Back from Davos, Esty sees rise of greener free market

Global business leaders, who convened last month in Davos, Switzerland, are beginning to see the green in going green.

The free market — for so long the source of environmental damage — has emerged as a promising agent of environmental protection in the 21st century, said Dan Esty, a joint professor of environmental law and policy at the Law School and the School of Forestry & Environmental Studies.

Esty returned last week from his ninth trip to the annual World Economic Forum in Davos, where he presented a study of environmental performance worldwide. In a phone interview with the News, Esty said that at the conference he noticed a major shift in business leaders’ perceptions of the relationship between the environment and economic vitality, which many of them are increasingly beginning to see as compatible.

“What’s really striking in the world in general, and it was very evident in Davos as well, has been a sea change in attitudes in the business world over the last year to see the environment no longer as just a set of regulations to follow and a burden to bear, but actually as an upside and an opportunity,” he said. “In a society that invests a lot more money in all elements of environmental protection, from climate change to water supply, the companies that are able to provide those solutions are going to thrive.”

Esty first received an invitation to the World Economic Forum in the mid-1990s. A few years later, he began delivering a presentation on the Environmental Performance Index at the conference, which he has done each year he has attended since.

The EPI — a study produced by a team of scientists and researchers from Yale and Columbia University, including students at the Law School, the environment school, the School of Management and Yale College — aims to provide information to world leaders making decisions at the intersection of economics, environmentalism and public policy. It ranks countries by their environmental performance using data on six policy areas: air pollution, biodiversity and habitat, climate change, environmental health, productive natural resources and water resources.

“We’re moving the world toward environmental decision making that’s data-driven and fact-based, which helps dispel long-standing theories and myths about what’s required for good environmental results,” he said.

Esty said he originally conceived the of the idea of the index as a “counter-balance” to the Forum’s rankings of countries by economic competitiveness.

But the data they have found suggests the two lists are not as opposed to each other as some had expected, Esty said.

“One of the things our analysis has demonstrated is that a number of countries have succeeded in achieving both strong economic performance and strong environmental results,” he said. “So the traditional theory that there’s a trade-off is increasingly shown not to be true.”

The United States, however, is not one of those countries, according to the EPI. The United States topped the economic-competitiveness rankings but placed 39th in environmental performance, trailing several industrialized peers, including Britain and Japan. Switzerland, by comparison, placed second in economic competitiveness and first on the EPI.

Esty said the United States scored unevenly among the study’s criteria, excelling in standards for clean drinking water and sanitation but lagging in those for greenhouse-gas emissions and waste per capita.

The biggest factor in America’s poor environmental performance, Esty said, is the lack of any coherent policy for combating global warming.

“The bottom line on climate change is to have a policy,” he said, “so people who have taken the problem seriously have developed policies to incentivize clean energy and bring down greenhouse-gas emissions.”

Esty’s advice to the next president is simple: Do something.

“The key to environmental progress is effort — good governance matters a lot — and second, a regulatory system that has incentives for innovation,” he said. “What’s most important is using price signals to ensure that people who cause harms pay for the damage they cause and people who can produce solutions to environmental problems can profit from selling their goods and services.”

Companies and investors are catching on, Esty said. In anticipation of a financial reckoning for carbon emissions, he said, the business world is looking for potential sources of renewable energy.

While no clear favorite for replacing fossil fuels has emerged so far, Esty said, exploring diverse options will help find short-term solutions that are suited to the natural resources available in different places — whether geothermal in the Philippines or wind in Denmark, he said.

His bet on the long-term solution: solar.

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