How can Multi-criteria Decision Analysis contribute to environmental policy making? A case study on macro-sustainability in Germany

8/12/2019 How can Multi-criteria Decision Analysis contribute to environmental policy making? A case study on macro-sustain…

http://slidepdf.com/reader/full/how-can-multi-criteria-decision-analysis-contribute-to-environmental-policy 1/26

Third International Conference of the European Society for Ecological Economics

May 3-6, 2000

Vienna, Austria

How can Multi-criteria Decision Analysis contribute to environmental policy

making? A case study on macro-sustainability in Germany

Ines OmannKarl-Franzens University, Department of EconomicsUniversitaetsstrasse 15/F4, A-8010 Graz

phone. +43-316-380 3458, fax. +43-316-380 9520, email. [email protected],url. http://www.kfunigraz.ac.at/vwlwww/omann

Abstract:When it comes to decision making in the field of environmental policy, there is still a lack of usefuldecision aid methods. This paper intends to show how multi-criteria decision analysis (MCDA) asan useful decision aid method could help to reduce inefficiencies in macro-related environmental-economic-social decision making. MCDA methods differ from conventional methods as they are

taking into account a set of objectives and criteria, that can be conflictual, multidimensional,incommensurable and incomparable. The information contained in the criteria and concerning theeffects of the decision can be uncertain as well as qualitative. As decisions in the field of environmental problems possess mostly the characteristics just mentioned, MCDA can beconsidered as a useful decision aid approach.The theoretical elaboration of multi-criteria methods has been improving during the last years, butthere is a lack of practical examples, especially for macroeconomic decision problems. A research

project, which was recently completed at the Wuppertal Institute for Climate, Environment andEnergy, is used to demonstrate the usefulness of MCDA. MCDA has not yet been applied, but itcould improve the results and their usage. Within the project different sustainability scenarios weredesigned, containing a set of different policy elements and measures to be implemented. The

scenarios, their evaluation, as well as a consultation process with different social groups and expertsand interdisciplinary in-depth case analysis were used to derive policy strategies. These strategiesform the result of the project as well as the base for a possible multi-criteria analysis. The aim of the

paper is (a) to show the improvements MCDA could have in macro-related environmental decisionmaking with special emphasis to the project and (b) to give a first idea which method can therefore

be appropriate.

Keywords: Multi-criteria decision analysis, environmental policy for sustainable development,macro-related decision making



3rd Biennial Conference of the European Society for Ecological Economics, Vienna, May 3 – 6, 2000 2

1. Introduction

When it comes to decision making in the field of environmental policy, there is still a lack of

useful decision aid methods. Decisions in complex policy fields are quite often inefficient, because

it is not possible for decision makers to consider all relevant aspects of the different options and

their impacts on various groups of the society. Thus this paper intends to show how multi-criteria

decision analysis could help to reduce inefficiencies in macro-related environmental-economic-

social decision making.

Scientists are often engaged to suggest solutions for problems at hand, for example

suggestions for environmental policy. But they can deliver various suggestions for policy strategies,

whereas the decision makers have to make one decision out of many options. This decision can

hardly be unequivocal. The responsibility of the scientist is quite limited. She1

is responsible for scientific legitimisation of the delivered result but not for the implementation of the recommended

strategies and its impacts. If there are more scientists from different disciplines involved, the

various suggestions are disciplinary correct, but usually important aspects, that belong to another

discipline, for the solution are left out of consideration. But the decision maker has the duty to

consider all relevant aspects. Hence there is a gap between the end of the project or the end of the

scientists' work and the political decision or implementation of a chosen option. Choosing just one

suggestion is thus not sufficient, but what else can be done? More support is needed. The scientistsor other advisers can give this support either because of their knowledge or with the help of a

support tool, such as the multi-criteria decision analysis.

Let us for instance consider the case of sustainable development. Decision making at the

macro-level concerning policy strategies towards sustainable development requires well informed

and educated decision makers with a lot of time dedicated to examine the impacts and the

acceptance of their decisions. Different legitimate aims, leading to trade-offs have to be weighed

against each other. To increase the acceptance of the decision, different stakeholders should be

involved. As there is usually a lack of time and knowledge (the field of sustainable development is

extremely diverse and complex, advanced decision making and involving stakeholders takes a lot of

time), a research project should not stop with the delivering of strategies but should provide a

supplemented decision aid.

A tool widely used and suggested to be helpful with respect to environmental decision

making especially on the micro-level is the cost-benefit-analysis (CBA). As long as CBA is

understood as a complete monetarisation of costs and benefits and the selection of the best

1 I would like to use the female form for the personal form. Of course men and women are included.




alternative according to a monetarised economic assessment, i.e. to a single number, this method

develops a lot of weaknesses when applied to complex issues (see for this argument 3.1). As an

alternative to CBA on the micro-level the concept of multi-criteria decision analysis (MCDA)

among others exists.

Decisions on the macro-level are very often made intuitively by the decision makers, who

sometimes include different stakeholders. Here again MCDA can be a very useful concept for

decisions, although it has not been used very often at this level.

Multi-criteria methods belong to the family of non-monetary evaluation methods (Munda et

al. 1993, 98). The approach of MCDA is a broad set, containing different methods presenting

decision aid tools. They differ from conventional methods as they are taking into account a set of

objectives and criteria, that can be conflictual, multidimensional, incomparable and

incommensurable. The information contained in the criteria and concerning the effects of the

decision can be uncertain as well as qualitative (Munda 1995). As decisions in the field of

environmental policy possess mostly the characteristics just mentioned, MCDA can be considered

as a useful decision aid approach.

In this paper it will be shown how the usage of the multi-criteria analysis as a decision aid

tool can improve the results of a research project, by the example of a strategy set to reach

sustainable development in Germany. As the suggested strategies do have impacts in different ways

on different dimensions (the economic, the environmental, the social) and on different society

groups, their implementation has to be carefully chosen. This is exactly, where MCDA should set in

to support the decision and clarify the impact for the decision makers and affected people.

In Section 2 the project will be presented, its structure, the goal and the results, which serve

as a base for the following sections. What exactly would be the added value of an MCDA and why

is it important for the special decision problem in the field of sustainable development on the

macro-level? These questions will be regarded in section 3. A conclusion and an outlook,

considering different methods of MCDA, which can be appropriate for the specific decision problem addressed in the paper, will be given in section 4.

