SERIEE and EPEA – overview EUROPEAN STATISTICAL TRAINING PROGRAMME (ESTP) Course on “Environmental Protection Expenditure statistics and accounts and related topics” Vienna, 26-28 March 2014 SERIEE and EPEA – overview Carolina Ardi and Cesare Costantino

SERIEE EPEA What’s SERIEE Why SERIEE Summary SERIEE What’s SERIEE Why SERIEE SERIEE modules and state of the art on their development SERIEE-related handbooks EPEA What’s EPEA Why EPEA EPEA aggregates Definitions and concepts Accounting tables and the ‘magica formula’ SERIEE and EPEA Environmental protection and CEPA Production account: units, transactions and Table B Supply and use of EP services: Table B1 National EP expenditure and financing: Tables A, C, C1

What’s SERIEE? SERIEE = Système Européen de Rassemblement de l’Information Economique sur l’Environnement i.e. European System for the Collection of Economic Information on the Environment Key words: Environment Economic data System

SERIEE as a “system” includes… … two satellite accounts… … and other statistics Environmental Protection Expenditure Account (EPEA) Qualitative perspective Protection against pollution and degradation phenomena Natural Resource Use and Management Expenditure Account, (RUMEA) Quantitative perspective Management and saving of the stock of natural resources against depletion phenomena integration of monetary and physical data, input-output tables for characteristic activities a recording system for eco-activities - remark: EU Regulation 691/2011 will include EGSS as a module of the European Environmental Economic Accounts

The demand for economic data on the environment: main needs Why such a sytem? The demand for economic data on the environment: main needs the need of policy makers to assess costs (and hopefully benefits) of environmental policies on the basis of sound data and analysis the need to monitor implementation of the polluter pays principle the growing need of assessing opportunities in terms of “green” growth There has been a shift of demand for data from assessing the cost of compliance to environmental policy and applying the polluter pays principle to assessing the potential of green growth in terms of productivity, employment, competitiveness. The SERIEE is a system of functionally oriented satellite accounts which aim at calculating a number of economic aggregates having a twofold objective: To allow to answer to a number of questions concerning the economic efforts made by a country for protecting the environment as well as managing and using the natural resources To allow the link between physical and monetary data for several analysis purposes like e.g.: to calculate the unitary cost for certain activities for the analysis of the efficiency of the measures undertaken or the comparative cost of environmental policies; to relate monetary flows to the data on natural resources used and on pollution caused by the various industries or branches for assessing the degree of application of the “user pays principle“ or the "polluter pays principle“;

SERIEE modules: state of the art and evolution EPEA The most developed one in terms of accounting methodology, data sources and data collection processes; important country experiences, legal base forthcoming RUMEA Developing module (a Eurostat TF is working) Shift of the scope from RUMEA to ReMEA integration of monetary and physical data Not developed as such These areas are partially covered by NAMEA-type accounts input-output tables for characteristic activities recording system for eco-activities EGSS: Eurostat handbook and data collection process; legal base forthcoming

Eurostat handbooks Handbooks For what Scope Eurostat (1994), “SERIEE - Système Européen pour le Rassemblement des Informations Economiques sur l’Environnement” Conceptual framework and accounting methodology EP Eurostat (2002), “SERIEE Environmental Protection Expenditure Accounts – Compilation guide” Accounting methodology, operational implemention guidelines, CEPA 2000 Eurostat, (2005), “OECD/Eurostat Environmental Protection Expenditure and Revenue Joint Questionnaire / SERIEE Environmental Protection Expenditure Account: Conversion guidelines”  Guidelines for using EPEA data for filling in the JQ-EPER and vice versa Eurostat (2001), “Environmental taxes - A statistical Guide” Guidelines for data collections and production of statistcs EP, RM Eurostat (2005), “Environmental Expenditure Statistics – Industry Data Collection Handbook” Eurostat (2007) ,“Environmental expenditure statistics: General Government and Specialised Producers data collection handbook” Eurostat (2009), “The environmental goods and services sector”

Implementation processes and handbooks Data sources and collection methods Data requirements Statistical output How to match EPEA (as well as JQ) data requirements for Public sect. and specialised producers How to use the available data for compiling EPEA 1. ON GENERAL GOVERNMENT AND SPECIALISED PRODUCERS: National accounts data by COFOG Budget analysis Surveys on GG EPE Financial statistics Surveys on specialised producers … 2. ON INDUSTRIES AND EGSS: Production statistics Ad hoc surveys ... For the EPEA Of which For the JQ EPEA How to use EPEA data for compiling JQ and vice versa SERIEE EPEA Compilation guide Environmental expenditure statistics: GG and Specialised Producers data collection handbook How to use the available data for compiling JQ How to match EPEA (as well as JQ) data requirements for industries and EGSS JQ EPERJQ-EPEA Conversion Guidelines For the EGSS How to use the available data for compiling EGSS Environmental expenditure statistics: Industry data collection handbook EGSS EGSS Handbook EGSS Handbook

