Getting green in Stockholm. Sweden performed particularly well in the Green Economy Index. mararie/Flickr

Countries can be economically lean and environmentally green, but there are other costs to consider.

To many, the idea of green growth can seem almost utopian. Economic growth, the linchpin of rising living standards, requires belching factories, energy consuming buildings, gas guzzling cars and trucks to move things around, and resources that must be pulled out of the ground. But evidence is mounting that cities and nations can be both leaner and greener, and that economic growth and prosperity can come with improved environmental outcomes.

That’s the main takeaway from the recently released Green Economy Index (GGEI), and my Martin Prosperity Institute (MPI) analysis of it. The study by the data analytics company Dual Citizen LLC ranks and rates 60 nations across the world according to two key measures:  its Green Perception Survey of more than 1000 green economy and green economy adjacent professionals worldwide, and its Green Performance Index, based on 32 measures of environmental performance, spanning climate change, natural capital, environmental industries and investment, and leadership on these issues.

The first map below shows how nations stack up on the survey-based Green Perception Index. Germany takes first place, followed by Denmark, Sweden, Norway and the Netherlands. The U.S. ranks sixth, with Japan, the U.K., Finland, and Switzerland rounding out the top 10. Canada is 12th, behind Australia but only one place ahead of China, despite that country’s considerable pollution in and around its industrial zones. At the bottom of the list are poorer nations: Senegal, Panama, Uruguay, Mongolia, and Slovakia.

(Zara Matheson, MPI)

The Green Perception Survey (GPS) is based on expert opinion and likely favors nations with innovative or forward-looking environmental policies, as opposed to higher levels of environmental performance. As we’ll see below, there are some discrepancies between perception and reality.

The next map shows how nations stack up on the Green Performance Index (GPI). The top ranked countries are similar, with Sweden, Norway, Germany, and Denmark all among the top five. But now Costa Rica moves up to third (it ranked 14th on the Green Perception Survey). Switzerland, Austria, Finland, Iceland and Spain round out the top ten.  The U.S. falls all the way to 28th, while Canada drops to 29th and Australia all the way to 37th. China drops from 12th in perception all the way to 55th in performance, near the bottom of the ranking. All of these countries have a considerable gap between how people perceive their environmental efforts and their actual performance. In fact, the correlation between the Green Perception Survey and the Green Performance Index is .59, indicating the two overlap to some degree, but are not the same.

(Zara Matheson, MPI)

***

This leaves a bigger question: What is the relationship between green performance and the economic wealth and performance of nations?

To get at this, my MPI colleague Charlotta Mellander ran a basic correlation analysis between the Green Performance Index and a series of standard measures of national economic performances. The usual caveats apply: Correlation doesn't equal causation, and points only to associations between variables.

Environmental performance is closely related to the wealth and development of nations, according to Mellander’s analysis. The Green Performance Index (GPI) is positively associated with economic output per capita (with a correlation of .55).  The chart below plots the relationship between the two. Here, the countries above the line have relatively better environmental performance per their level of development; those below the line have worse. (Note that all of the posts in this post are interactive; hover over the points for more complete data on each nation).

So more advanced countries like Sweden, Norway, Switzerland and Denmark perform better than their economic output per capita would predict.  Conversely, the U.S. and Canada sit below the line, as does China, performing worse on the GPI than their economic output per capita would predict.

The GPI is also positively related to a series of other basic measures of economic competitiveness (World Economic Forum’s Global Competitiveness Index, .53), human development (the UN Development Program’s Human Development Index, .54), and entrepreneurship (the Global Entrepreneurship Monitor, .63). It is also related to my own measures of the global creative class (.52) and the Global Creativity Index, a composite measure of creative-economic performance (.63).

The graph below shows the relationship between the GPI and the creative class. Once again, those nations above the line perform better than what their creative class share would predict. Sweden, Denmark and Norway are well above the line.  The U.S. is a bit closer to the line, showing its environmental performance to be roughly in line with the predicted value based on its creative class share. Canada and the U.K. are again below the line: Their environmental performance is worse than their creative class would predict.

Of course, the relationship likely reflects the fact that more affluent and advantaged nations can afford better environmental performance. These more affluent countries have evolved post-industrial knowledge economies, with smaller manufacturing footprints. There is negative correlation between the GPI and the working class (-.39), which suggests a continued connection between industrial economies and worse environmental outcomes.

Environmental performance is also associated with higher levels of happiness and well-being.  The association between the GPI and life satisfaction measured by Gallup’s World Poll is among the highest in Mellander’s analysis (.63).  This likely reflects the well-documented connection between happiness and the wealth of nations.  But Gallup surveys also document the role played by green space and a clean environment in the happiness of residents.

The chart below plots the relationship between the two.

Interestingly, we find only a weak association between urbanization levels and the GPI (.31). This likely reflects the two very different types of urbanization across the world – the close association between urbanization and economic development in advanced nations, and the continued, troubling persistence of lower levels of development and global slums in emerging economies. This weak association with urbanization should serve as a call to arms for global leaders, who need to focus on creating more environmentally sustainable and economically prosperous cities.

Lastly, we find a troubling connection between inequality and environmental performance. Income inequality, as measured by the Gini coefficient, has a weak though significant negative correlation with the Green Performance Index, -.24. (See the chart below).

The countries in the left upper left hand quadrant—Sweden, Denmark, Norway, Germany, Finland, and Austria—combine a relatively good environmental performance with relatively low levels of inequality. The countries in the lower left—Japan, Indonesia, Vietnam, and the Czech Republic—have low levels of inequality alongside a relatively weak environmental performance. Countries in the upper right of the graph—Costa Rica, Brazil and Peru—combine a good environmental performance with high levels of inequality. Countries in the lower right—China, Argentina and Panama—combine high inequality and a poorer environmental performance. The U.S. and Canada are situated at the middle of the graph, reflecting their middling performances on inequality and environmental performance.

***

This worrying connection suggests there are two paths nations and cities can take when it comes to economic growth, environmental performance and inequality. There is a low road, taken by nations like the U.S., the U.K. and Canada, where economic growth comes hand in hand with higher levels of inequality and poorer environmental performance. But there is also a high road, taken by Northern European and Scandinavian nations, where economic growth goes along with lower levels of inequality and greener environmental outcomes. If we want a future where the rapid development of emerging nations and cities is sustainable and continuous, we’re all better served by taking that high road.

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