Constructing aggregate environmental-economic indicators: a comparison of 12 OECD countries

The application of aggregate indicators in environmental-economic research has received little attention. An important reason is the incompleteness of environmental data. This article presents a systematic approach to constructing indicators of the environment and economy on a macro level. It includes a distinction into the following categories: the volume of economic activities as an indicator of potential environmental pressure; actual environmental pressure; environmental quality; and environmental policy. In each category aggregate indicators are calculated for 12 OECD countries, mostly based on data from 1993; and the correlation between these indicators is examined. Significant correlation is found between the economic activity indicators (or “potential” environmental pressure) and the actual environmental pressure and environmental quality, whereas a weak correlation exists with these indicators and two types of aggregate indicators of environmental policy. Because of some arbitrary choices, which are inevitable, the results must be judged with caution. Several suggestions are offered to improve the calculation and comparison of aggregate indicators.