EPEA = Environmental Protection Expenditure Account What’s EPEA? EPEA = Environmental Protection Expenditure Account The EPEA is as a functionally oriented satellite account to the national accounts. As a satellite account, it follows closely the principles of National Accounts as concerns the classification of units, valuation and categorisation of transactions. It allows for links between economic and physical accounts. In the DPSIR model’s perspective the EPEA describes responses of society to environmental problems Key words: Environmental Protection (EP) Expenditure Account

To answer questions on economic efforts made by a country for EP Why EPEA? To answer questions on economic efforts made by a country for EP How much does a country spend for protecting the environment? (use side) Which is the size of the sector of the economy which carries out EP activities? (supply side) Who finances the national expenditure for EP? (financing perspective) Who pays for EP? (cost born by each sector of the economy) Ensured linking physical and monetary data to calculate unitary cost of EP activities for comparative efficiency analyses to relate monetary flows to pollution phenomena by sector, branch for monitoring the implementation of the “polluter pays principle” The SERIEE is a system of functionally oriented satellite accounts which aim at calculating a number of economic aggregates having a twofold objective: To allow to answer to a number of questions concerning the economic efforts made by a country for protecting the environment as well as managing and using the natural resources To allow the link between physical and monetary data for several analysis purposes like e.g.: to calculate the unitary cost for certain activities for the analysis of the efficiency of the measures undertaken or the comparative cost of environmental policies; to relate monetary flows to the data on natural resources used and on pollution caused by the various industries or branches for assessing the degree of application of the “user pays principle“ or the "polluter pays principle“;

How does EPEA answer the questions? Questions, e.g. How much does a country spend for protecting the environment Answers: EPEA aggregates, e.g. National expenditure for EP Accounting tables (Tables A, B, B1, C, C1) Basic data

Answers to questions: EPEA aggregates (1) How much does a country spend for protecting the environment? (use side) NATIONAL EXPENDITURE FOR EP (by resident units) Domestic uses of EP products: either EP services (including in-house produced) or connected and adapted products final uses (by GG, Corporations and Households) intermediate consumption (Corporations) Domestic gross capital formation for EP, including net acquisition of land (by GG and Corporations) Transfers for EP (either current or capital): those that are not already reflected in the above categories of expenditure (by all institutional sectors)

Answers to questions: EPEA aggregates (2) Which is the size of the sector of the economy which carries out EP activities? (supply side) PRODUCTION OF EP SERVICES (output of EP services and other aggregates related to the supply of EP services) Output of EP services (principal, secondary, ancillary) Labour input for the production of EP output Investments for the production of EP output (accounted for also in the National expenditure for EP) Stock of capital

Answers to questions: EPEA aggregates (3) Who finances the national expenditure for EP? (financing perspective) FINANCING OF NATIONAL EXPENDITURE FOR EP Transfers between institutional sectors for EP to be accounted for Breakdown by financing sectors (origin of the transfer) and beneficiary sectors (receiver of the transfer)

Answers to questions: EPEA aggregates (4) Who pays for EP? (cost born for EP) NET COST OF EP (FINANCIAL BURDEN OF EP, cost of EP actually born by each institutional sector) Includes any other cost deriving from EP (e.g. interest on fixed capital used for EP production) Excludes any economic advantage deriving from EP expenditures (e.g. profits for EP producers, EP taxes for General Government)

Main characteristics of EPEA aggregates Consistency with national accounts aggregates and their breakdown (institutional sector and NACE) this allows to calculate ratios to appropriate national accounts aggregates like e.g. GDP, Output, Gross Capital Formation, Employment, … all transactions that are components of core national accounts aggregates should be accounted for by applying same criteria (same accounting treatment, same price system, ...) Further breakdown typical of functional satellite accounts Breakdown according to the roles played in environmental protection by the different economic units, i.e. producers (characteristic, specialised, non- specialised), users, financers Breakdown by environmental domain (according to CEPA)

EPEA main concepts (1) EPEA adopts a number of concepts typical of functionally oriented satellite accounts: Characteristic activities and products Characteristic and non-characteristic producers Specific products Specific transfers In order to be consistent with the core system of national accounts, EPEA adopts its fundamental concepts: Economic activity Market vs non-market output

