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Exploring Trade and the Environment: An Empirical Examination of Trade Openness and National Environmental Performance

May 24, 2011, NEW HAVEN, CT -- The Yale Center for Environmental Law and Policy released today a first-of-its-kind empirical study on the relationships between trade and the environment. The report—called “Exploring Trade and the Environment: An Empirical Examination of Trade Openness and National Environmental Performance”—finds evidence that trade openness can have both positive and negative associations with environmental quality.

The report’s 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. The EPI ranks countries on twenty-five environmental performance indicators in ten policy categories relating to two core policy objectives – environmental health, which measures environmental stresses on human health, and ecosystem vitality, which measures ecosystem health and natural resource management. The most recent edition of the EPI, which ranks 163 countries, can be found online here.

The EPI’s rich assembly of global data sets allowed researchers to test specific environmental performance indicators—including water quality, greenhouse gas emissions, and biodiversity—against quantitative measures of international trade and trade policies from the World Bank, World Trade Organization, and the Heritage Foundation, among other data sources.

The study shows that decisionmaking 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.

Specifically, the study has 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.

“This study is intended to be a first step toward more empirical analysis at the global scale of the important and complex interplay between trade and the environment,” said Professor Jay Emerson, the study’s lead researcher. “Our statistical findings suggest that trade and governance policies can be developed that help improve environmental outcomes.”

The study also features a pilot time series analysis of the relationships between trade trends and climate change. One notable finding is that a subset of developing countries, such as China, India, and Mexico, have experienced trade growth while also decreasing their greenhouse gas emissions per unit of GDP. Such gains in carbon efficiency for rapidly developing countries with increasing trade intensity deserve additional research.

The report’s authors stress that considerable work is still needed to clarify the policy effects and implications of their findings. In particular, the report points to the urgent need for improved time series data in both the trade and environmental fields, and that internationally recognized measurement procedures should be used year after year to support longer-term analyses. The report’s authors also emphasize that their statistical findings do not support drawing conclusions about causation.

The Yale Center for Environmental Law and Policy strongly encourages further research and analysis to help deepen understanding of the complicated relationships between trade and the environment. Given the Center’s longstanding commitment to promoting transparency in all its published work, underlying data and other statistical material associated with this study are available here for free. The executive summary can be accessed here, and the full report is available here. The beta version of the data can be found here.

Yale’s study was made possible by a grant from FedEx Corporation.

For more information, contact Susanne Stahl, Program Coordinator, Yale Center for Environmental Law and Policy, +1.203.432.5594 (tel), +1.203.432.0237 (fax), susanne.stahl@yale.edu.

 

Downloads:

Executive Summary.

Full Report.

Data (Beta Version).


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