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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 Omann Karl-Franzens University, Department of Economics Universitaetsstrasse 15/F4, A-8010 Graz phone. +43-316-380 3458, fax. +43-316-380 9520, email., url. Abstract: When it comes to decision making in the field of environmental policy, there is still a lack of useful decision aid methods. This paper intends to show how multi-criteria decision analysis (MCDA) as an useful decision aid method could help to reduce inefficiencies in macro-related environmentaleconomic-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 the effects 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 be considered as a useful decision aid approach. The theoretical elaboration of multi-criteria methods has been improving during the last years, but there 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 and Energy, is used to demonstrate the usefulness of MCDA. MCDA has not yet been applied, but it could improve the results and their usage. Within the project different sustainability scenarios were designed, 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 experts and interdisciplinary in-depth case analysis were used to derive policy strategies. These strategies form 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 decision making 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

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-economicsocial 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. She 1 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 scientists or 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

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

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

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.

see also and the Project Information by the HBS

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

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 socioenvironmental 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.

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).

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

Labour & Environment


Development of elements for a socio-environmental reform strategy





Cross-area analyses

environmental/consultation process



Development of sustainability criteria




Development of scenarios

socio-environmental sustainability scenario

supply-side scenario socio-economic sustainability scenario

Model simulation

scenario simulation with PANTA RHEI

Evaluation of the three scenarios




development of disciplinary strategies Integration I Result II




elaborating of synergies and conflicts

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 the inefficiences a: Wuppertal Institute for Climate, Environment and Energy b: German Institute for Economic Research c: Social Science Research Centre

Figure 1 : Structure of the project

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

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 a MCDA 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.

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

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

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 are many 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

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

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 the different groups of criteria. They are not necessarily consistent, but give room for synergies

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

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 socioenvironmental 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.

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


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.

For a more detailed critique and alternative ways of monetarising costs of sustainable policies, see OConnor, 1999.

6 7

For the double problem of complexity, see also Hinterberger et al. 2000. In general MCDA methods can be divided in two groups (Hwang and Yoon 1981): namely (a) for selecting from multiattribute discrete options ("Multi Attribute Decision Making", short MADM), also referred to as Multiple Criteria Evaluation Problems, and (b) for solving problems which require selection from continuous sets of options ("Multi Objective Decision Making", short MODM). They vary within their structure and the way of 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).

3rd Biennial Conference of the European Society for Ecological Economics, Vienna, May 3 6, 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 operationalised with 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 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

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


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 gathered from 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 and criteria (in our case between the environmental, the economic and the social dimension of

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


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, but usually 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,

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

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


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 also realised, 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

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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 socioenvironmental reform strategy based on balanced incorporation of economic, environmental and social interests in order to reach a more sustainable development in Germany. This is a clear but very abstract statement, which does not automatically lead to sub-objectives or

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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 in such 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 WIscientists suggested among others the implementation of a negative income tax and the WZBscientists suggested different elements, like more socially sound working time patterns,

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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 in order 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 preference structure of the stakeholders involved. In the project case, MCDA can not provide one exact

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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 Aj 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 pij 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:

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

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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 a certain 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

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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 detailed information 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.

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Impact Matrix Options/ Criteria a environmental b c d e f g economic h i j k l m n social o p q r

Zero option

Environmental structural change

1 2 3

Social structural change

4 5 6 7

8 9 10 11

Working time
12 13 14

Consumptional change
15 16 17

pa0 pbo pc0 pd0 pe0 pf 0 pg0 ph0 pi0 pj0 pk0 pl0 pm0 pn0 po0 pp0 pq0 pr0

















pa17 pb17 pc17 pd17 pe17 pf17 pg17 ph17 pi17 pj17 pk17 pl17 pm17 pn17 po17 pp17 pq17 pr17

Table 1 : Scheme of the impact matrix

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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 fr Wirtschaftsforschung, Wuppertal Institut fr Klima, Umwelt, Energie, Wissenschaftszentrum Berlin fr Sozialforschung (2000): Abschlubericht des Verbundprojektes Arbeit und kologie. 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 Complex World. In: International Journal of Sustainable Development , Vol. 3, No.3. Hinterberger, F., Omann, I., Schmitz, S., Spangenberg, J. (2000b): Ein kologisch-soziales Nachhaltigkeitsszenario fr Deutschland. Theoretische Grundlagen und

empirische Ergebnisse. Beitrag fr die Klausurtagung der AG Stoffstrme der Vereinigung fr kologische konomie 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 konomie. In: Khn, J., Welfens, M.J., Neue Anstze in der Umweltkonomie. Marburg: Metropolis. Martinez-Alier, J., Munda, G., ONeill, 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

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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. OConnor, 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): Konfliktbewltigung durch Kooperation in der Umweltpolitik, in: oikos: Kooperationen fr die Umwelt. Im Dialog zum Handeln. Chur, Zrich. Saaty, T.L. (1980): The Analytic Hierarchy Process for Decision in a Complex World. Pittsburgh: RWS Publications. Strassert, G. (1995): Das Abwgungsproblem 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.

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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.

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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 the interdisciplinary 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

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Each policy field contains "core strategies", which can be seen in Table i.
Policy field 1: Environmental forming of the structural change 2: ecological 3: restructuring of oriented the subsidies and infrastructural investment programs programs Policy field 2: Social forming of the structural change 4: socially sound 5: social basic 6: security of 7: measures for forming of the insurance different forms of the equal status structural work of genders change Policy field 3: Innovations 8: qualification 9: environmental 10: strengthening of 11: innovations innovations research and of products education and productionprocesses Policy field 4: Working time 12: flexibilisation 13: reduction of 14: social patterns and working time of working time reduction of with working time compensation of wages Policy field 5: Consumptional change 15: support of 16: ecologically 17: strengthening of social and sound supply common selfecological help for socioconsumption environmental welfare Table i: Core strategies of each policy field 1: ecological financial reform

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 strategies 10 . 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.


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