For nearly three decades, the Washington D.C.-based Heritage Foundation has published an Index of Economic Freedom. The Index measures economic freedom by scoring each country in the following categories. 

1. Rule of law: property rights, judicial effectiveness, and government integrity;
2. Government size: fiscal health, government spending and tax burden;
3. Regulatory efficiency: business freedom, labor freedom, and monetary freedom; and
4. Open markets: trade freedom, investment freedom, and financial freedom.

Heritage compiles publicly available data from sources such as the African Development Bank, the Asian Development Bank, the European Commission, the Economist Intelligence Unit, the International Monetary Fund, the World Bank, various U.S. government agencies, Oxford University’s World Economic Outlook, and the World Economic Forum. ¹

Countries earn aggregate scores and fall into one of five categories:

1. Free (scores of 80 to 100)
2. Mostly Free (70 to 80)
3. Moderately Free (60 to 70)
4. Mostly Unfree (50 to 60)
5. Repressed (50 and below). 

In the 2023 Index, only four countries (Singapore, Switzerland, Ireland and Taiwan) received the most elite designation of “Free” nations² while 23 others fall into the “Mostly Free” category, including the United States. Another 56 countries are “Moderately Free.” The most fleeting connections to economic freedom are found in the 65 “Mostly Unfree” countries and the 28 “Repressed” countries. 

The principles that make a country economically free are also critical to a cleaner environment. One of the most comprehensive measurements of a country’s environmental performance is Yale University’s Environmental Performance Index (EPI). Produced every other year, the EPI similarly scores a country on a 0-100 scale and includes 180 countries in its 2022 report.³

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The EPI gives a country a score based on 40 environmental indicators broken down into eleven issue categories. These fall into three broader categories consisting of: 

1. Climate change: climate change mitigation;
2. Environmental health: air quality, sanitation & drinking water, heavy metals, and waste management;
3. Ecosystem vitality: biodiversity & habitat, ecosystem services, fisheries, water resources, acid rain, and agriculture. 

The report’s technical appendix details how the authors weigh each of the eleven issue categories and how the authors weigh each of the 40 environmental indicators. ⁴

Using these two indices, we can explore the importance of economic freedom on environmental performance. When correlating the Index of Economic Freedom and the Environmental Performance Index, one finds a strong, positive relationship between economically free economies and clean economies. ⁵

Yale’s report emphasizes: 

Considering the strong association between EPI and Index of Economic Freedom (IEF) scores, the 2022 EPI drivers analysis suggests that democratically-elected governments and free markets are best positioned to respond to environmental challenges and adopt policy preferences that drive countries toward a more sustainable future. 

Free economies are clean economies for many reasons. Well-defined and legally protected property rights incentivize environmental stewardship. Free, competitive markets empower producers to meet the needs of consumers, including consumer demand for environmentally friendly services and products. Open markets are conduits for investment, innovation, and technological advancement, which generates significant economic and environmental efficiencies. Indeed, freer economies are wealthier, providing more private and public resources for environmental protection.

1. The Heritage Foundation, 2022 Index of Economic Freedom, https://www.heritage.org/index/explore[↩]
2.  Singapore, Switzerland, Ireland, New Zealand, Luxembourg, Taiwan, and Estonia. [↩]
3.  Wolf, M. J., Emerson, J. W., Esty, D. C., de Sherbinin, A., Wendling, Z. A., et al. 2022 Environmental Performance Index. New Haven, CT: Yale Center for Environmental Law & Policy, https://epi.yale.edu/epi-results/2022/component/epi [↩]
4. See Yale EPI technical appendix at https://epi.yale.edu/downloads/epi2022technicalappendix.pdf [↩]
5.  Yale’s report finds a similar positive correlation. “Finally, we find that economic liberalism is positively associated with environmental performance. While our results do not give countries carte blanche to pursue laissez-faire economic strategies without regard for the environment, they do cast doubt on the implicit tension between economic development and environmental protection.”[↩]