Environmental activity accounts Expenditures, taxes and EGSS Note that some of the participants may know more about energy accounting than the presenter. However, this introduction is very helpful to ensure everyone has the same basic knowledge. RIKKE: Ask participants: who knows about [experience in producing or using]: Energy statistics Energy balances Energy accounts

Outline Review of basics What are environmental activity accounts? (30min) 2-1 Protection expenditures 2-2 Goods and services 2-3 Taxes and subsidies Group exercise (15min) Questions and discussion (15min) SEEA-CF - Environmental activity accounts

Learning Objectives Learning objectives What Environmental Activity Accounts are and why they are important The basic concepts How they are treated in the SEEA Country examples Data sources and measurement challenges Energy, Water, Solid Waste, Air emissions, Wastewater, Asset Accounts (Minerals & Energy, Land, Soil, Timber, Aquatic Resources, Other Biological Resources, Water) Think about links to climate change: Mitigation, adaptation, impact reduction, early warning… SEEA-CF - Environmental activity accounts

SEEA: Stocks and flows Environment Economy P = Price (monetary value) 1. Review of basics SEEA: Stocks and flows Assets (P & Q) Land, Soil Timber Aquatic Other biological Minerals & energy Water Ecosystems + conditions Environment Flows (P & Q) Materials Energy Water Ecosystem services Economy Production Consumption Accumulation Imports Exports P = Price (monetary value) Q = Quantity (physical) Residuals (Q) Solid waste Air emissions Effluents Ecosystem impacts Already in the SNA – just need to ensure we have detail. Mitigate & Manage (P) Protection $ Goods & Services Taxes & subsidies Ecosystems & Oceans

Scope of environmental activities 1. Review of basics Scope of environmental activities SEEA-CF 4.11 …economic activities whose primary purpose is to reduce or eliminate pressures on the environment or to make more efficient use of natural resources. Environmental restoration, conservation Resource management Taxes, subsidies and permits Technologies to reduce impacts How to decide on primary purpose? Primary purpose: intended, major use How to decide on primary purpose? Primary purpose: intended, major use SEEA-CF - Environmental activity accounts

Which are environmental activities? 1. Review of basics Which are environmental activities? Installing solar panels Buying equipment to measure pollution Buying an apartment in an area with less pollution Buying mercury-free batteries Buying guns to shoot rabbits Installing low-flow shower Taxing fuel Taxing carbon emissions Remember: Primary purpose criterion?         Environmental protection Resource management SEEA-CF - Environmental activity accounts

Environmental Activities in SEEA-CF 1. Review of basics Environmental Activities in SEEA-CF Supply Use From  To Environmental Goods and Services Sector (EGSS) Environmental protection expenditure accounts (EPEA) All  All (Government, companies, households, NPISH) Environmental subsidies and similar transfers Government  All Environmental taxes & permits All  Government Taxes and subsidies in more detail than EPEA NPISH = Non-profit institutions serving households Environmental activities are the transactions of monetary terms between economic units that maybe considered environmental. There are suppliers and users and exchanges in different sectors (goods and services) Subsidies: from the government Tax: to the government Both EGSS & EPEA are aligned with SNA (usage of same terminology) What is NPISH? Can you pronounce it? Primary purpose: intended, major use SEEA-CF - Environmental activity accounts

Uses Implied in 9 SDGs Assessing benefits/costs Allocating funds 1. Review of basics Uses Implied in 9 SDGs How much are we spending? Who provides? How financed? Assessing benefits/costs Allocating funds Tax or cap? (price vs quantity) Which account links to which SDG? Goal 6. …sustainable management of water… Goal 7. …sustainable and modern energy… Goal 9. …sustainable industrialization… Goal 11. Make cities and human settlements …resilient and sustainable… Goal 12. …sustainable consumption and production… Goal 13. …combat climate change and its impacts Goal 14. …oceans, seas and marine resources… Goal 15. …terrestrial ecosystems… forests… desertification… land degradation… biodiversity loss Goal 17. …means of implementation… Fisheries subsidies: mostly bad since encourage overfishing; may be good if promote sustainable management. Links to climate action: costs of fuel efficiency, sustainable energy, mitigation; all climate change expenditures? 14.6 Fisheries subsidies: Are they good or bad? 13 Links to climate action? SEEA-CF - Environmental activity accounts

