Exploring Trade and the Environment

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In 2011, the Yale Center for Environmental Law and Policy released a first-of-its-kind empirical study on the relationships between trade and the environment. The new report—called “Exploring Trade and the Environment: An Empirical Examination of Trade Openness and National Environmental Performance”—takes a unique data-driven approach grows out of its use of the Environmental Performance Index (EPI), a country-level global ranking released every two years by researchers at Yale’s Center for Environmental Law and Policy and Columbia University.

Our study shows that decision-making needs to move beyond the broad definitions of “trade openness” and “environmental performance” and instead recognize the importance of a more refined interplay between international trade flows, liberalization policies, good governance, and disaggregated environmental factors such as environmental health, ecosystem degradation, and climate change. We find evidence that trade openness and economic growth can have both positive and negative empirical environmental associations.

Specifically, there are three main findings:

  1. Even after controlling for levels of economic activity, higher trade flows appear to be positively associated with environmental health outcomes and negatively associated with measures of ecosystem vitality.
  2. Trade-liberalizing policies also show a positive association with environmental health but a less clear relationship with ecosystem vitality.
  3. The data point to the importance of good governance as a possible factor that allows nations to capture the benefits of trade and development while mitigating environmental degradation and greenhouse gas emissions.