Better composite environmental performance index

Abstract

After reviewing existing environmental performance indices the paper suggests an index of overall environmental performance in terms of geometric mean and avoiding scaling or finding weights for component indicators which may be independent or have correlations with different degrees. The suggested index satisfies many desired properties including monotonically increasing, time reversal test, formation of chain indices, independent of change of scale, reduction of substitutability between component indicators, etc. and facilitates further statistical analysis like estimation, confidence interval and test of significance and identifies the critical areas requiring corrective measures. Such identification is important from a policy point of view. Separate indices for core areas or drivers can be constructed easily by clumping relevant indicators pertaining to each core area. The method helps to reflect path of improvement registered by a country or a region over time. Such paths may provide new criteria for comparison of countries across time.