Protection expenditure accounts (EPEA) 2-1 Protection Expenditures Protection expenditure accounts (EPEA) SEEA-CF 4.45 …to enable identification and measurement of society’s response to environmental concerns through the supply of and demand for environmental protection services and through the adoption of production and consumption behavior aimed at preventing environmental degradation Payments ($) from User to Supplier Get some information on “Supply” from user, but incomplete ( EGSS to get complete picture) SEEA-CF - Environmental activity accounts

Protection expenditure accounts (EPEA) 2-1 Protection Expenditures Protection expenditure accounts (EPEA) Why exclusions? because primary purpose is not “environmental protection” Exclusions because primary purpose not “environmental protection”; timber & aquatic have own categories. SEEA-CF - Environmental activity accounts

Protection expenditure accounts (EPEA) 2-1 Protection Expenditures Protection expenditure accounts (EPEA) Four main tables in SEEA: Who produces protection services? Supply and use All national expenditures Who pays for it? SEEA-CF - Environmental activity accounts

Waste disposal, sewage treatment… 2-1 Protection Expenditures EPEA: Who produces? Resident producers Generation of income “Specialist” = primary activity + + Examples? This table is a combined production and generation of income account which presents information on the production of characteristic environmental protection products i.e., environmental protection specific services, by resident producers Resident producers: resident vs territory Waste disposal, sewage treatment… SEEA-CF - Environmental activity accounts

2-1 Protection Expenditures EPEA: Supply and Use Basic prices = purchase price + (taxes) –(subsidies) Total supply = resident + imports Total use = consumption + exports This table is a supply and use table for the specific services Displays the total supply of specific services from resident producers and the rest of the world and the use of environmental protection specific services by various economic units SEEA-CF - Environmental activity accounts

EPEA: National expenditures 2-1 Protection Expenditures EPEA: National expenditures Adds connected products adapted goods Capital formation (investment) What are households paying for? This table broadens the scope of the EPEA to include connected products and adapted goods purchased by those undertaking environmental protection activities Includes capital formation for environmental protection activities by specialist, non-specialist and own account producers, and relevant environmental protection transfers Provides an estimate of the total outlays by an economy on environmental protection which is reflected in the aggregate: national expenditure on environmental protection Environmental protection (waste disposal, air purification, more efficient technology etc.) SEEA-CF - Environmental activity accounts

EPEA: Who pays for it? Government + corporations + households 2-1 Protection Expenditures EPEA: Who pays for it? Government + corporations + households This table is an extension of the third table designed to present the financing of national expenditure on environmental protection “Rest of the world” pays residents? Example: transfers for international cooperation (e.g., ROTW subsidizes sewage treatment in country) SEEA-CF - Environmental activity accounts

EPE Accounts Data sources SNA for aggregates & benchmarks More detail 2-1 Protection Expenditures EPE Accounts Data sources SNA for aggregates & benchmarks More detail Government expenditure accounts Balance of payments/trade Focussed survey of EPE SEEA-CF - Environmental activity accounts

2-1 Protection Expenditures EPE Accounts Canada: Bi-annual industry Survey of Environmental Protection Expenditures (SEPE) 3,500 respondents (20+ employees) Capital & operating expenditures “spending made in response to current or anticipated regulations, conventions or voluntary agreements” Spending on renewable energy and on greenhouse gas emission mitigation All expenditures (including voluntary) SEEA-CF - Environmental activity accounts

EPE Accounts INEGI Mexico “Green” GDP Depletion costs 2-1 Protection Expenditures EPE Accounts INEGI Mexico “Green” GDP Depletion costs Hydrocarbons Forest resources Groundwater Degradation costs Soil Solid waste treatment expenditures Water pollution expend. Air pollution expend. 8.5% of GDP in 2003 5.0% in 2015 National plan  4.5% by 2018 Concept Total cost for Depletion and Degradation Percentages with respect to GDP Total Costs 907,473 5.0 Depletion costs 122,716 0.7 Hydrocarbons 79,175 0.4 Forest resources 15,658 0.1 Ground water 27,883 0.2 Degradation costs 784,757 4.3 Soil 88,402 0.5 Solid waste 61,253 0.3 Water pollution 57,403 Air pollution 577,698 3.2 Could be misinterpreted as “raise GDP by stopping EPE” Possibilities for mis-interpretation? Could be misinterpreted as “raise GDP by stopping EPE” SEEA-CF - Environmental activity accounts

