Conceptual foundations Air Emission Accounts Conceptual foundations Angelica Tudini ESTP course Vienna, 6-7 September 2012 Vienna, September 2012 ESTP course on air emission accounts ESTP course on air emission accounts Vienna, 6-7 September 2012 Angelica Tudini - Istat

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 version of the System of National Accounts, 1993 (1993 SNA). It isthe fifth version of the SNA, the first of which was published overfifty years ago. At its thirty-third session in 2003, the StatisticalCommission requested that the 1993 SNA be updated to bring thenational accounting framework into line with the needs of datausers. The background was that the economic environment in manycountries had evolved significantly since the early 1990s when the1993 SNA had been developed and, in addition, methodologicalresearch over the past decade or so had resulted in improvedmethods of measuring some of the more difficult components ofthe accounts. In accordance with the mandate from theCommission, the 2008 SNA does not recommend fundamental orcomprehensive changes that would impede a smooth transitionfrom implementation of the earlier versions, including the 1968SNA, which is the national accounting framework still used in anumber of countries. Further, consistency with related manuals,such as those on the balance of payments, on government financestatistics and on monetary and financial statistics was an importantconsideration in the update.The 2008 SNA was prepared under the auspices of theInter-Secretariat Working Group on National Accounts(ISWGNA), which consists of five organizations: the StatisticalOffice of the European Commission (Eurostat), the InternationalMonetary Fund (IMF), the Organisation for Economic Cooperationand Development (OECD), the United Nations StatisticsDivision and regional commissions of the United Nations,Secretariat and the World Bank. The 2008 SNA is published jointlyby the five organizations. Angelica Tudini ESTP course on air emission accounts Vienna, 6-7 September 2012

Chapter 22 – Satellite accounts European system of national and regional accounts in the European Union (ESA 2010) Draft June 2012 version Chapter 22 – Satellite accounts … Environmental accounts version of the System of National Accounts, 1993 (1993 SNA). It isthe fifth version of the SNA, the first of which was published overfifty years ago. At its thirty-third session in 2003, the StatisticalCommission requested that the 1993 SNA be updated to bring thenational accounting framework into line with the needs of datausers. The background was that the economic environment in manycountries had evolved significantly since the early 1990s when the1993 SNA had been developed and, in addition, methodologicalresearch over the past decade or so had resulted in improvedmethods of measuring some of the more difficult components ofthe accounts. In accordance with the mandate from theCommission, the 2008 SNA does not recommend fundamental orcomprehensive changes that would impede a smooth transitionfrom implementation of the earlier versions, including the 1968SNA, which is the national accounting framework still used in anumber of countries. Further, consistency with related manuals,such as those on the balance of payments, on government financestatistics and on monetary and financial statistics was an importantconsideration in the update.The 2008 SNA was prepared under the auspices of theInter-Secretariat Working Group on National Accounts(ISWGNA), which consists of five organizations: the StatisticalOffice of the European Commission (Eurostat), the InternationalMonetary Fund (IMF), the Organisation for Economic Cooperationand Development (OECD), the United Nations StatisticsDivision and regional commissions of the United Nations,Secretariat and the World Bank. The 2008 SNA is published jointlyby the five organizations. Angelica Tudini ESTP course on air emission accounts Vienna, 6-7 September 2012

They are based on a set of clear definitions ESA2010 - 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 Angelica Tudini ESTP course on air emission accounts Vienna, 6-7 September 2012

BASIC PRINCIPLES OF THE ESA AS A SYSTEM Draft ESA2010 §1.53 The main characteristics of the system are: a) Statistical units and their groupings; b) Flows and stocks; c) The system of accounts and the aggregates; d) The input-output framework. Angelica Tudini ESTP course on air emission accounts Vienna, 6-7 September 2012

a) Statistical units and their groupings; 1.54 The system uses two types of unit 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. KAUs are the relevant unit for air emission accounts Angelica Tudini ESTP course on air emission accounts Vienna, 6-7 September 2012

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. … Activities can be determined by reference to a specific level of NACE Rev. 2 (Statistical classification of economic activities in the European Union). 2.146 If a unit carries out more than one activity, all the activities which are not ancillary activities (see Chapter 3, paragraph 3.12) 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. 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. Angelica Tudini ESTP course on air emission accounts Vienna, 6-7 September 2012

2.148 Definition: The local kind-of-activity unit (local KAU) is the part of a KAU which corresponds to a local unit. The local KAU is called establishment in the 2008 SNA and ISIC Rev. 4. The KAU groups all the parts of an institutional unit in its capacity as producer contributing to the performance of an activity at class level (four digits) of the NACE Rev. 2 and corresponds to one or more operational subdivisions of the institutional unit. The institutional unit's information system must be capable of indicating or calculating for each local KAU at least the value of production, intermediate consumption, compensation of employees, the operating surplus and employment and gross fixed capital formation. The local unit is an institutional unit, or part of an institutional unit, producing goods or services situated in a geographically identified place. 2.149 If an institutional unit producing goods or services contains a principal activity and also one or several secondary activities, it is subdivided into the same number of KAUs, and the secondary activities are classified under different headings from the principal activity. The ancillary activities are not separated from the principal or secondary activities. But KAUs falling within a particular heading of the classification system can produce products outside the homogeneous group on account of secondary activities connected with them which cannot be separately identified from available accounting documents. Thus a KAU may carry out one or more secondary activities. Angelica Tudini ESTP course on air emission accounts Vienna, 6-7 September 2012

