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This report outlines the rationale for incorporating the assessment of environment indicators alongside routine monitoring of macroeconomic indicators. The theory and background literature on formulating environmental indicators is considered, and current international and regional initiatives aimed at deriving sets of indicators are discussed. A potential set of primary environmental indicators is presented, organised according to a ‘status-cause-response’ model and split into 15 broad categories of environmental concern. Some possible composite indicators, the result of further manipulation of the primary indicators, are also identified. Potential sources of data are then considered, focusing initially on international and regional sources. An ongoing pilot study assessing the feasibility of collecting relevant environmental data for Barbados at the national level is presented in the accompanying report.