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Environmental Performance Measurement

Thursday, January 28, 2010
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Iceland Ranks at Top of 2010 Environmental Performance Index

By Daniel C. Esty

The latest Environmental Performance Index (EPI), produced by the Yale Center for Environmental Law and Policy and by the Center for International Earth Science Information Network at Columbia University, was released this week, identifying Iceland as the world leader in addressing pollution control and natural resource management challenges. The rankings cover 25 metrics aggregated into ten categories including: air pollution, water resource management, forestry, biodiversity and habitat, and climate change. Iceland is followed in the rankings by Switzerland, Costa Rica, Sweden, and Norway, each having a broad-based commitment to environmental protection. The countries found at the bottom of the rankings are mainly from the African continent. Their low ranks are based on very weak results in terms of environmental health measures, as they lack basic amenities such as clean water and sanitation.

The latest rankings, made public in a session at the World Economic Forum in Davos this week, again show a number of European countries at the higher end of the spectrum, though there were a number of surprises. For one, Costa Rica is ranked third, reflecting its substantial efforts towards environmental protection, while building its economy and strengthening its national identity. Meanwhile, the U.S. ranks 61st globally, which is a reflection of weak performance on greenhouse gas emissions and air pollution. However, since the data is mainly from 2007 and 2008, the results do not reflect the Obama Administration’s environmental efforts, but rather represent the years of environmental neglect that preceded his inauguration.

The 2010 EPI provides a pilot experiment of looking at trend data. The rankings provide an interesting way to see, on an issue-by-issue basis, who has succeeded and who has fallen short in terms of policy performance. Collecting such information makes it easier to both identify best policy practices, and to disseminate such information. However, efforts to collate “Change EPI index” – that is data that helps us to understand who is making progress, and who is stagnant or declining – has proven to be difficult.

The 2010 EPI also enables one to identify drivers of policy success, using a variety of tools. The EPI shows that the most important determinants for success are the level of GDP and the scale of investments directed toward environmental protection. Yet at every level of development some countries perform better than anticipated, while others lag behind.

The EPI continues to be limited by available data. In many cases, there is not comprehensively collected or methodologically consistent data on important issues. A significant number of countries failed to report data in some key areas. The importance of sound data emerged as a major theme at Copenhagen, and it is of upmost importance that we invest in better environmental metrics and in the external verification of the data reported.

The EPI shows the importance of using quantitative tools in the decisionmaking progress, as it enables policymakers to benchmark progress. It demonstrates the value of being able to understand the strengths and weaknesses of existing policy and strengthen those that work. The full results and accompanying analysis are available at http://epi.yale.edu.

Posted in: Environmental Performance Measurement
Tuesday, September 29, 2009
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Newsweek Green Rankings

By Daniel C. Esty

Newsweek has just released its first corporate Green Rankings “scoring” 500 large American companies on their performance in responding to pollution control and natural resource management challenges. This ranking represents another step towards a more transparent world where companies know that their environmental performance is being scrutinized. 

I am especially pleased to see the Newsweek rankings as well as the Carbon Disclosure Project’s latest corporate greenhouse gas emissions scorecard since the Yale Center for Environmental Law and Policy has been promoting data-driven, analytically rigorous analysis of “green” performance for more than a decade.

The Newsweek project (on which I was an advisor) compiles an impressive range of information, gathered by three of the country’s top environmental research firms, about corporate environmental results and practices. Each company’s “Green Score” reflects three components: (1) Environmental Impact, which draws from quantitative measures and modeled results covering a range of issues including greenhouse gas emissions, air pollution and water use; (2) Green Policies, which examines corporate governance and practices related to the environment; and (3) Environmental Reputation, which reflects survey data on attitudes from corporate and environmental experts.

Having a more fact-based and empirical picture of which companies are doing well – and which less so – with regard to environmental management will be of interest to a variety of stakeholders, including the communities where these companies operate as well as their customers, suppliers, and employees.  Perhaps most importantly, environmental performance in general and “carbon exposure” in particular are increasingly of interest to those in the capital markets. As Congress continues to discuss climate legislation, and as the prospect of carbon charges in one form or another looms, investors have begun to ask which companies have been attentive to climate change and will therefore be advantaged in a carbon-constrained world. Likewise, they want to know which companies and industries will be relatively more burdened.  The Carbon Disclosure Project’s rankings are particularly relevant in this regard.

In some important respects, the Green Rankings (and the CDP report) raise more questions than answers. But this is to be expected in a world of haphazard environmental data.  Indeed, the index methodologies will be refined in the years ahead – and the picture painted will be sharpened.

Posted in: Environmental Performance Measurement

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