Multicriteria Analysis

Despite great progress in the quantification of damage costs in recent years, determination of monetary values remains elusive for certain impact categories, including those related to ecosystem acidification, eutrophication, and reduced visibility. One of the objectives of the ExternE-Pol project was to develop a framework based on multicriteria analysis or Multi-Criteria Decision Analysis (MCDA) that could be used for exploiting the preferences of decision-makers, stakeholders, or environmental experts (in the following simply referred to as “stakeholders”) to derive monetary values for impacts whose monetization has remained problematic. The ultimate goal is to integrate multicriteria methodology into the wider frame of cost-benefit analysis (CBA) for supporting policy and decision-making, especially in the context of sustainable development. Both CBA and MCDA aim at broadening the decision making perspective beyond the limits set by the market mechanism, while both rely on values attached by people with multiple points of view. In traditional CBA, human values are either reflected in existing market prices or are produced by aggregating individual preferences drawn from methods of welfare economics, such as the Contingent Valuation Method (CVM). In contrast, in MCDA, values reflect human preferences and in particular the preferences of the stakeholders involved in the specific decision context. In this report we summarize the tasks undertaken to develop an MCDA framework for indirect monetization of environmental goods, and present the results obtained from a case study using this framework.