2. The research project "labour and environment"2

In order to show the advantages of MCDA for political decisions on the macro-level let me

focus on one research project as an example. While working for the project and being involved in

the different phases, I more and more realised, that this project is very well suited as a base for a

multi-criteria analysis because of both, its structure and its content.

2 see also http://www.a-und-oe.de and the Project Information by the HBS




The foundation of the German trade unions, the Hans Boeckler Foundation (HBS) has

initiated the project "labour and environment" to study the implications of the various sustainability

concepts for the social sphere and the world of labour. It is one of the largest trans-disciplinary

research projects ever conducted on the topic of sustainability and labour in Germany. Three

institutions were participating in a research co-oporation. 3 Different guiding questions were raised.

We will focus on one of them: the development of possible building blocks in a socio-

environmental reform strategy based on a balanced incorporation of economic, environmental and

social interests and involving goals likely to be supported by groups and institutions outside the

trade union movement. This formulation of the task tries to consider different aspects, it requires

suggestions for policy strategies for a socio-environmental reform strategy aiming to reach

sustainable development while considering the interests of different members of the society. As this

task is not a simple and straight forward one, the result can not be simple either. On the contrary the

result turned out to be a set of different complex core strategies on a very abstract level. But we will

come back to this later. The structure of the project itself is quite complex. As this complexity is

one reason leading to the need for MCDA, the structure is shown in figure 1 and will be explained

carefully in the following.

3 They are the German Institute for Economic Research (DIW), the Wuppertal Institute for Climate, Environment and

Energy (WI) and the Social Science Research Center Berlin (WZB).




Figure 1: Structure of the project

Labour & Environment

Objective Development of elements for a socio-environmental reform strategy

Scientists WIa

DIWb

WZBc

Cross-area

analyses

environmental/consultation

process

economic social

Development of sustainability

criteria

environmental economic social

Developmentof scenarios

socio-environmental

sustainability scenario

supply-side scenario

socio-economic

sustainability scenario

Model

simulation

scenario simulation with PANTA RHEI

Evaluation of the three

scenarios


developmentof disciplinary

strategies


Integration I elaborating of synergies and conflicts

ResultII development of core strategies in 5 policy fields

I, II: Here the application of a multi-criteria decision analysis would have improved the result and reduced theinefficiences

a: Wuppertal Institute for Climate, Environment and Energy

b: German Institute for Economic Researchc: Social Science Research Centre




Structure of the project

The project was structured (see Figure 1) in three main broadly successive working

phases, subdivided in more smaller phases: (1) cross area analyses, (2) scenario development

and analyses and (3) the drawing up of strategy elements. The aim of the cross-area analyses

was to determine and specify the various linkages and interrelationships between

sustainability and labour seen from an economic, environmental and social perspective. These

analyses helped to provide both a basis for drawing up and evaluating the scenarios and to

generate findings that can help directly in formulating socio-environmental strategy elements.

In essence the cross-area analyses involved collecting and processing the current state of

theoretical and empirical knowledge.

The development of three different scenarios for Germany was the main target of

phase two. The scenarios were based on the objectives and sustainability criteria, that were

defined in the course of setting the guiding questions and on the causal relationships resulting

from the cross-area analyses. The scenarios, describing possible future developments, were

drawn up in a qualitative way. Certain aspects were also portrayed in a quantitative fashion by

simulations with a macroeconomic dynamic model. The scenario analyses were completed by

evaluations on the basis of economic, social and environmental criteria, that were developed

before.4

The task in the last main phase was to find conflictual and synergetic relationships

between the objectives and the scenarios and to formulate strategy elements in the form of

core strategies, that are characterised by agreement between the different goals and criteria of

the institutes. The aim besides the formulation of a well-founded package of strategy

elements, which was successfully done, was to deliver verifiable forecasts of their expected

impacts and efficiency and the extent to which it is possible to compensate for their negative

side-effects. The latter was not done in a sufficient way, because of the impossibility to make

forecasts without any specific method. This was exactly the point where the application of aMCDA would have been extremely helpful and suitable as well. At that time the idea of

carrying out a MCDA after the project and developing the method within my doctorate thesis

became really strong.

4 In other words the researcher of the WI evaluated all scenarios from an ecological point of view, theresearchers of the DIW from an economic and the researchers from the WZB from a social point of view.




How is the concept of Sustainability understood in the project?

The term "sustainability" was already mentioned several times, but what does it mean

according to the paper and the project? Sustainability is primarily a normative concept,

containing values, perception patterns and preferences, which precedes the scientific analysis.

Taking this into account, there is still the need to transform the concept into one, that can be

worked with and can be used as a base for political decisions. The most known and most often

cited definition is the one mentioned in the Brundtland Report (WCED 1987), which says, a

society can be called sustainable, when it meets the needs of the present generation without

compromising the ability of future generations to meet their own needs. But this definition

remains on a very abstract level. It is not easy to operationalise it and much effort has been

put on its interpretation (e.g. Hinterberger et al. 2000a), but it is definitely going beyond

environmental economics or politics and tackles all aspects of human life (DIW et al. 2000).

The three dimensions of the sustainability concept - the economic, the social and the

environmental - are already visible in the Brundtland Definition, although a bit hidden. The

concept of the triangle of sustainability tries to visualise these three dimensions as the three

corners of this triangle, carrying the concept. The economic system, the environment and the

society have to be seen as interlinked and dynamic systems, each of them having its own

laws, rules and structures. The functioning of the system can only be kept with the

maintenance of the functions of each subsystem and of the system as a whole. Only by the

integration of all three dimensions the conceptional weaknesses of the current environmental

discussion, that isolates usually the social and economic dimension, can be avoided (Enquete

Kommission 1998, 18).

Does sustainability imply substitutability between different forms of capital?

Representatives of the concept of "weak sustainability", which was developed by

Pearce/Turner 1991, affirm substitutability, whereas the concept of "strong sustainability",

developed by Daly 1991 deny it. Both approaches show an extreme viewpoint and there aremany other views lying between both, such as the concept of "reasonable sustainability"

(Serageldin 1996). Here the different forms of capital are partially substitutable, but there are

some parts of natural capital, which cannot be substituted at all, such as drinking water. This

concept seems to be the most plausible and realistic one, although it does not say, where

exactly sustainability lies between perfect and none substitutability at all.

