Physical Environmental Accounts – Air Emission Accounts(AEA) European Statistical Training Programme (ESTP) Sacha Baud – Statistics Austria Vienna, 28 – 30 May 2018 THE CONTRACTOR IS ACTING UNDER A FRAMEWORK CONTRACT CONCLUDED WITH THE COMMISSION

Introduction

Introduction What are air emissions accounts? Air emission accounts (AEA) record the flows of gaseous and particulate materials from the national economy into the atmosphere which is part of the environmental system. AEA refer to air emissions caused by production and consumption activities, i.e. caused by the economic system. The air emissions are presented in a breakdown by emitting economic activity. Air emissions comprise emissions of greenhouse gases and emissions of air pollutants.

Introduction Residence principle AEA record the emissions arising from the activities of resident units of a given national economy, regardless of where these emissions actually occur geographically. AEA are fully compatible with the concepts, principles and data of national accounts. Therefore AEA have the same accounting principles and system boundaries as the national accounts. The residence principle of national accounts says, that an economic unit is a resident unit of a given country when it has a centre of economic interest in the economic territory of that country. This means that the economic unit is engaged in economic activities in that territory for 1 year or more.

Introduction AEA versus national emission inventories National emission inventories have been established in the context of international conventions (UNFCCC, UNECE-CLRTAP). They present emissions of greenhouse gases and air pollutants in a breakdown by technically delineated processes and sources. In contrast to AEA, national emission inventories follow the territory principle, i.e. they include emissions originating from the geographic territory of a given country without taking into account the origin of the producer of the emissions.

Introduction AEA versus national emission inventories AEA differ from national emission inventories because of the differences between residence and territory principle and the definition and scope of national totals as defined in emission inventories. These differences are shown in AEA through “bridging items”.

Introduction AEA serve to answer questions such as: How much CO2 is emitted by private households and how much by industries? Which are the ‘hot spots’ within the production system? How much do they contribute to the economy in terms of value added, employment...? What is the relationship between the economic performance and the environmental performance of various production activities? Are the economic activities that pollute the most the same ones that spend the most on environmental protection?

Conceptual foundations

Chapter 29 – Satellite accounts and other extensions System of National Accounts 2008 European Commission International Monetary Fund Organisation for Economic Co-operation and Development United Nations World Bank Chapter 29 – Satellite accounts and other extensions F. Examples of satellite accounts … 2. Environmental accounting

Chapter 22 – Satellite accounts European system of national and regional accounts in the European Union (ESA 2010) Chapter 22 – Satellite accounts … Environmental accounts

SEEA, the international standard for environmental economic accounts

Conceptual foundations AEA are in line with the accounting structures and principles of the System of Environmental-Economic Accounting – Central Framework (SEEA-CF). AEA belong to the main area of physical flow accounts. They are a kind of simplified physical supply tables recording the flow of residuals stemming from the various economic activities, i.e. production and consumption activities. Air emissions are incidental and undesired outcomes of the economic system released to the environment.

Conceptual foundations Source: Eurostat Manual for air emission accounts 2015

Conceptual foundations ESA 2010 - 22.10 Major advantages of satellite accounts include the following: They are based on a set of clear definitions. Application of a systematic accounting approach (for example using the supply and use of goods and services by product and by industry). Linkage to the basic national accounting concepts. Linkage to national accounts statistics.

Conceptual foundations ESA 2010 – 1.53 The main characteristics of the system are: Statistical units and their groupings b) Flows and stocks c) The system of accounts and the aggregates d) The input-output framework

a) Statistical units and their groupings 1.54 The system uses two types of units and two corresponding ways of subdividing the economy, which are quite different and serve separate analytical purposes. 1.55 The first purpose of describing income, expenditure and financial flows, and balance sheets, is met by grouping institutional units into sectors on the basis of their principal functions, behaviour and objectives. 1.56 The second purpose of describing processes of production and for input-output analysis is met by the system grouping local kind-of-activity units (local KAUs) into industries on the basis of their type of activity. An activity is characterised by an input of products, a production process and an output of products.

a) Statistical units and their groupings Local KAUs are the relevant unit for air emission accounts.

