Sensitivity of environmental performance index based on stochastic dominance

Area of Science:

• Environmental Science
• Sustainability Science
• Econometrics

Background:

• The Environmental Performance Index (EPI) is a widely recognized composite index assessing national environmental performance across 32 indicators.
• Composite indices like the EPI rely on subjective weighting of indicators and categories, potentially influencing outcomes.

Purpose of the Study:

• To investigate the sensitivity of the EPI to subjective weighting schemes using stochastic dominance efficiency.
• To analyze how variations in assigned weights affect country rankings and overall environmental performance scores.

Main Methods:

• Application of stochastic dominance efficiency methodology to EPI data.
• Examination of the impact of alternative weight assignments on index outcomes and country rankings.

Main Results:

• Significant variations in country environmental performance and rankings were observed with different weighting criteria.
• The environmental health category generally received higher importance in optimal scenarios, while ecosystem vitality was weighted higher in inferior scenarios.
• Country rankings showed substantial shifts, with some nations experiencing over 100 position changes, and many others showing significant score alterations.

Conclusions:

• Sensitivity analysis is crucial for enhancing the reliability and transparency of composite indices such as the EPI.
• The choice of weights significantly impacts the EPI's results, underscoring the need for robust and transparent methodologies.