The above mentioned concept of the three dimensions is also the concept underlying

the project. It is straight forward to take this definition for this paper. In order to




operationalise this approach, objectives, criteria and indicators have to be defined. They can

support the work with and the measurement of it.

Objectives, criteria and strategies:

The starting point of the project was the agreement about the non-sustainability of the

current situation. The long-term maintenance of the economic, social and environmental

system and the prevention of irreversible damages in all three dimensions is the overall aim of

sustainable development, as seen in the project; this requires also equity in and between

generations, between North and South as the guarantee of a humane life. All in all

sustainability is understood as the possibility to live a "good life", while we all have the duty

to keep and improve the state of the natural environment, where individual preferences are

taken into consideration and economic competitiveness in a global perspective is assured

(DIW et al. 2000).

This very general and abstract aim of a sustainable development can also be seen as

the objective of a socio-environmental reform strategy. As this objective should be more than

a meaningless phrase, it is important to measure its achievement. This can be done with the

help of criteria. They can be of a qualitative or quantitative type, allowing to measure the

fulfilment of the entire objective or of its defined parts. The definition of the aim on the three

dimensions presents itself in a way that leads to three groups of criteria. This was done in the

project as precondition for the evaluation of the scenarios. The criteria were used to evaluate

them from an economic, social and environmental point of view.

For the economic dimension a framework is needed, within which the economy can develop

in a way that the criteria of the other dimensions are met and can keep its function

(Hinterberger et al. 2000a). It should be (internationally) competitive and assure labour as

well as income and the base for intragenerational justice, not only concerning income, but

concerning also its distribution, gender issues, distribution of labour and positions, societal

loads, equity of chances and life quality in general.The social system has to be formed in that way, that it offers a humane standard of life

and the availability of employment possibilities. Distributional equity has to be ensured in

order to fulfil the requirement of intragenerational equity.

The maintenance, protection and improvement, where necessary, of the environmental

quality while considering the precautionary principle is the main issue of environmental

sustainability.

Of course there are overlaps between the criteria within a group and between thedifferent groups of criteria. They are not necessarily consistent, but give room for synergies




and conflicts. This leads us to the necessity not to see the criteria or groups as separated

formulas but as parts of the overall aim and to integrate them whenever possible into the

concept of sustainability. Coming from the overall aim to the criteria is one step of

operationalising, the next would be to express the criteria through quantitative - if possible -

otherwise qualitative indicators. For example, the unemployment rate is an indicator for social

sustainability, the CO2-emissions present an indicator for environmental and the economic

growth for economic sustainability. The development of sustainability indicators was and is

the task of many researchers and research projects, but no common set of them has been

provided so far. This development was not a task in the project, as this would have required

an additional phase and the agreement on a common set of indicators, which would have been

extremely difficult.

The last phase of the project consisted of the formulation of strategies for a socio-

environmental reform strategy. This was done in three steps (see also figure 1). After the

development of disciplinary strategies, synergies and conflicts were identified and finally five

integrated policy fields containing cores strategies were formulated. The policy fields are the

following: environmental forming of the structural change, social forming of the structural

change, innovations, working time and consumptional change.

3. Why does Multicriteria Decision Analysis makes sense?

In section 2 an overview of the project and its structure was given. There were two

stages, where the usage of an MCDA could be considered as useful. The first one was after

the development of the disciplinary strategies. The second and more important point was at

the end of the project, when the result was delivered to the decision makers (see also figure 1).

This result consisted of pure strategy recommendations together with the cross-area analyses,

the scenarios and their evaluation. But which strategies should be implemented in which

form? Which impacts can be expected? What about the acceptance of the policy measures

according to different groups of the society? To answer these questions more efficiently than

just intuitively, a MCDA can be of great help.

This section is divided into four parts; after a general description of the failure of CBA

in an environmental-economic-social context, the MCDA approach is explained. The third

part deals with the advantages of MCDA methods, whereas these advantages will be related to

the project in the fourth part.




3.1 The failure of conventional methods

CBA was becoming quite popular after World War II in public decision making using the

concepts of Willingness to Pay or Accept, shadow prices and the consumer surplus principles.

It applies the concept of welfare economics. The gains and losses of the members of the

society, whose wellbeing will be affected by the decision, are measured in monetary terms

and then weighed against each other. Rational choice behaviour, based on a one-dimensional

well-defined performance indicator, is assumed. The optimisation rule is applied to reach a

decision. All objectives can be expressed in a common denominator and the loss in one

objective can be evaluated against the gain in another. This idea of compensatory changes

underlies not only the concept of the CBA, but also the classical economic utility theory

(Munda et al. 1993, 99).

The determination of one common denominator is difficult and the operational value

of this optimising approach limited:

“There are no units that can be used as the basis of a decision, neither units of

money nor hours of work. One must directly judge the desirability of the two

possibilities” (Neurath 1973, 146).

The specification of a welfare function requires complete information about the actions and

their combinations, about the trade-offs between all actions and about the constraints in the

decision making process. Given the uncertainty and the far reaching consequences often

inherent in environmental-economic-social decision making, this requirement cannot be

fulfilled by a CBA. Thus this kind of assessment inevitably fails to capture the complete range

of relevant aspects, is static and oversimplifying. Besides it implies a concept of weak

sustainability,5 as it allows for substitution. Decision making in the field of sustainability,

which is a complex and dynamic issue, serves as one example, 6 where the usage of CBA

contains the risk that the result is not only simple, but simply wrong.

5 For a more detailed critique and alternative ways of monetarising costs of sustainable policies, see O’Connor,

1999.6 For the double problem of complexity, see also Hinterberger et al. 2000.7 In general MCDA methods can be divided in two groups (Hwang and Yoon 1981): namely (a) for selectingfrom multiattribute discrete options ("Multi Attribute Decision Making", short MADM), also referred to asMultiple Criteria Evaluation Problems, and (b) for solving problems which require selection from continuoussets of options ("Multi Objective Decision Making", short MODM). They vary within their structure and the wayof solving the problem. Within a MADM approach one option is chosen, the amount of options – such as

projects, investments, decisions, etc. – is finite and determined. The amount of options within a MODM

approach is not predetermined. Goals are given through clear objective functions. The solution is calculated

with the help of a certain procedure (Zimmermann et al. 1991, De Montis et al. 2000).