Local kind-of-activity units and industries 2.144 Most institutional units producing goods and services are engaged in a combination of activities at the same time. They may be engaged in a principal activity, some secondary activities and some ancillary activities. 2.145 … Activities can be determined by reference to a specific level of NACE Rev. 2. 2.146 If a unit carries out more than one activity, all the activities which are not ancillary activities … are ranked according to the gross value added. On the basis of the preponderant gross value added generated, a distinction can then be made between principal activity and secondary activities.

Local kind-of-activity units and industries 2.147 In order to analyse flows occurring in the process of production and in the use of goods and services, it is necessary to choose units which emphasise relationships of a technico-economic kind. This requirement means that institutional units must be partitioned into smaller and more homogeneous units with regard to the kind of production. Local kind-of activity units are intended to meet this requirement as an operational approach. It is recommended to register as many local KAUs as there are secondary activities performed by the institutional unit. However, often the available accounting documents do not allow this. So, in practice local KAUs may have besides their principal activity also one or more secondary activities.

Local kind-of-activity units and industries 2.150 An industry consists of a group of local KAUs engaged in the same, or similar, kind-of-activity. At the most detailed level of classification, an industry consists of all the local KAUs falling within a single class (four digits) of NACE Rev. 2 and which are therefore engaged in the same activity as defined in the NACE Rev. 2. Implication for air emission accounts: Since national accounts data are presented by industry, each activity is responsible for the emissions stemming from its principal, secondary (if any) and ancillary activities

Local kind-of-activity units and industries Industries are delineated in national supply and use table (SUTs) and thus there are close links between AEA and supply tables. AEA use the same industry breakdown (A*64) as supply and use tables. Industries in the supply tables should be rather homogenous, ideally producing only their typical product because all local KAUs in the same industry have the same principal activity. In practice however, local KAUs and hence industries can have one or more secondary activities.

Local kind-of-activity units and industries Compilers of AEA have to take into account these circumstances. That means that they have to contact the national SUT compilers to ensure that AEA have the same structure of principal and secondary activities by industry as the national supply table. Example: If NACE 38 produces electricity and heat as secondary activity based on the supply table also AEA have to record the corresponding emissions of electricity and heat production in NACE 38.

Industries and households – Questionnaire ... ...

Industries and households Same classifications are used for economic data: Industries NACE Rev. 2 (Statistical classification of economic activities in the European Community) Households Air emission accounts functions: transport, heating, other

AEA residence principle The residence principle defines the scope of the national economy and what is included in the accounts. National accounts use the same principle. In national accounts a resident unit is defined as an institutional unit that has its centre of economic interest on the economic territory of that country, irrespective of nationality, legal form or presence on the economic territory at the time they carry out a transaction. The national economy is defined as the entity including all activities of resident institutional units. Therefore AEA record air emissions arising from activities of resident units, regardless of where these emissions actually occur.

AEA residence principle Therefore AEA record air emissions arising from activities of resident units, regardless of where these emissions actually occur. Example: Emissions from air transport Emissions of a flight of Ryanair from Frankfurt to New York is recorded in the Irish AEA. National emission inventories do not follow the residence but the territory principle, which means that air emissions are recorded in the country in which the emissions occur, regardless the origin of the emitter (fuels are recorded in the country where they are sold).

Territory vs residents Source: Eurostat Manual for air emission accounts 2015

Implications for AEA Whenever national emission inventories and/or energy accounts are used to compile AEA the data based on the territory principle have to be adjusted to the residence principle. This is done in the so-called bridging items. Emissions of non-residents on the national territory have to be deducted and emissions of resident units abroad have to be added. Bridging items for land, water and air transport are differentiated. PEFA can be a source for calculating transport emissions according to the residence principle. Annex 3 of the AEA manual describe how to derive bridging items for national emission inventories.

