
Build in all ‘standard’ economic indicators
• GDP: ‘benchmark’ indicator and important as a composite
to other indicators
• Price index: change in ‘real price’ level, for example due to
taxation
• Investments
• Household consumption
Government:
• Public budget
• Tax revenues
Foreign sector
• Trade openness
• FDI
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Economic indicators
Theme
Indicator
Level
Unit
Economic
production
GDP
National
Regional
Industry/Services/Governm
ent
Monetary
Trade balance
Current account
deficit/surplus
National
Monetary
Trade openness
(Export + Import) /
GDP
National
Regional
Unitless
Public budget
Public
deficit/surplus
by GDP
National
Percentage
Investments
Investment share in
GDP (FDI)
National
Regional
Monetary
Price level
Change in relative
price compared
to baseline
National average
Regional average
Goods (by type)
Percentage
Consumption
Household
consumption
National
Regional
Monetary
Percentage
Government income
Tax revenues
National
Regional
Monetary
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Environmental indicators
• Database on emissions: GHG and non-GHG gasses
– Emissions (damages) / GDP
• Database on waste:
– Waste (damage) / GDP
• Introduce land use via production function: integrate land
types and land productivity
– Productive land / industrial production
– Land type conversion
• Link environment and social system: effect on health and
labour supply of emissions and pollution (GEM-E-3)
– Medical expenditures due to environmental damage
– Labour supply losses due to environmental damage
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Environmental indicators
Theme
Indicator
Level
Unit
Climate change
Greenhouse
emissions
gas
National
Regional
Industry
Monetary (damages)
Tonnes
Energy
Energy intensity
GDP
by
National
Regional
Monetary
Tonnes
Air pollution
Air
pollution
(damages) of well
know substances
National
Regional
Industry
Monetary
Tonnes
Waste
Generated waste
industries
National
Regional
Industry
Monetary(damages)
Tonnes
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by
Title
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Social indicators
• Income distribution: household type
– Poverty (Incidence, Intensity, Inequality)
– Income inequality (Atkinson index or Gini coefficient)
• Expenditures by household type
– Welfare by household type (Equivalent variation)
• Skill types and relative endowment by household
– Unemployment and wage by skill type / household
• Informal sector
– Share of labour in informal sector
• Household savings
• Change in labour supply
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Social indicators
Theme
Indicator
Level
Unit
Poverty
Mean income of ‘poor’
household
compared to
poverty line
National
Regional
Value between 0 and
1
Inequality in income
distribution
Atkinson index
National
Regional
Value between 0 and
1
Tax system
Kakwani index
National
Regional
Unitless
Income
Household disposable
income
National
Regional
Monetary value
Unemployment
Unemployment rate
National
Regional
Household type
Percentage
Welfare
Utility based index :
equivalent
variation
National
Regional
Unitless
Concentration of
production
Herfindahl index for
concentration
Regional
Unitless
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Single indicator for welfare ?
Nearly impossible to have overall indicator
Candidates:
• Atkinson index: implicit assumption of “social welfare
function” with chosen equality preference
• Equivalent variation: utility based household
consumption indicator, which can be expended in a similar
way as the ISEW/GPI indicators with resource/environment
damages
• Genuine savings: total domestic investment –
depreciation – damages to natural resources and
environment + investment in human capital
No single ‘perfect indicator’ and no single ‘perfect’ framework.
CGE modelling: combine Atkinson (inequality) and Equivalent
variation (consumption based utility)
Genuine savings: possible, but harder to implement
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Indicator framework
• Score indicators to performance
• Choose indicators in terms of policy simulation
• Compare different scenarios, where alternative is
scored to baseline scenario in different dimensions
• Apply indicators that can be aggregated and
disaggregated easily over household
groups/sectors/regions
• Economic indicators: common, little restriction on
their use
• Social and environmental indicators: need for a
consistent database or additional modules
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Policy assessment
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Adapt indicator framework to policy
Create a baseline scenario (dynamic or static)
Check alternate scenarios
Compare costs & benefits
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(avoided) damages to environment
change in equity (Atkinson index)
welfare (equivalent variation)
domestic production
competitiveness of economy
…
• Score policy effect on different dimensions as in
‘barometer of sustainability’ approach
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Thank you
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