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Development of An Index to Measure the Trade-off between Environment (ENVE) and Resource Utilization (RU)



Natural resources such as lakes, rivers and forests are inputs for economic growth. They also provide a range of environmental services; the provision of these services is one of three pillars of the sustainable development, with the other pillars being economic and social. Notwithstanding the importance of environmental goods and services, economic development has been a greater priority for low- and middle-income countries, where growing demands for food, freshwater, timber, and fuel have led to excessive resource utilization. Although this has contributed to substantial net gains in human well-being, activities such as agriculture, hydropower and infrastructure development have also led to degradation of the ecosystem, creating a barrier to the Sustainable Development Goals . There are trade-offs when it comes to using natural resources for human activities with respect to the environment, and it is important to recognize these trade-offs. Rarely have these been quantified in a manner that can allow for comparison of trade-offs over a range of natural resources, and a range of uses.

Figure 1: Weighing the trade-offs between environment and resource use

Climate change adds another dimension to the problem. It can exacerbate  the existing challenges to ecosystem degradation, impact economic development and itself is a result of anthropogenic activities. Changing climate, for example,may lead to migration of species to places where climatic conditions are more conducive to their survival. Similarly, climate change can affect agriculture and other human activities that are necessary for development. Lastly, climate change over the past century has itself been primarily attributed to over-exploitation of natural resources for anthropogenic activities, including deforestation and industrialization. This has led to environmental and socio-economic losses, and thus shifts in the trade-offs between environment and resource use.

What actions do you propose?

As concern for the environment mounts, there have been attempts to create indicators to measure and assess environmental outcomes and track progress of environmental goals. Although there have been major developments in methodologies to measure environmental goods and services, these are particularly difficult to measure, and such methods look at the environmental benefits in isolation, disregarding the economic benefits of resource use. No such index has been developed that can incorporate the costs-benefits of both the environment and the economic gains from resource use.

This project proposes to develop an index that assesses the benefits from environment versus the benefits from resource use to understand the trade-offs between environment and resource use, for a number of natural resources, including lakes, oceans, forests, rivers and land. Development of an environment-resource use  (ENVE-RU) tradeoff index can be done at different scales using different methods and tools. A look-up table can be drawn up, with the indices for a range of resources and their various uses to help those without a quantitative understanding of the tradeoffs. To illustrate the proposed method, some example applications involving this index (with made-up numbers) are presented.


The steps for developing the index will include:

  1. Valuation of Costs-Benefits of Environmental Resources 
  2. Valuation of Costs-Benefits of Development Activities 
  3. Development of Trade-off Index 

Lakes: The development of the index for the lakes will first assess the benefits from using the lake for a particular purpose (drinking, agriculture, disposal or other uses). The uses can affect the quality or quantity of the lake. In fact, diminishing water flows can become a cause of lake degradation as the concentration of pollutants in the lake will increase. Agriculture and waste disposal in lakes can further lead to quality degradation. The degradation to water quality, from overuse or contamination is then assessed in terms of the loss of ecosystem and environmental services provided by the lake. A ratio of this is calculated and a chart could be drawn up as shown in Figure 2.

Field:  The development of the index will assess the benefits from using the field for agriculture purposes, grazing purposes or other uses. The degradation to the land is then assessed in terms of the loss of ecosystem services provided by the lake.

Forests:  The development of the index will first assess the benefits from using the forest for a number of uses, including timber and more large scale deforestation.The damages or costs to the environment are calculated and a ratio of the trade-offs developed.

Figure 2: An example of a Look up Table

This chart above demonstrates how certain uses within a particular natural resource can be more justifiable, as its use can lead to fewer losses for each dollar benefit gained. An example is drinking from a lake can provide larger benefits, but less losses to the gains, where disposal in the lake can present major drawbacks. This is done across a range of resources and a range of their uses. benefit. 

Who will take these actions?

Construction of in index will be carried out through a rigorous team of scientists, economists, engineers and development practitioners. The key activities will be carried out by a global team of experiments who are well versed in the valuation of ecosystem services. The indices should represent examples from different regions as well.

After undertaking this assessment, the ENVE-RU Index should be used in research and practice as a tool to inform decision making. The broader insights from the index will prove to be extremely valuable, as they will also in understanding what uses of natural resources are sustainable and do not come at heavy costs. 

Where will these actions be taken?

These actions will be taken at a global scale, where an international team will be formed. As future development goals of low- and middle-income countries require a sincere consideration of environmental goods and services, their inclusion in this team is essential. As part of this exercise, interpreting this index is essential and requires recognizing the conserving and protection of environment is in fact, an important pathway out of poverty for depressed and marginalized communities.

What are other key benefits?

The benefits of such an index are manifold. Not only does it allow for comparing the trade-offs of environment-resource use over a range of natural resources, but also for a comparison over a range of uses for the same resources. Current methods of valuation of natural resources do not assess environmental benefits over a range of resources or uses, but through this index, the valuation of natural resources will be conducted through a standard method, and allow for comparisons.

A look up table with the indices for a range of natural resources  will be useful particularly for the non-science, non-environment community and help development practitioners manage the inherent tradeoff between environmental services and resource use during the development process.

What are the proposal’s costs?

There are no expected drawbacks from developing an index - however, for the benefits to be realized, it is important to mainstream the use of the ENVE-RU index in feasibility studies. 

The main costs are the costs of personnel. For the valuation of Environmental Resources and Development Activities, the initial costs for one year are as follows:

3 lead economists @ $100,000 per annum- $300,000

5 junior economists @ $60,000 per annum-  $300,000

5 environmental engineers @ $80,000 per annum-  $400,000

Computers @ $1,000 per laptop-  $10,000

Additional contingencies: $20,000

Total: $1,030,000

Time line

The timeline for the implementation of this project is as follows:

  1. Component 1: Valuation of Costs-Benefits of Environmental Resources - 1 year
  2. Component 2: Valuation of Costs-Benefits of Development Activities - 1 year
  3. Component 3: Development and refinement of Trade-off Index - 1 year
  4. Report on methodology, development and interpretation of ENVE-RU Index - 1 years


After these four years, more examples can be added to the table of indices. 

Related proposals


Ackerman, F. and Heinzerling, L., 2002. Pricing the priceless: Cost-benefit analysis of environmental protection. University of Pennsylvania Law Review150(5), pp.1553-1584.

Camagni, R., Capello, R. and Nijkamp, P., 1998. Towards sustainable city policy: an economy-environment technology nexus. Ecological economics24(1), pp.103-118.

Pearce, D., Atkinson, G. and Mourato, S., 2006. Cost-benefit analysis and the environment: recent developments. Organisation for Economic Co-operation and development.

United Nations  2010. Millennium Development Goals,