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Friday, July 22, 2011
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Quantifying Environmental Indicators and Trade

By Guest Author, Diana Connett, MEM '12, Yale School of Forestry & Environmental Studies, and Jay Emerson, Associate Professor of Statistics, Yale University

Some of the most influential institutions in the international trade realm are integrating environmental concerns into their trade-related work. Groups such as the WTO, World Bank, United Nations, OECD, and various multilateral trade groups, have convened workgroups to flesh-out definitions of ‘environmental goods and services.’ The challenge, as is usually the case with environmental data, is how best to quantify the associations between trade and environmental conditions.

This is a difficult challenge. The world of environmental metrics is young and evolving (unlike the longstanding world of more traditional trade statistics). And connecting quantifiable environmental values to quantifiable economic values (or the narrower subset of quantifiable trade values), and vice versa, is particularly problematic.  There is, for instance, currently no internationally recognized system of environmental accounts. There is also no universally-agreed-upon environmental equivalent to GDP, or the stock market, and so different organizations have developed their own frameworks for assessing relationships between environmental conditions and trade.

Our latest report, “Exploring Trade and the Environment,” is one attempt to connect quantifiable environmental values to quantifiable economic values. Building on eleven years of research in environmental metrics, and the resulting Environmental Performance Index, the report explores ways of assessing quantifiable associations between environmental factors and trade statistics. One of its more straightforward, yet still significant, findings is a strong correlation between high levels of trade and low environmental impacts on human health (see the ENVHEALTH category in the figure below).

Bivariate associations of environmental performance, trade flows, and GDP per capita. Scatterplots of each pair of variables appear above the diagonal; associated correlations and a record of missingness appear below the diagonal, with shading indicating the sign<br /> and strength of the correlation.

Bivariate associations of environmental performance, trade flows, and GDP per capita. Scatterplots of each pair of variables appear above the diagonal; associated correlations and a record of missingness appear below the diagonal, with shading indicating the sign and strength of the correlation.


To appreciate what this really means, it’s important to understand the data underlying the terminology we use. ‘Environmental impacts on human health’ comes from the World Health Organization’s ‘Disability-Adjusted Life Years’ (DALYs) measure, and ‘levels of trade’ refers to the percent of a country’s GDP that is generated by imports and exports. The DALY metric is composed of, among other things, measures of infrastructure, such as access to improved drinking water and sanitation sources. The variable itself has a strong correlation with GDP. The finding of a ‘strong association between trade levels and environmental impacts on human health’ is thus hardly surprising: countries with more robust trade also typically have better water and sanitation infrastructure.

On a deeper level, perhaps what is most interesting about this finding is that it demonstrates the interconnectedness of policy problems and solutions. For policymakers in the developing world, for instance, our analysis suggests that improving human health means not only the obvious actions of increased water and sanitation infrastructure investments, but it also means putting in place policies that increase overall national trade levels.

Posted in: Environmental Performance Measurement

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