United Nations Headquarters, New York Definition and delimitation of the Environmental Goods and Services Sector according to the 2009 Eurostat handbook Cesare Costantino Italian national statistical institute Environmental accounting Federico Falcitelli Ministry of the Economy and Finance State General Accounting Department Expert Group meeting on International economic and social classifications United Nations Headquarters, New York 1-4 September 2009

Summary Background Definition and delimitation of EGSS according to the 2009 Eurostat handbook Definition of EGSS and relationship with the scope of the satellite accounts on environmental expenditure Delimitation of EGSS, definitions and classifications with specific reference to: Environmental purposes Products Producers Overview Concluding remarks

Need for an international handbook Background Strong policy interest in measures targeted to the environmental goods and services sector need to have good quality, comparable, coherent data on e.g. EGSS’ turn-over, value added, etc., while minimising the burden on national statistical offices The international guidelines available - “The Environmental Goods & Services Industry. Manual for data collection and analysis” (OECD/Eurostat, 1999) – need to be improved leave open a number of issues on the definition, classification and identification of the sector do not deal with all operational aspects are endorsed within the SEEA2003, which currently is undergoing a revision process with a view to becoming an international statistical standard

Eurostat’s initiative for developing the handbook Background In 2007 Eurostat launched an ad hoc Task Force for developing a handbook on the Environmental Goods and Services Sector - EGSS The handbook was finalized and was approved in march 2009 by the Eurostat Working Group on Environmental Expenditure statistics The approach developed by Eurostat was considered by the London Group and is taken into account for the on-going revision of the SEEA

Structure of the handbook: The Eurostat handbook Background Structure of the handbook: Ch. 1 background information on EGSS Ch. 2 definition, delimitation and classification of the sector Ch. 3 guidelines to identify and classify the population Ch. 4 methodologies for data collection, reporting and analysis Ch. 5 Standard tables for data collection and process for their compilation Ch. 6 Recommendations and examples on presentation and interpretation of figures

Definition of EGSS Definition The Environmental Goods and Services Sector consists of a heterogeneous set of producers of technologies, goods and services aimed at: measuring, controlling, restoring, preventing, treating, minimising, investigating and sensitizing to environmental damages to air, water and soil as well as problems related to waste, noise, biodiversity and landscapes. That includes “cleaner” technologies, goods and services that prevent or minimise pollution. measuring, controlling, restoring, preventing, minimising, investigating and sensitizing to resource depletion. That mainly results in resource-efficient technologies, goods and services that minimise the use of natural resources.

SUPPLY USE Environmental Goods and Services Sector statistics Supply side perspective: EGSS statistics and satellite environmental accounts Definition SUPPLY USE Environmental Goods and Services Sector statistics SEEA and SERIEE satellite accounts (EPEA+RUMEA) EPEA Environmental Protection Expenditure Account Goods Services Goods Services Environmental protection Environmental protection RUMEA Resource Use and Management Expend. Account Goods Services Goods Services Resource use and managament Resource use and management

Defining and delimiting the EGSS Definition and delimitation EGSS is defined and delimited by answering three main questions What does it mean “environmental”? Environmental purposes covered Which kind of environmental technologies, goods and services? Products covered Which kind of producers? Producers covered

Types of environmental purposes covered EGSS includes the provision of environmental technologies, goods and services that respond to two types of environmental purposes: Environmental Protection (EP): technologies and products suitable for both preventive and remedial purposes, i.e. for the prevention, reduction, elimination and treatment of air emissions, waste and wastewater, soil and groundwater contamination, noise and vibration as well as radiation, the prevention, reduction and elimination of soil erosion and salinity as well as other kinds of degradation, the preservation of biodiversity and landscapes as well as the monitoring and control of the quality of the environmental media and waste Resource Management (RM): technologies and products suitable for managing and/or conserving the stock of natural resources against depletion phenomena, including both preventive and restoration activities as well as the monitoring and control of the levels and uses of natural resource stocks. remark 1: in both cases EGSS includes Administative activities, education, training, information and communication activities Research and development activities remark 2: EGSS’ output is for every kind of use, i.e. intermediate and final consumption as well as gross capital formation

Activities not included in EGSS Environmental purposes Not included in EGSS: Activities related to natural hazards and natural risk management (nevertheless, e.g. the protection of soil against erosion for reducing the risk of landslides and floods are included, given the primary aim of protecting the soil) Extraction, exploitation and mobilisation of non-renewable resources (Resource Use - RU)