Consequently other methods, that are more appropriate for strategic evaluation in the

field of environmental decision making have to be developed and applied. MCDA offers such

an appropriate tool for combined environmental-economic-social evaluation and decision

issues (Munda et al. 1993, 100).

3.2 The concept of MCDA

Multi-criteria Decision Analysis Methods were developed within the last 30 years as a

response to the increasing problems, decision makers were facing when concerned with

complex issues. Conventional concepts, such as the CBA or the environmental impact

assessment were insufficient and led to non-sustainable decisions.

MCDA approaches are generally used for decision problems with various - mostly

conflicting - objectives (Zimmermann, Gutsche 1991). As these objectives are operationalisedwith one or more criteria, various criteria exist. That is where the name multi-criteria

decision analysis comes from. Another characteristic is the variety of scales to measure the

criteria. Some criteria can be transformed into quantitative indicators (like economic growth

presented by the GDP, measured in monetary terms), others use qualitative parameters, like

life quality (presented in linguistic terms such as good, moderate, bad). Qualitative parameters

can be used directly as linguistic variables or can be transformed into cardinal ones and then

used as quantitative variables (Munda et al. 1993). The ranking of the options after aggregating and taking all information about the impacts of the options and the preferences of

the decision makers plus the concerned groups into account, presents the result. It depends on

the available data, the structure of the information, chosen aggregation method, preferences.

In general a MCDA consists of the following steps (Munda et al. 1995, Strassert, 1995):

1. definition and structuring of the problem,

2. generation of options,

3. definition of a set of evaluation criteria,

4. choice between discrete and continuous methods, 7

5. preparation of the decision (supply of data)

6. identification of the preference system of the decision maker and eventually affected

groups of the society and

7. choice of an aggregation procedure à carrying out of the procedure; usage of feedback

loops with the people affected by the decision.

The aggregation procedure determines which concept of sustainability is

operationalised. It depends on the degree of compensability (the possibility of offsetting a




disadvantage on some attribute by a sufficiently large advantage on another attribute; if no

trade-offs occur, a preference relation is noncompensatory) allowed by the aggregation

procedure (Martinez-Alier et al. 1998, 283). Noncompensability can lead to the possibility to

operationalise the concept of strong sustainability. Depending on the MCDA method,

compensation is possible or not and thus the operationalisation of weak or strong

sustainability.

The result of an MCDA is not unequivocal as in CBA, but presents a set or matrix of

different rankings, depending on the preference structure of the involved stakeholders. As no

solution is able to optimise all the criteria simultaneously, compromise solutions have to be

found. In many cases, one option is better than another for some criteria, but less good for

others, thus many pairs of actions remain incomparable or weak comparable (values are

irreducibly plural and cannot be uniquely ordered along a single scale). The concept of weak

comparability implies incommensurability (the absence of a common unit of measurement

across plural values). Incommensurability does not allow monetary and physical reductionism

(Martinez-Alier et al. 1998, 280).

The concept of MCDA is perfectly compatible with the concept of ecological

economics (Munda et al. 1995); it leads away from economic commensurability and strong

comparability of neo-classical economics and of CBA towards multi-criteria evaluation of

evolving realities (Martinez-Alier et al. 1998, 283).

3.3 Advantages of MCDA in environmental-social-economic decision making

After finishing the research project there are two extreme possibilities for the scientist: leave

the decision maker entirely alone with the decision, which means leaving the entire

responsibility of the decision to the decision maker, or introduce restrictive hypotheses, which

means solving the problem in a classical way. The usage of a MCDA presents a third

possibility, which lies in between the two extreme positions (Munda et al. 1994b).

MCDA methods use partly mathematical hypotheses and partly information gatheredfrom the decision makers and others. When choosing to use MCDA the scientists’

responsibility does not stop with the deliverance of the policy strategies but is maintained

during the decision and implementation stages. Science should be more than publishing

research projects and participating in conferences, it should be an interactive dialogue (Luks

1996, 94). In that way scientists are forced to go beyond their own discipline, i.e. to consider

aspects and information, that are probably fields of other disciplines, but relevant to the

research issue. In that way more focus is given to the interlinkages between the objectives andcriteria (in our case between the environmental, the economic and the social dimension of




sustainability). These interlinkages must be considered in order to integrate the different

dimensions of a complex research problem, which itself is a requirement for a successful

decision making and for determining criteria to monitor the success. The scientific advice has

to be adapted to the needs of the decision makers.

On the other hand - when using an MCDA method - the decision makers have to be

very clear in the definition of their objectives and criteria to measure the success of the

decision. Often the objective is on a very abstract and vague level, the same is true for criteria,

if defined by the decision makers at all. Otherwise the scientists have to define objectives and

criteria by themselves, which holds the danger, that the result of the scientific project is not

accepted.

Given the complexity inherent in the concept of sustainable development, any method

trying to operationalise this in a planning context, can be considered a kind of "second best".

MCDA methods are thus "second best". Still they can be seen as favourable compared to

conventional methods. They are able to tackle environmental-economic-social integration,

multiple use, inter-regional spatial links and trade-offs, families of conflictual criteria,

qualitative information and uncertainty. They are thus of fundamental importance for the

concept of sustainable development (Munda et al. 1994, 6) and present an appropriate tool to

operationalise efficiency and sustainability criteria.

The inclusion of environmental elements is not new, they have already been included

in conventional models, but only in cardinal forms, because of the strong quantitative

tradition in economics. MCDA models are able to deal with information of a quantitative,

qualitative and mixed type. No monetary or quantitative in another way evaluation is

necessary. The options can be comparable in a number of different ways, but without a single

unit of measure. Thus weak analogues of Pareto-optimality can still apply as well as the

concept of dominance.8

In the ideal case information is precise, certain, exhaustive and unequivocal, butusually it is not. Uncertainty of information concerning the criteria, their measurement and the

impacts of the decision is realistic and can be included in MCDA. To wait for certainty in the

case of political measures for sustainable development, could be a dangerous strategy, as it

will last too long (Luks 1996, 104).

