The usefulness of aggregate indicators in policy making and evaluation: a discussion with application to eco-efficiency indicators in New Zealand

Abstract

Aggregate indices can assist decision-making by summarising a complex array of information. However, little research has been conducted on aggregate environmental indicators. The purpose of this paper is to address the debate surrounding aggregate environmental indices. In doing so, the paper highlights the strengths and weaknesses of aggregate indices for use in decision-making. We conclude that aggregate indices do have a role in assisting decision makers, as long as they are not used in isolation from more detailed information. The paper addresses several methodological issues that must be addressed when calculating aggregate indicators including selection of appropriate aggregation functions, weighting, and selecting variables for inclusion in the aggregation function. The methodological issues are applied to a case study of New Zealand data. Specifically, we apply principal components analysis (PCA) to eco-efficiency indicators. This case study reveals that PCA is an effective approach to aggregating eco-efficiency indicators. In doing so, we have identified an aggregation technique that is appropriate for increasing-scale indicators and can assist decision makers by reducing redundancy in the indicators matrix, while providing results that are consistent with the more detailed information.