EPEA main concepts (2) Satellite accounts concepts (1): Characteristic activities and products Characteristic activities are economic activities whose purpose is environmental protection They are classified according to CEPA 2000 Output of characteristic activities are EP services (characteristic products) Characteristic and non-characteristic producers Characteristic producers : producer units of the national economy which execute characteristic activities; the following characteristic producers are distinguished: specialised producers, which execute a characteristic activity as their principal activity; specialised producers belonging to the institutional sectors GG and NPISHs are considered as a whole and distinguished from specialised producers belonging to other sectors non-specialised characteristic producers, which execute a characteristic activity as a secondary activity or as an activity which is ancillary to a principal non- characteristic activity; these producers are grouped according to their principal non-characteristic activity Non-characteristic producers: all other producer units of the national economy

EPEA main concepts (3) Satellite accounts concepts (2): Specific products: all products whose use contributes to EP: Characteristic products, i.e. EP services produced through characteristic activities Connected products, i.e. products whose use by resident units directly serves an EP objective but which are not characteristic services. Examples: Air: catalytic converters, carburation regulation services. Water: septic tanks, biological products for septic tanks. Waste: trash bags, bins, rubbish containers. Noise: exhaust pipes, exhaust pipe adjustment services, noise reduction windows Adapted products, i.e. products that meet the following criteria: they are less pollutant, at the time of their consumption and/or scrapping, than equivalent normal products; equivalent normal products are those products which furnish similar utility, irrespective of the impact on the environment they are more costly than equivalent normal products; only these extra cost are considered as EP expenditure in the EPEA examples for adapted products may be: desulphurised fuels, lead-free gasoline, CFC-free products

EPEA main concepts (4) Satellite accounts concepts (3): Specific transfers: Unrequited payments received by resident or non-resident units which contribute to the financing of characteristic activities and uses of specific products or constitute a compensation for income or capital losses related to environmental protection. Current and capital transfers are distinguished. Examples: Subsidies on products, for lowering the price of specific products for the user (producer is the receiver, user is the beneficiary) Investment grants for GFCF for EP activities Voluntary transfers to NPISHs Specific taxes constitute specific transfers when their revenues are earmarked for environmental protection Remark: neither “environmentally-related” taxes constitute elements of national expenditure for EP nor they contribute to the financing of the same expenditure. These are e.g. taxes on emissions that are not earmarked for EP

EPEA main concepts (5) National accounts fundamental concepts adopted by EPEA (1): Economic activity An economic activity takes place when resources such as capital goods, labour, manufacturing techniques or intermediary products are combined to produce goods or services. Thus, an economic activity is characterised by an input of resources, a production process and an output of products (goods or services). Activity is a principal activity if it represents the largest part of the Gross Value Added of the producers. It is secondary when it is not principal and at the same time provides output sold on the market. It is ancillary when the output is for own use Market vs non-market output market output is output sold at economically significant prices. A price is an economically significant price when it covers at least 50% of the cost of production of a product. The corresponding producer units are market producers non-market output is output provided free or at prices that are not economically significant. The corresponding producer units are non-market producers. In the case of non-market producers revenues from non-market output may appear when output is sold at prices that are not economically significant. Such revenues are called partial payments

EPEA main concepts (6) Fundamental national accounts concepts adopted by EPEA (2): Institutional sectors Main role in the EP General Government User of EP services (final consumption) those produced by GG and provided free of charge or at prices not economically significant those purchased (subcontracting) for the benefit of the community User of EP products as intermediate consumption or GFCF Financer of production of EP services and uses of EP products by other sectors NPISHs Producers of non-market EP services Corporations Producers of EP services as principal, secondary or ancillary output Users of EP products as intermediate consumption or GFCF Financers through taxes Households

EPEA accounting tables and aggregates (1) 1994 SERIEE Manual provides the set of 5 accounting tables to be adopted for EPEA accounts: The use of goods and services for EP (Table A: National expenditure for EP) The supply of EP services (Table B: Production of environmental services and related capital transactions and employment) The supply and use table of EP services (Table B1: EP supply and use table; transition table) The flows incurring among institutional sectors for financing the National expenditure for EP (Table C: Financing of National expenditure for EP) The net cost of born by each institutional sector for EP (Table C1: Environment-related financial burden) 2002 EPEA Compilation guide provides a slightly simplified version of the 5 accounting tables by highlighting the priority/most important figures to fill in