If conflicting values or criteria exist, either a weighting procedure for the different

criteria or a conflict analysis is used. In the first case weights are assigned to criteria,

8 For all options x and y, if all criteria rank x above y, then x ranks above y, all things considered.




depending on the preference structures of the stakeholders involved. In the second case gains

and losses of all effects and impacts on different groups are assessed, these gains and losses

are taken together in form of groups and compromise solutions result.

Concluding this section, we can say, the MCDA approach tries first to reduce the

complexity of the decision problem in aggregating the information and developing a ranking

of the options and then it explains explicitly where the ranking comes from and which

impacts it generates. Its operational strength lies among others in the ability to address

problems marked by various conflicting interests. Thus MCDA "helps providing more insight

into the nature of these conflicts by providing systematic information into ways to arrive at

political compromises in case of divergent preferences in a multi-group or committee system

by making the trade-offs in a complex situation more transparent to decision makers and the

affected persons" (Munda et al. 1994, 7).

3.4 Advantages of MCDA in the case study

The need for new decision aid approaches is raised from the HBS itself:

"Experience so far in Germany with fundamental conflicts in environmental and other

policy areas has shown that conventional opinion-forming and decision making

procedures are not suited to generate a stable, broad-based consensus, that establishes

a basis for action. What is clearly needed is a long-term, participatory learning and

bargaining process in which all the relevant social groups co-operate with the aim of

specifying the contours of the new development and establishing the preconditions for

its implementation. [] In order to give the procedure the necessary dignity, commitment

and pressure to achieve consensus, these institutions should seek at the end of the day to

arrive at a decision that is binding on society as a whole []."

The HBS as an important decision maker in Germany has realised, that environmental

policy making has far reaching impacts on the society, on the economic system and that its

success is heavily dependent on the acceptance of the implemented strategies. She has alsorealised, that environmental policy should not only deal with the measurable and contrastable

dimensions of the system (i.e. society), but also with its higher dimensions, where power

relations, hidden interests, social participation, cultural constraints and others become relevant

variables that affect the outcomes of the strategies to be adopted (Martinez-Alier et al. 1998,

282). These dimensions are also important issues in any MCDA approach, being a sign of the

appropriateness of MCDA in the case of environmental policy.

In the last phase of the project, after the development and evaluation of the scenarios,disciplinary sets of strategies containing different elements were drawn up. These sets varied




a lot, as the intentions of the institutes were diverse. Nevertheless it was tried to figure out the

commons and synergies and to formulate a set of core strategies to deliver as a result to the

HBS. As a new approach, the HBS has foreseen a so called “transfer phase” for this year,

where the scientists will present their results to different trade unions and other groups of the

society and discuss them. Their reaction will help the HBS for its political decision processes

and will also give them an idea about the acceptance of the strategies. Hence we can say, that

the decision makers are not left entirely alone, but there is an ongoing co-operation between

them and the scientists. This transfer phase contains elements of a MCDA, which could

improve the success of the research but which could be improved even more with the

application of a MCDA.

The responsibility for the decision of the implementation and their impacts is still

lying in the hands of the HBS. The scientists remain within their disciplines; this holds the

danger, that the interlinkages between the three dimensions of sustainability are not

considered. The decision makers are probably not able to consider and integrate them. As one

important objective is to reduce unemployment, various strategies are developed to reach this

aim. But these strategies influence of course not only the social dimension, but also the

economic and the environmental. Consider as an example the reduction of working time

without totally compensation of wages. This strategy may reduce competitiveness, as the

income is decreasing and thus the demand (consumption, investment), it reduces

unemployment and thus increases the life quality. Concerning the environmental dimension,

more leisure can lead to environmentally unsound activities in the additional spare time, but

the lower income can also lead to more demand for repair services of broken machines, which

can relieve the environment. In some case the decision makers are able to see these

interlinkages, as they are obvious as in the example above, but in many cases they are not able

to see them. Thus more research and examination is needed, which would be undertaken in a

MCDA.All methods of MCDA require the exact definition of the objectives, their criteria and

their impacts, which are summarised in the impact matrix (see also section 4). This again

requires the close co-operation between the scientists and the decision makers. The latter have

to define the objectives very clearly and where possible the criteria as well.

The objective in the project was the development of building blocks in a socio-

environmental reform strategy based on balanced incorporation of economic, environmental

and social interests in order to reach a more sustainable development in Germany. This is aclear but very abstract statement, which does not automatically lead to sub-objectives or




criteria. The HBS did not define any criteria or indicators, but left this work to the researchers.

In the case of a planned MCDA the definition would have taken place in another way. It

would have been discussed with the decision makers and the affected groups of the society.

The latter was at least done by one institute (the Wuppertal Institute) in order to get the

different positions and meanings, which influenced the scenario analysis, the criteria

development and the building of strategies.

The ability to tackle different dimensions and their integration is crucial for the

success of the project. It was partly done, as the institutes tried to discuss and evaluate the

criteria, scenarios and strategies, which had been developed by the partner institutes. But it

was not done together with the stakeholders. In a MCDA this integration with the help of all

involved people is necessary and would be an important task.

There are conflicting objectives and criteria in the case of sustainability and thus in the

project. We all know that it is nearly impossible to reach environmental, social and economic

sustainability simultaneously with a set of strategies without violating any dimension. Positive

impacts on one dimension (the increase of economic growth by subsidising special industrial

sectors) does usually have negative on other dimensions (aggravating the air quality in this

area and thus the life quality of the people living there). Impacts can also be positive and

negative concerning one dimension. Let us consider the example just mentioned; the social

dimension is negatively affected because of the decreased life quality, but can be positively

affected by a lower unemployment rate, as some sectors' output is growing and thus their

labour force.

We have already seen that MCDA is able to tackle these conflicts, not only to take

them into account, but also to integrate them into the method and the decision process. We,

the scientists in the project were aware of these conflicts, but could neglect them as we

remained mainly in their disciplines. As soon as we tried to summarise the disciplinary

strategies to get common core strategies, these conflicts became evident. They were solved insuch a way, that the strategies were put on a level with high abstraction (see Appendix 1.2).