What is crucial is the “main purpose” Environmental purposes How to establish whether a product responds to an environmental purpose The environmental purpose at issue has to be the “main purpose” for the product How to identify the main purpose mainly on the basis of the technical nature of the activity or the producer’s intention, i.e. regardless of the intention of the users The selection criterion based on the producer’s intention should however be applied for handling cases that are not already solved according to the technical nature of the activity In practice, producer’s intention means: the awareness of the producer about the environment-friendly characteristics of its output; the awareness of the producer about the use of its output; the environment-related markets to which the producer addresses its output (e.g. producers of renewable energy technologies, clean cars or eco-efficient devices). Does EGSS include whatever product beneficial to the environment? All products whose main purpose (according to the technical nature or the producer’s intention) is not an environmental purpose are not included in the EGSS even if the product has a favourable impact on the environment (e.g. electronic delivery of documents). Hence, excluded from the EGSS are products that, while beneficial to the environment, primarily satisfy technical, human and economic needs or requirements for health and safety.

Types of environmental products Types of products Environmental protection (EP) Resource management (RUM) Environmental specific services are the output of Environmental Protection (EP) or Resource Management (RM) “characteristic” activities EP services: waste management, wastewater management, and any other kind of service according to CEPA RM services: water or energy saving, production of energy by means of renewable sources, and any other kind of service according to CReMA Connected products have no use except for supporting the execution of EP or RM specific services may be services or goods (durable or non-durable goods) e.g. maintenance services for septic tanks, trash bags, septic tanks, and all components that are used specifically and exclusively for environmental protection technologies e.g. tap filters, differentiate systems for flushing the toilet, and all components that are used specifically and exclusively for resource management technologies Adapted products equivalent normal products have to exist (at least theoretically) their primary use is not for EP or RM they may be durable or non-durable goods “cleaner” products: e.g. mercury-free batteries, cars or buses with lower air emissions, biodegradable soaps, ecological paints “resource efficient” products: e.g. recycled paper, recycled glass, efficient refrigerators and washing machines, renewable energy, heat from heat pumps and solar panels End-of-pipe technologies treat pollution that has been generated or resources that have already been withdrawn, or measure the level of pollution or resources use (monitoring) e.g. filters, incinerators, wastewater management facilities e.g. plants and methods for producing recycled products Integrated technologies decrease material inputs, reduce energy consumption, minimise waste and/or reduce emissions compared to the national current standard “cleaner” technologies: e.g. organic farming which reduces the impact of agriculture on soil quality “resource efficient” technologies: e.g. plants and methods for producing renewable energy such as through windmills, solar panels, hydroelectric turbines, combined heat and power

Institutional sectors Kinds of producers Producers Institutional sectors General Government Corporations activities Market/non market activities Principal/secondary/ancillary activities

Environmental purposes and classifications to be used Environmental prot. (EP) CEPA 2000 remark: CEPA 2000 is an international standard EGSS environmental purposes Resource manag. (RM) CReMA (Classification of Resource Management Activities) remark: CReMA is derived by the draft CRUMA 2009 (Resource Use activities not included)

CReMA (Classification of Resource Management Activities) 10: Management of waters 11: Management of forest resources 11 A: Management of non-cultivated forest areas 11 B: Minimisation of the intake of forest resources 12: Management of wild flora and fauna 13: Management of energy resources 13 A: Production of energy from renewable sources 13 B: Heat/Energy saving and management 13 C: Minimisation of the intake of fossil resources as raw material for other use than energy production 14: Management of minerals 15: Research and development 16: Other natural Resource Management activities

Summary of main concepts Overview Economic variables Turn over Value added Employment Exports Environmental purposes Environmental protection CEPA 2000 Resource management CReMA Products Env. Specific services Connected products (goods and services) Adapted goods (cleaner and resource-efficient) End of pipe technologies Integrated technologies Producers Principal / secondary Non market Corporations NACE 2 digit level Market Ancillary General Gov. Administrative level

Definition and delimitation of EGSS: major achievements Concluding remarks The EGSS concept according to the 2009 Eurostat handbook is consistent with the one developed within the 1999 OECD/Eurostat guidelines As concerns definition and classification issues, the main “value added” of the 2009 Eurostat handbook is represented by having: enhanced the consistency with the internationally agreed satellite accounting systems SEEA and SERIEE provided an improved classification for resource management activities (less developed in the 1999 guidelines, leading to overlapping with CEPA) clarified a number of issues left opened in the 1999 guidelines (e.g. concerning cleaner goods and technologies) made the definition and delimitation of the sector more operational, by providing the users of the handbook with practical instructions

Questions to the Expert Group What is your opinion on the criteria to delimitate the EGSS?

Thank you for your attention cecostan@istat.it federico.falcitelli@tesoro.it