Bridging tables

Emission inventories vs. Emission accounts

Air Emission Inventory Air Emission Accounts Territorial principle Residence principle Process-based allocation of emissions Allocation of emissions to economic activities Breakdown by seven sectors (Energy, industrial processes; solvent and other product use; agriculture; land use, land-use change and forestry; waste; other) Breakdown by industries (NACE 2-digit level) and households Functional allocation of transport emissions Allocation of transport emissions to the final producer

Inventory-first approach

Inventory-first approach The inventory-first approach starts from existing emission inventories (UNFCCC, UNECE-CLRTAP) and adjusts as well as re-arranges the relevant emission data to the AEA format. In emission inventories the emissions are compiled on the basis of processes, e.g. combustion processes, storage of fuel, waste water treatment in industry. UNFCCC covers six greenhouse gases (CRF classification – Common Reporting Format). UNECE-CLRTAP covers inter alia 5 air pollutants and particulate matter PM2.5 and PM10 (NFR classification – Nomenclature for Reporting)

Inventory-first approach Besides these two classifications it might be that the SNAP (Selected Nomenclature for Air Pollutants) classification is still used by compilers of national emission inventories. SNAP is more detailed than CRF and NFR but it is an older classification and for the new versions of CRF and NFR there might be no correspondance to SNAP.

Inventory-first approach Source: Eurostat Manual for air emission accounts 2015

Inventory-first approach CRF/NFR/SNAP code NACE 2 digit directly indirectly The emissions of most SNAP codes can directly be allocated to industries and households. Indirect allocation of emissions, e.g.: CRF/NFR 1A4ai; SNAP 020103: Space heating in service industries; breakdown of emissions by means of Useful Energy Analysis and distribution of labour force.

Inventory-first approach CRF/NFR 1A2a-g; SNAP 03010A-F: Unspecific combustion processes in manufacturing industries; detailed information from Federal Environment Agency for some industries, e.g. Iron and Steel, Chemical and Petrochemical, Paper, Food; rest with Useful Energy Analysis, Transformation Input and Energy Accounts. CRF 1B1ai, 1B1aii; NFR 1B1a; SNAP 050103: Fugitive emissions from coal mining and handling; allocation of emissions to consumers of coal using Useful Energy Analysis, Transformation Input and Energy Accounts.

Inventory-first approach Part of NFR 2G; CRF not reported; SNAP 0604: Fireworks No informationen available; 50/50 allocation to households and NACE 2 digit 92 (Pyrotechnicians). NFR 5C1bi; part of CRF 5C1; SNAP 090208: Industrial waste incineration Allocation of emissions to NACE 2 digits 23 and 38, using information from the Federal Environment Agency.

Inventory-first approach Indirect allocation of transport emissions: Transport emissions from air emission inventories must be adapted to the system boundaries of Air Emission Accounts, i.e. emissions of resident units abroad have to be included whereas emissions of non- resident units on the national territory have to be deducted. Basis could be the Physical Energy Flow Accounts. This principle applies to: Road transport Water transport Air transport

Inventory-first approach Road transport is broken down into five vehicle categories: CRF/NFR 1A3bi; SNAP 0701: Passenger cars CRF/NFR 1A3bii; SNAP 0702: Light duty vehicles (< 3.5 t) CRF/NFR 1A3biii; SNAP 0703: Heavy duty veh. (> 3.5 t) incl. buses CRF/NFR 1A3biv; SNAP 0704: Mopeds and motorcycles (< 50 cm3) CRF/NFR 1A3biv; SNAP 0705: Mopeds and motorcycles (> 50 cm3) CRF/NFR 1A3bv; SNAP 0706: Fuel evaporation from vehicles CRF not rep./NFR 1A3bvi-vii; SNAP 0707: Automobile tyre and break wear

Inventory-first approach Each vehicle category is broken down into type of fuel (e.g. motor gasoline, diesel, liquid biofuels) and maybe into driving modes (highway, rural, urban). Air emission inventory experts should have detailed information on the composition of road transport emissions, e.g. a complex model consisting of parameters like vehicle category, age, engine type, fuel type, average km/year, driving modes etc. Road transport occurs in general in all industries and it is also undertaken by households. In industries it can be a principal (land transport and transport via pipelines), a secondary (e.g. postal services, construction,) or ancillary (in all industries) activity.

Inventory-first approach There is no standard methodology available for the allocation of road transport emissions to industries and households, because this task can only be done with auxiliary data. And these data differ from country to country. Minimum requirements are: Adjustment to residence principle Breakdown by the five vehicle categories and Breakdown by fuel type (and by engine)

Inventory-first approach Recent developments relating to the allocation of road transport emissions A Task Force on allocation of road transport was implemented to make proposals for an improved allocation of road transport to NACE and households (for AEA and PEFA). The TF focused on: Study of methodological approaches Compiling an inventory of national methods Ranking and clustering the methods in A/B/C quality classes

Inventory-first approach Recent developments relating to the allocation of road transport emissions The TF identified the following main methods of countries: Road transport models Surveys Use tables of national accounts The TF proposes to classify the elements of the national methods, not the complete approach.

