Application and use of the ISEW for assessing the sustainability of a regional system: A case study in Italy

The Index of Sustainable Economic Welfare (ISEW) was introduced by Daly and Cobb in 1989 in order to integrate the information embodied in GDP. Since economic growth implies externalities and market failures, and a portion of it can be defined as “uneconomic”, the ISEW method introduces some corrections and adjustments to the GDP calculation framework. The ISEW has been calculated for a number of nations but it has been rarely applied to sub-national systems. Its calculation at the local level is important especially in case of administrative decentralization, and autonomy and responsibility of local authorities in certain fields. For this reason, a more and more comprehensive knowledge of the characteristics and peculiarities of the territorial system they manage is necessary. This paper presents the results of the ISEW calculation for Tuscany, a region in central Italy, in the period 1971–2006. This is one of the few attempts to apply the ISEW in time series at the regional level. Final results show that a discrepancy between ISEW and GDP appeared in the 1970s. Social and environmental pressures increased during the period under study making the gap equal to about 30 percent of regional GDP in 2006. The ISEW can be used also as a tool for evaluating policies, but further adjustments in calculation of certain items are considered necessary for taking into account and evaluating punctual policies. A case of energy policy is presented.

Research highlights
► We calculated the ISEW for Tuscany (Italy) in the period 1971–2006.
► Since its introduction, ISEW has been rarely applied to sub-national systems.
► An increasing gap between regional GDP and ISEW is shown.
► The gap is also due to environmental pressure caused by economic growth.
► Some aspects of the calculation are revised to make the index more sensitive.