EPEA accounting tables and aggregates (2) Questions Aggregates Tables How much does a country spend for protecting the environment (EP)? National expenditure for EP Table A Which is the size of the sector of the economy which carries out EP activities? Production of EP output Employment for EP activities Investments for EP activities Table B Which part of the GDP is devoted to the protection of the environment? National expenditure for EP/GDP Table A + GDP Which is the economic relevance of the sector of the economy which carries out EP activities? Production of EP output/total output Employment for EP activities/total employment GFCF for EP activities/total investments Table B + total output, employment, GFCF Who finances the national expenditure for EP? Contribution of each institutional sector to the financing of the National exp. for EP Table C Who pays for the EP? Net cost of EP (i.e. National current expenditure borne by each institutional sector less possible receipts plus possible other costs related to EP) Table C1

Accounting tables and their main aggregates (3) Table A Uses (expenditure) table Table B Production table Table B1 Supply–use table Table C Financing of expenditure Table C1 Net cost of environmental protection Main aggregates, price system, break down EP uses (intermediate consumption, final consumption, GFCF) at purchasers’ prices by user EP production costs and investments at basic prices by producer EP supply and uses at purchasers’ prices by kind of uses EP uses at purchasers’ prices cross classified by user and financer Net cost of current EPE by institutional sector (e.g. excluding NOS of EP producers, VAT received bY GG)

The EPEA tables: ‘magic formula’ Table B Production table Table B1 supply–use table Table A Uses (expenditure) table Table C Financing of expenditure Table C1 Net cost of environmental protection OUTPUT of EP services FROM OUTPUT TO USES: introduction of imports/exports and USES by resident units FINANCING of: uses of EP services FINANCING of CURRENT: taxes/subsidies on products Gross capital Costs of capital formation plus (interest) land acquisition uses of adapted & connected products uses of ad. & con. products specific transfers less EP benefits environmental taxes Table A Uses (expenditure) table Table B Production table Table B1 Supply–use table Table C Financing of expenditure Table C1 Net cost of environmental protection Source: Eurostat (2002), SERIEE Environmental Protection Expenditure Accounts – Compilation Guide, Luxembourg.

Table A (2002 Compilation Guide) Summary presentation USERS/BENEFICARIES Producers Consumers Rest of Total Components of national expenditure specialised other households government the world 1 Uses of EP services - / nr X - 2 Capital formation for environmental protection 3 Uses of adapted and connected products nr x 4 Specific transfers 5 Total domestic uses 6 less financed by the rest of the world 7 National expenditure X or x…the transaction is recorded at this intersection. nr…not recorded here to avoid double counting). -…not relevant or zero by definition

Table B (2002 Compilation Guide) producers Specialised producers Non-specialised producers (by industry) Total TRANSACTIONS Government sector Corporations sector with secondary output with ancillary output 1 Intermediate consumption 1.1 of which EP services 1.2 of which ad. & con. products X (X) 2 Compensation of employees 3 Taxes on production 4 Less subsidies on production 5 Consumption of fixed capital 6 Net operating surplus 7 Output (basic prices or cost of production) 7.1 Non-environmental output 7.2 Environmental protection output X X 7.2.1 non-market 7.2.2 market 7.2.3 ancillary 8 Current EP resources 8.1 market output (sales) 8.2 transfers 9 Capital transactions - 9.1 Gross fixed capital formation 9.2 Other capital uses (land) 9.3 Investment grants received 9.4 Other capital transfers received 10 Labour inputs 11 Stock of fixed assets 12 Financing by producers GVA Relevant also for EGSS statistics X…the transaction is recorded at this intersection. (X)…item not essential. 0…zero by definition.

Table B1 (2002 Compilation Guide) non-market EP services market EP services ancillary EP services USES Final consumption X - plus intermediate consumption of which by specialised producers nr of which by other producers plus capital formation (land improvement) x plus exports (x) equals total uses (at purchasers' price) SUPPLY Output (basic prices or cost of production) plus imports (cif) plus non-deductible VAT plus taxes on imports other than VAT plus taxes on products other than VAT less subsidies on products equals total supply (at purchasers' prices) Relevant also for EGSS statistics X…components that are typically important. x…components that are typically small. (x)…often very small/may be ignored

Table C (2002 Compilation Guide) USERS/BENEFICIARIES FINANCING UNITS Producers Consumers Rest of Total of which specialised other households government the world current expenditure General government Central government Local government NPISHs Corporations Specialised producers Other producers Households x t,x t - National expenditure Rest of the world Uses of resident units In the table, a ‘t’ indicates (usually indirect) financing through specific taxes (or voluntary contributions) of households and producers

Table C1 (2002 Compilation Guide) SECTORS Corporations Households Government Total Elements of net costS Specialised Other including NPISHs 1 Financing of current national expenditure 2 Non-deductible VAT on current expenditure 3 Taxes on production x - -x 4 Net operating surplus 5 Any other profits 6 Interest on fixed capital Net cost of environmental protection: (1-2-3-4-5+6)