Inventory-first approach Recent developments relating to the allocation of road transport emissions The proposed categories are: A: very good, best practice suitable as a model B: sufficient, acceptable C: insufficient, not acceptable The TF delivered a list called ‘Classification of methods’ with 42 elements, describing methodological elements and their quality class.

Source: Eurostat

Source: Eurostat

Inventory-first approach Allocation of road transport on the basis of auxiliary data: Using statistics on energy consumption Using road transport statistics

Inventory-first approach CRF/NFR 1A3bv; SNAP 0706: Fuel evaporation from vehicles Application of the same breakdown as for gasoline. CRF not rep./NFR 1A3bvi-vii; SNAP 0707 Automobile tyre and break wear No informationen available; allocation on the basis of the stock of vehicles without taking into account any further variables, like the type of vehicle or the driving behaviour. CRF 1A3d; NFR 1A3dii; SNAP 0803: Domestic nagivation CRF 1A3d; NFR 1A3di(ii); SNAP 0804:International navigation

Inventory-first approach CRF 1A3a; NFR 1A3aii(i); SNAP 080501: Domestic airport traffic CRF 1A3a; NFR 1A3aii(ii); SNAP 080503: Domestic cruise traffic Consumption of kerosene and jet gasoline from EA Emission factor x

Energy-first approach

Energy-first approach The energy-first approach uses energy statistics/balances (or PEFA in case of availability) as a starting point for the compilation of AEA. Energy use has to be adjusted to the residence principle, then broken down by NACE (very similar to PEFA). PEFA table C ‚Emission relevant use table‘ is the most suitable starting point for an energy-first approach. In the next step calculation of emissions employing emission factors. Collection and allocation of emissions from non-combustion processes; most likely from national emission inventories.

Energy-first approach

Multi-purpose data system approach

Multi-purpose data system approach Some countries have developed a multi-purpose data system with all kinds of emission data at very detailed level to compile national emission inventories and AEA.

Multi-purpose data system approach

What is included in AEA and what is not?

What is included in AEA and what is not? Respiratory emissions from humans and domesticated animals: In general these respiratory emissions are excluded even though these emissions stem from the national economy and are emitted to the environment. Only methane emissions from enteric fermentation (ruminant animals) are taken into account. Emissions and (uptakes) from (by) cultivated plants, as latter belong to the national economy: There would be several reasons to take into account relevant emissions from and uptakes by cultivated plants but they are not considered in AEA.

What is included in AEA and what is not? Emissions of gaseous substances from soils: Emissions from managed soils are excluded from AEA because the SEEA-CF defines that cultivated plants and forests belong to the economy but the soil beneath belongs to the environment (system boundary at the root of the cultivated plant). Emissions of gaseous substances from soil cultivation: These emissions, e.g. from fertiliser and manure application as well as animal excreta, belong to AEA because they are the results of production activities.

What is included in AEA and what is not? Emissions from waste landfills that goes to atmosphere: Emissions of methane to the atmosphere belong to AEA as they are emitted to the environment. Emissions captured, e.g. for the production of biogas, stay within the economy and are therefore excluded. BUT: CO2 emissions from combustion of biogas are then included in AEA. Flaring and venting: These emissions are recorded in AEA. Gaseous substances captured: Carbon storage or methane capured at landfill sites are excluded from AEA. They are internal flows of the economy.

Reporting to Eurostat

Reporting to Eurostat Questionnaire: Compulsory, voluntary data, bridging items, early estimates, validation checks, confidential data, flags. Quality report SDMX: voluntary test 2018

Practical examples

Reference documents See: http://ec.europa.eu/eurostat/web/environment/methodology e.g: Air emissions accounts questionnaire 2018 Air emissions accounts quality report template 2018 Technical note EEEA/2017/01: Allocating emissions of fluorinated gases to NACE industries in air emissions accounts Manual for air emissions accounts, 2015 edition Annex I (Correspondence between CRF/NFR – NACE Rev. 2) to Manual for Air Emissions Accounts

Questions?