As our basic opinions about the policy fields were compatible, this was possible and we found

synergies that allowed the development of common core strategies. But when we tried as a

next step to define common strategy elements on a more concrete level, we failed. Let us

consider for example the core strategy "basic social insurance". While the scientists of the

DIW put the main emphasis on the stabilisation of existing insurance systems, the WI-

scientists suggested among others the implementation of a negative income tax and the WZB-scientists suggested different elements, like more socially sound working time patterns,




availability of infrastructure for self-help, revaluation of informal and honorary work (DIW et

al. 2000).

We were not able to handle these conflicts in a way to get acceptable results. This

leads one to the conclusion, that the conflicts among different groups of the society would

even be stronger, as their basic opinions are usually quite divergent. Here again the

application of a MCDA method would have helped to handle these conflicts. It could have

been used for social participation and further work in defining the elements of the strategy.

This is now the duty and responsibility of the HBS and one can imagine, this is NOT an easy

task.

Many of the criteria concerning sustainability can only be measured in qualitative

terms (see also section 4). Information about them and about their impact is not precise,

certain and can not be monetarised. Thus a decision aid method, that is able to deal with

qualitative and uncertain information, is necessary. In section 3.3 we have already seen, that

MCDA can deal with this kind of data and information. Concerning the impacts of the

strategies and thus the effects on the criteria, we have to admit a big uncertainty. We used a

macroeconomic dynamic simulation model to simulate the different scenarios (see more about

the model and the simulation in Hinterberger et al. 2000b). The results can not give more than

a first idea about the direction and the probable range of the impact on economic and a few

environmental (CO2-emissions, material input) and social (unemployment rate) indicators. As

this model requires quantitative information, either expressed in monetary or in physical

terms, only some suggested scenario elements could be simulated. Elements, which were not

compatible with the model structure or qualitative elements had to be neglected. Hence the

uncertainty about the effects is high, which is an indicator for the inappropriateness of a CBA

in the case of the project or in the case of environmental policy in general.

Transparency of the conflicts and the impacts is extremely important for every

decision maker. The responsible persons need insight into the nature of these parameters inorder to make the decision. Transparency of the decision process is again important for the

acceptance of the decision and the implemented sustainability strategies by the affected

people. As MCDA improves this transparency, it can improve the decision process and the

adoption of the strategies in Germany. The result of a MCDA is usually a ranking or a set of

rankings of options, in our case of strategies. As the strategies do not exclude each other, the

outcome of the decision is not to implement ONE option, but some, or some at different

times. This ranking will not be unequivocal, it will depend among others on the preferencestructure of the stakeholders involved. In the project case, MCDA can not provide one exact




ranking, but it can provide the background of the ranking and the information about its

formation.9

4 Method choice and outlook

From section 3 it is evident why the usage of MCDA in the case of macro-related

environmental policy making can improve its success. This leads us to the next step: "Which

MCDA method should be applied in the case of the project 'labour and environment'?" To

answer this question is beyond the scope and aim of this paper, but some first ideas about the

selection of the method will be given.

Coming back to the different steps of a MCDA, the following can be said.

1. Definition and structuring of the problem. The problem can be defined as follows: The

implementation a socio-environmental reform strategy to reach sustainable development

in Germany. Decision about which strategy out of a strategy set should be implemented

when and how? Its structure is given by the project and its result.

2. Generations of options. The options are the different strategies in the five policy fields

(see Appendix 1.2). But it still has to be defined, how many strategies out of each policy

field should be taken and from which level. Example given: The core strategy is the

ecological tax reform, this strategy is on a quite abstract level; the next level are the

elements: CO2-tax, Material input tax and others.

3. Definition of criteria. Three sets of evaluation criteria (see Appendix 1.1) were elaborated

in the project. As each set represents one dimension of sustainability, they can be seen as

criteria for sustainability in general as well. They have already been used for the

evaluation of the scenarios.

4. Choice of a continuous or discrete method. As we have a discrete number of options (see

Appendix 1.2) the choice of a MADM method would be appropriate.

5. Supply of data. This is usually the generation of the impact matrix (see Table 1). Suppose

A j is the set of options, where j = 0,.....,17 (as we have got 17 options, the option 0 presents the zero option: business as usual); gi is the set of evaluation criteria, where i =

a,....,r (we have r distinct criteria). The decision problem may now be presented in a

matrix form. This matrix is a 17 x r matrix. The element p ij represents the evaluation of

the jth option by means of the ith criterion. For example: Option 2 is to implement

ecological oriented infrastructural programs; criterion a is an environmental criterion:

9 In our case the decision maker is able to realise, why environmental sustainability is reached with strategy xand why economic sustainability is then endangered.




Limitation of energy use in order to guarantee the international distributional equity and

national necessary contribution for the climate stabilisation (this means a reduction of

energy use of 75% or a factor 4 for Germany until 2050).

pa2 represents the evaluation of the ecological oriented infrastructure program by means

of the influence on energy use. This can be measured by the impact on the CO2-

emissions, the option would have. Would one option be the best according to each

criterion i, no decision problem exists. But in our case we can assume, before defining the

impact matrix, that there won't exist such option. Besides the options are not exclusive,

more than one can be chosen, maybe even all, not simultaneously implemented, but

within some years.

6. Identification of the preference system: This is dependent on the aggregation method, thus

points 6 and 7 cannot be done separately. In our case it is extremely important to include

different groups of society in the decision process, as each person in Germany will be

affected by the reform strategy in a way. Hence a first conclusion may be, that the

assignment of weights to the criteria might be too costly and hardly possible, as too many

different weighing sets will emerge. The application of a conflict analysis or a mediation

would thus be more appropriate. Mediation means a process, where different parties,

being in a conflictual situation meet each other on a "round table", where they search for

solution, that is acceptable for all. The mediation is leaded by a neutral presenter, the

mediator. Mediation is a kind of alternative dispute resolution or alternative decision

process (Renn 1994).