EPE Accounts Challenges Small sample  limit detail released 2-1 Protection Expenditures EPE Accounts Challenges Small sample  limit detail released Harmonizing government & private expenditures SEEA-CF - Environmental activity accounts

Environmental Goods and Services Sector (EGSS) Supply side of environmental activities = production of environmental goods and services Objective assess the contribution of EGSS to the total economy and employment EGSS statistics provide… Indicators of the production or environmental goods, services and technologies Contribution of production within the economy as a whole Extent of related employment, investment and exports from the sector Production, “green” employment, value added, exports, gross investment Production, “green” employment, value added, exports, gross investment SEEA-CF - Environmental activity accounts

Environmental Goods and Services Sector (EGSS) Scope: …producers of all environmental goods and services …all products…produced, designed and manufactured for environmental protection and resource management… Environmental specific services, connected products, adapted goods and technologies “Primary purpose” criterion (technical nature of product or activity / intention of the producer) Target population, Intention of producer difficult to ascertain (e.g., StatCan survey) Start with screening (do you…) Target sectors for more detail Via nature of good/service? EGSS excludes goods and services produced for purposes that, while beneficial to the environment, primarily satisfy technical, human and economic needs or that are requirements for health and safety SEEA-CF - Environmental activity accounts

Environmental Goods and Services Sector (EGSS) Sewage and refuse disposal Recycling Waste & scrap, recycled goods Renewable energy production Sustainable energy systems Insulation Equipment Consulting & engineering Construction, inspection Organic agriculture Government, NGOs, education Providers of EGSS SEEA-CF - Environmental activity accounts

Environmental Goods and Services Sector (EGSS) What do they produce? 2-2 Goods and services Environmental Goods and Services Sector (EGSS) EGSS EGSS Who produces? Methodology: Data sources: Activity approach: Identify industry Product approach: Identify commodities Industry consumption surveys Household surveys SNA (supply/use) Commodity statistics Industry production surveys SNA, industry statistics Corporate reports SEEA-CF - Environmental activity accounts

Environmental Goods and Services Netherlands Many environmental activities have been identified by Statistics Netherlands as EGSS activities For every activity a specific methodology has been developed to compile the data Canada Ongoing frame developed from existing surveys (EPE) Screening in other surveys (e.g., innovation, biotech) SEEA-CF - Environmental activity accounts

Environmental Goods and Services Netherlands data sources SEEA-CF - Environmental activity accounts

Environmental Goods and Services Canada Goods SEEA-CF - Environmental activity accounts

Environmental Goods and Services Canada Services SEEA-CF - Environmental activity accounts

Environmental Goods and Services Challenges Identifying primary purpose of product “Widget” could be for pollution reduction or creation Identifying target survey population Complex industries (manufacturing, consulting services…)  Iterative process (activity AND product approach) The more effort, the larger the EGSS International comparability Same: Scope, Methodology, Data sources? Cleaner goods / resource efficient goods = “green”? Integration with EPEA / ReMEA (use of EGSS) Dissemination of the results (confidentiality) SEEA-CF - Environmental activity accounts

Environmental taxes SEEA-CF 4.150 2-3 Taxes and subsidies Environmental taxes SEEA-CF 4.150 … tax base is a physical unit of something that has a … negative impact on the environment Energy taxes: Carbon, fuel, other Transport taxes Pollution taxes Resource taxes Remember: Primary purpose criterion Energy taxes Includes taxes on energy products used for both transport and stationary purposes Carbon taxes should be reported as a separate subcategory within energy taxes A special type of carbon taxes: payments for tradable emissions permits Transport taxes Includes taxes related to the ownership and use of vehicles and other transport equipment, and the use of roads Pollution taxes Taxes on water and air emissions, generation of solid waste and Sulphur Resource taxes Taxes on water abstraction, extraction of raw materials and other resources Why resource consumption/depletion tax? Resource consumption/depletion tax to reduce consumption of depletable resources SEEA-CF - Environmental activity accounts