Industries 2.150 Definition: 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 Angelica Tudini ESTP course on air emission accounts Vienna, 6-7 September 2012

Hybrid supply and use table Angelica Tudini ESTP course on air emission accounts Vienna, 6-7 September 2012

Industries and households – Eurostat questionnaire ... ... Angelica Tudini ESTP course on air emission accounts Vienna, 6-7 September 2012

Same classifications used for economic data industries NACE Rev. 2 (Statistical classification of economic activities in the European Community) COICOP (Classification of Individual Consumption by Purpose) Air emission accounts functions: transport, heating, other households Angelica Tudini ESTP course on air emission accounts Vienna, 6-7 September 2012 Air emission accounts – Theory and concepts 12 12

Which units? Resident units 2.01 The economy of a country is a system whereby institutions and people interact through exchanges and transfers of goods, services and means of payment (e.g. money) for the production and consumption of goods and services. THE LIMITS OF THE NATIONAL ECONOMY 2.04 The units which constitute the economy of a country and whose flows and stocks are recorded in the ESA are those which are resident. The residence of each institutional unit is the economic territory where a unit has its centre of predominant economic interest. These units are known as resident units, irrespective of nationality, legal form or presence on the economic territory at the time they carry out a transaction. 2.07 ‘Centre of predominant economic interest’ indicates that a location exists within the economic territory where a unit engages in economic activities and transactions on a significant scale, either indefinitely or over a finite but long period of time (a year or more). The ownership of land and buildings within the economic territory is deemed to be sufficient for the owner to have a centre of economic interest there. Angelica Tudini ESTP course on air emission accounts Vienna, 6-7 September 2012

Economic territory Economic territory consists of the following: a) The area (geographic territory) under the effective administration and economic control of a single government; b) Any free zones, including bonded warehouses and factories under customs control; c) The national air-space, territorial waters and the continental shelf lying in international waters, over which the country enjoys exclusive rights; d) Territorial enclaves, these being geographic territories situated in the rest of the world and used, under international treaties or agreements between states, by general government agencies of the country (such as embassies, consulates, military bases, scientific bases, etc.); e) Deposits of oil, natural gas, etc. in international waters outside the continental shelf of the country, worked by units resident in the territory as defined in points a) to d). Fishing boats, other ships, floating platforms and aircraft are treated in the ESA as mobile equipment, whether owned and/or operated by units resident in the country, or owned by non-residents and operated by resident units. Transactions involving the ownership (gross fixed capital formation) and use (renting, insurance, etc.) of mobile equipment are attributed to the economy of the country of which the owner and/or operator respectively are resident Angelica Tudini ESTP course on air emission accounts Vienna, 6-7 September 2012

Warning: important clarification in ESA2010 for multiterritory enterprises (Chapter 2, § 2.07 ) ‘Centre of predominant economic interest’ indicates that a location exists within the economic territory where a unit engages in economic activities and transactions on a significant scale, either indefinitely or over a finite but long period of time (a year or more). …. Taxation and other legal requirements tend to result in the use of a separate legal entity for operations in each legal jurisdiction. In addition, a separate institutional unit is identified for statistical purposes where a single legal entity has substantial operations in two or more territories (for example, for branches, land ownership, and multi-territory enterprises). As a result of splitting such legal entities, the residence of each of the subsequently identified enterprises is clear. ‘Centre of predominant economic interest’ does not mean that entities with substantial operations in two or more territories should not be split. In the absence of any physical dimension to an enterprise, its residence is determined according to the economic territory under whose laws the enterprise is incorporated or registered. Chapter 18, Rest of the world, §18.17) A few enterprises operate as a seamless operation over more than one economic territory, typically for cross-border activities such as airlines, shipping lines, hydroelectric schemes on border rivers, pipelines, bridges, tunnels and undersea. Separate branches need to be identified unless the entity is run as a single operation with no separate accounts or decision-making for each territory that it operates in. In such cases, because of the central focus on data for each national economy, it is necessary to split the operations between economies. The operations are then prorated according to an appropriate enterprise-specific indicator of the proportions of operations in each territory. The prorating treatment may also be adopted for enterprises in zones subject to joint administration by two or more governments. Ask your national accountants colleagues! Angelica Tudini ESTP course on air emission accounts Vienna, 6-7 September 2012

Implications for air emission accounts Emissions accounted for must be those stemming from the resident-unit’s economic activities rather than from sources on the national territory. Emissions by resident units abroad, essentially covering tourists driving abroad and companies engaged in international transport activities, are fully included in the Air Emissions Accounts either under the economic activity earning the value added from these activities or under households (the case of tourists driving car abroad). Conversely, all emissions by non-resident entities on the national territory (foreign lorries and tourists, bunkering of foreign vessels) should be excluded. In short, Air Emissions Accounts record emissions arising from all resident units’ activities, regardless from where these emissions actually occur geographically Source: 2009 compilation guide Angelica Tudini ESTP course on air emission accounts Vienna, 6-7 September 2012

Territory vs residents Source: 2009 compilation guide Angelica Tudini ESTP course on air emission accounts Vienna, 6-7 September 2012