7. Aggregation method: Choosing a method is not an easy task, especially in our case. Most

of the methods are designed for micro-related decision problems. They can partly be used

for the macro level, but new parts have to be developed. In De Montis et al. 2000 (a paper

presented at the conference as well) a criteria list for MCDA quality assessment was

developed. It can help to make a first selection of appropriate methods. The choice of acertain method is dependent on the overall objective of the decision making problem. This

leads to an evaluation path with respect to the general theoretical assumptions, to the

operational issues and to the mathematical algorithms adopted (De Montis et al. 2000).

Three main points are considered as important for the choice of the method: (1) the

theoretical foundations of the operational components of the methodology, (2) the

application in the user and decision making context and (3) the application in the context

of the specific problem type. For each of these points, criteria were derived. As it is not possible to explain and show the criteria list here, I ask the interested reader to look at the




reference. When trying to use this list for our decision problem, two discrete methods

seem appropriate: These are NAIADE (Novel Approach to Imprecise Assessment and

Decision Environments) and AHP (Analytic Hierarchy Process). Both methods belong the

the group of MADM (for a general overview see De Montis et al. 2000, for detailedinformation see Saaty 1980 for AHP and Munda et al. 1995 for NAIADE). NAIADE

seems appropriate because of its strong emphasis on stakeholder participation and its

allowance for qualitative and uncertain data; AHP because of its transparent process and

structure and the data handling as well. But both are not optimally suited for this problem

or for macro-related environmental policy decisions in general. To look for the right

method, to adapt consisting methods to our problem or to develop a new method will be

the content of future research.

Choice of a method

Let us assume, the result of the MCDA applied for our case study is a set of different

rankings, depending on the preferences of the different stakeholders, who were involved in

the process. The decision maker (HBS) is now again confronted with a decision problem. But

it differs from the first one in important aspects. The HBS has to choose one ranking, while

this ranking and its development are transparent. But still, she has got a decision problem. At

this point the scientists must leave the responsibility to the decision maker and the society. No

MCDA can help to make the decision. What is needed is the start of a democratic process.

This process should involve all interested stakeholders and finally come to a solution.

Here we can see the importance of a new understanding of science, as social participation is a

crucial input for the solution. Post-normal science, first developed by Funtowicz and Ravetz

shows such a new understanding, that can be the scientific concept behind MCDA (see

Funtowicz/Ravetz 1991, Luks 1996 for more about post-normal science). If science is turning

towards societal issues and problems, it is unavoidable, that its methods, results and

suggestions are dragged in the political discussion process (Luks 1996, 97).

In order to start the democratic process, an institutional framework and institutional

facilities must be provided. The application of a MCDA alone does not guarantee a good

solution. Its result has to be implemented in an adequate and efficient way. I might argue, that

neither this democratic process would set in automatically, nor these institutions do exist

today. Hence there is without any doubt an urgent need for more research in the fields of

decision theory according to political science and institutional theory.




Impact MatrixZerooption

Environmentalstructural

change

Social structuralchange

Innovations Working timeConsumptionalchange

Options/Criteria

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

a pa0 pa1 pa2 pa3 pa4 pa5 pa6 pa7 pa8 pa9 pa10 pa11 pa12 pa13 pa14 pa15 pa16 pa17

b pbo pb17

c pc0 pc17

d pd0 pd17

e n v i r o n m e n t a l

e pe0 pe17

f pf 0 pf17

g pg0 pg17

h ph0 ph17

i pi0 pi17

j p j0 p j17

k pk0 pk17

e c o n o m i c

l pl0 pl17

m pm0 pm17

n pn0 pn17

o po0 po17

p pp0 pp17

q pq0 pq17

s o c i a l

r pr0 pr17

Table 1 : Scheme of the impact matrix




Acknowledgements:

My sincere thanks go to Birgit Friedl, Friedrich Hinterberger, Thomas Mitterer-Kuhn,

Joachim Spangenberg and Sigrid Stagl for their fruitful comments and support.

References:

Daly, H.E. (1991): Steady State Economics, 2nd edition. Washinton/Covelo.

Daly, H.E. (1996): Beyond Growth. Boston: Beacon Press.

De Montis, A., De Toro P., Droste-Franke, B., Omann, I., Stagl S. (2000): Criteria for quality

assessment of MCDA methods. Paper presented at the 3rd conference of ESEE,

May 3-6, Vienna.

Deutsches Institut für Wirtschaftsforschung, Wuppertal Institut für Klima, Umwelt, Energie,

Wissenschaftszentrum Berlin für Sozialforschung (2000): Abschlußbericht des

Verbundprojektes Arbeit und Ökologie. Berlin und Wuppertal, April 2000.

Funtowicz, S.O., Ravetz, J.R. (1991): A new Scientific methodology for Global

Environmental Issues. In: Costanza, R.: Ecological Economics. The Science and

Management of Sustainability. New York, Oxford: Columbia Press, 137-152.

Hinterberger, F., Luks, F., Stewen, M., van der Straaten, J. (2000a): Policy in a ComplexWorld. In: International Journal of Sustainable Development , Vol. 3, No.3.

Hinterberger, F., Omann, I., Schmitz, S., Spangenberg, J. (2000b): Ein ökologisch-soziales

Nachhaltigkeitsszenario für Deutschland. Theoretische Grundlagen und

empirische Ergebnisse. Beitrag für die Klausurtagung der AG Stoffströme der

Vereinigung für Ökologische Ökonomie in Weimar, 25.-27.10.1999. Will be

published in a book edited by Stahmer, C. and Hartard, S., Marburg, Metropolis.

Hwang, C., Yoon, K. (1981): Multiple Attribute Decision Making . Berlin: Springer.

Luks, F. (1996): Post-Normal Science, Dematerialisierung und die Ökonomie. In: Köhn, J.,

Welfens, M.J., Neue Ansätze in der Umweltökonomie. Marburg: Metropolis.

Martinez-Alier, J., Munda, G., O’Neill, J. (1998): Weak comparability of values as a

foundation for ecological economics. In: Ecological Economics 26, 277-286.

Munda, G., Nijkamp, P., Rietveld, P. (1994a): Multicriteria Evaluation in Environmental

Management: Why and How? In: Paruccini, M. (ed.): Applying Multiple Criteria




Aid for Decision to Environmental Management . Dordrecht: Kluwer Academic

Publishers.

