Tuesday, January 24, 2006

U.S. 2006 Environmental Performance Index

Tyler Klocke points us, in the post just below, to a new environmental performance index. I took a quick look at the material on the website Tyler links to. I found the U.S. was ranked 28th worldwide. I looked through some of the country specific information, and I noted a few things of interest. I was going to ask what the information means and what it doesn't mean? Apparently, some reports have suggested the information means the U.S. has been underperforming. Of course, such an inference should make quite a splash on politics. My personal intuition would be that I would be skeptical that the U.S. is underperforming. John Whitehead did a quick regression analysis with the data used in constructing the index. Here is the inference he draws:
"The U.S. ranks 28th in the world in achieving certain environmental goals according to the Environmental Performance Index produced by Yale and Columbia. Yesterday Mark Thoma linked to a NYTimes article which could be interpreted as implying that the U.S. should be doing better.

The analysis conducted in the reports puts the U.S. under the line. In other words, the U.S. is doing worse than expected given its income level. I wondered if this were true. Using a slightly more complicated analysis it appears that the U.S. is doing about as well as it should be doing."
[ . . . . ]
"This model tells us that EPI increases with GDP but at a decreasing rate. In other words, the EPI is subject to diminishing returns. An country can improve its environmental performance with increasing gains in per capita GDP but these gains are smaller and smaller as GDP per capita increases.

One way of thinking about this model is as a production function. The input is income and the output is EPI. Plug in a country's GDP and region and the model will tell you how that country should be doing. Countries that have a positive difference between their EPI and the predicted EPI are doing better than expected. Countries that have a negative difference are doing worse than expected.

The U.S. ranks 28th in the world in EPI. The U.S. ranks 29th in the world. The U.S. EPI is 78.5 and the predicted EPI is 78.4514. The multiple regression model predicts the U.S. performance almost perfectly. The U.S. is achieving environmental goals about as well as expected given its GDP per capita. "

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