Munda, G., Nijkamp, P., Rietveld, P. (1994b): Qualitative multicriteria evaluation for

environmental management. In: Ecological Economics 10 (1994), pp- 97-112.

Munda, G. (1995): Multicriteria Evaluation in a Fuzzy Environment . Heidelberg: Physica

Verlag.

Neurath, O. (1973): Empiricism and Sociology. Dordrecht: Reidel.

O’Connor, M., 1999, GREEned National STAtistical and Modellling Procedures: The

approach to the calculation of environmentally adjusted national income figures.

In: International Journal of Sustainable Development, Vol. 2, No. 1. Pages!

Pearce, D.W., Turner, R.K. (1991). Economics of Natural Resources and the Environment.

Baltimore.

Renn, O. (1994): Konfliktbewältigung durch Kooperation in der Umweltpolitik, in: oikos:

Kooperationen für die Umwelt. Im Dialog zum Handeln. Chur, Zürich.

Saaty, T.L. (1980): The Analytic Hierarchy Process for Decision in a Complex World .

Pittsburgh: RWS Publications.

Strassert, G. (1995): Das Abwägungsproblem bei multikriteriellen Entscheidungen. Frankfurt:

Peter Lang.

Serageldin, I. (1996): Sustainability and the Wealth of Nations, First Steps in an Ongoing

Journey. Washington.

World Commission for Environment and Development WCED (1987): Our Commont Future.

Oxford.

Zimmermann, H.J., Gutsche, L. (1991): Multi-Criteria Analyse. Berlin: Springer.




Appendix

1. Main results of the project "labour and environment"

1.1. Sustainability Criteria

Environmental criteria:

a) Limitation of energy use in order to guarantee the international distributional equity and

national necessary contribution for the climate stabilisation (this means a reduction of

energy use of 75% or a factor 4 for Germany until 2050).

b) Limitation of resource use in order to satisfy the prevention of environmental stresses and

the international distributional equity (this means a reduction of resource use of 90% or a

factor 10 for Germany until 2050).

c) Limitation of land use in that way, that no additional net land degradation occurs.

d) Protection of biodiversity, in particular through switch-over to environmentally sound

agriculture and forestry (the long-term goal is to reach organic farming everywhere),

through extension of protected areas (10% of the surface area of a country), stop of net

new land-use and prevention of biotope disturbance.

e) Risk-prevention for humans and the environment, in particular through the prevention of

nuclear power use, of the release of genetically changed organism and of other

accumulating risks.

Economic criteria:

f) Maintenance of the productivity level; therefore the maintenance and the development of

the entire capital, including natural resources, social and human capital is required.

g) Maintenance and creation of public welfare, incentives for efficiency and the

improvement of the efficiency in that way that individual interests serve the public

interests and to counteract restraints of competition.

h) Development of competence for innovation.

i) Supply of chances for the participation at the working life in different forms of labour.

j) Guarantee of the ability to carry the cost of living for those, who are not able to participate

at the working life or at socially accepted forms of work.

k) Contribution to international stability in an adequate way.

l) Limitation of public deficits for investment purposes and to care for a fair

intergenerational balance with the help of a robust social security system.




Social criteria:

Social criteria:

m) Access to work in different forms (f. ex. gainful employment, teamwork, social work,

honorary work).

n) Environmentally sound satisfaction of material needs, physical and psychological health

and the possibility of active social participation.

o) Guarantee of a social insurance through a security system for those, whose own supply is

not sufficient.

p) The setting of infrastructure and legal rights to enable social participation individually as

well as for each social group and both sexes.

q) Social innovations for a sustainable quality of life and possibilities to determine the

different forms of work.

r) The democratic stimulation of social acceptance and social amicability of sustainability

strategies, even if they require material limitations, because of the restricted use of natural

and social resources in the interest of international and intergenerational justice.

In the case of usage of the criteria for a MCDA, they have to be expressed as indicators, that

allow an easier measurement. Concerning our criteria above, some clear indicators exist like

the unemployment rate, the total material requirement and others. But for many criteria these

indicators have to be developed. Sometimes it will be possible to have quantitative indicators,

but in many cases, especially for the social criteria, they will remain on a qualitative level.

1.2 Strategies

The building of strategies consisted of three steps. Step 1 was the development of

disciplinary strategies, separately by each institute. Step 2 was the evaluation of these

strategies from an economic, an environmental and a social point of view. And theinterdisciplinary step 3 was the identification of synergies and conflicts between the strategies

and the formulation of 5 integrated policy fields, which are the following:

a) Environmental forming of structural change

b) Social forming of structural change

c) Innovations

d) Working time

e)

Consumptional change




Each policy field contains "core strategies", which can be seen in Table i.

Policy field 1: Environmental forming of the structural change

1: ecologicalfinancial

reform

2: ecologicaloriented

infrastructural

programs

3: restructuring of the subsidies and

investment

programsPolicy field 2: Social forming of the structural change

4: socially soundforming of the

structuralchange

5: social basicinsurance

6: security of different forms of

work

7: measures for the equal status

of genders

Policy field 3: Innovations

8: qualification 9: environmentalinnovations

10: strengthening of research and

education

11: innovationsof products

andproduction-processes

Policy field 4: Working time

12: flexibilisation

andreduction of working time

13: reduction of

working timewithcompensation

of wages

14: social patterns

of working time

Policy field 5: Consumptional change

15: support of social andecological

consumption

16: ecologicallysound supply

17: strengthening of common self-help for socio-

environmentalwelfare

Table i: Core strategies of each policy field

Each of these 17 core strategies, which are defined thoroughly in the final report of the

project (DIW et al. 2000), contains itself 3 to 7 strategy elements, which can be seen as an

operationalisation of the strategies10. These elements were developed separately by each

institute and remained within the disciplinary strategies, as no agreement about them could be

reached. The options remain on a quite abstract level where they show agreement between the

three dimensions, but concerning their further design they diverge. The core strategies and

their description built the result for the HBS.

10 For example, material input tax as element of the ecological financial reform, negative income tax as elementof social basic insurance or choice of individual time schedules as element of social patterns of working time.

Documents

How can Multi-criteria Decision Analysis contribute to environmental policy making? A case study on macro-sustainability in Germany