Environmental taxes 2-3 Taxes and subsidies SEEA-CF - Environmental activity accounts

Environmental subsidies 2-3 Taxes and subsidies Environmental subsidies SEEA-CF 4.138 … transfer intended to support activities that protect the environment or reduce the use and extraction of natural resources… transfer intended to support activities that protect the environment or reduce the use and extraction of natural resources Subsidies Social benefits to households Investment grants Other current transfers Other capital transfers Transfers between different economic units have different names. SEEA-CF - Environmental activity accounts

Environmental subsidies 2-3 Taxes and subsidies Environmental subsidies SEEA-CF - Environmental activity accounts

Environmental taxes & subsidies 2-3 Taxes and subsidies Environmental taxes & subsidies Data sources SNA Tax department (administrative data) Surveys Country examples EU SEEA-CF - Environmental activity accounts

Environmental activities (EU) Country examples Environmental activities (EU) EGSS – 1oo% increase in 12 years EPEA – 2% of GDP Taxes – €325B Observations? SEEA-CF - Environmental activity accounts

Group Exercises Group Exercise Sector EPE EGSS Government Households ST company ECS Company RG Company Total Small country (10,000 households, government, 3 companies) Government: Collects $1M from households for sewage treatment Collects $20M from households for general taxes Pays $900K to ST Company for treating sewage ST Company: Purchases services from ECS company for redesign for $40K ECS company manufactures and sells $100K in solar panels to households Households: Donate $50K in used products to RG company RG company: Sells recycled products for $50K Manufactures hiking boots & sells to households to $100K Calculate Gross EPE and EGSS SEEA-CF - Environmental activity accounts

Group Exercise (one answer) Group Exercises Group Exercise (one answer) Government: (a) Collects $1m from households for sewage treatment Collects $20M from households for general taxes (b) Pays $900K to ST Company for treating sewage ST Company: (c) Purchases services from ECS company for redesign for $40K ECS company: (d) manufactures and sells $100K in solar panels to households Households: (e) Donate $50K in used products to RG company RG company: (e) Sells recycled products for $50K Manufactures hiking boots & sells to households to $100K Gross EPE and EGSS = $2090 Sector EPE EGSS Government (b) 900 (a) 1000 Households 1000 (d) 100 (e) 50 ST company (c) 40 ECS Company (c) 40 RG Company Total (Gross) $2090 Gross includes double counting. Which? E.g., intermediate consumption… Gross vs net? SEEA-CF - Environmental activity accounts

Environmental Activities Take home points Environmental Activities Take home points EPEA track USE of environmental protection (EP) EGSS tracks SUPPLY of environmental protection (EP) Taxes limit consumption and subsidies (should) promote EP Most data already available, but needs more detail Discussion Links to climate change? Are all climate change mitigation, adaptation, planning…in EPEA? Does your NSO track Environmental Activities? EPE. EGSS, taxes, subsidies? Which would be the most important? Who [are/could be] your data providers? SEEA-CF - Environmental activity accounts

References References Statistics Netherlands: https://www.cbs.nl/en-gb/our- services/methods/surveys/korte-onderzoeksbeschrijvingen/environmental- protection-expenditure Statistics Canada: http://www23.statcan.gc.ca/imdb/p2SV.pl?Function=getSurvey&SDDS=190 3 Eurostat: http://ec.europa.eu/eurostat/web/environment/environmental- goods-and-services-sector OECD: http://www.oecd.org/tad/envtrade/environmentalgoodsandservices.htm SEEA-CF - Environmental activity accounts

Acknowledgements Materials prepared by: Materials adapted from: Michael Bordt Regional Adviser on Environment Statistics ESCAP Statistics Division bordt@un.org Hye Kyeong Choi Consultant on Environment Statistics ESCAP Statistics Division gracechoi0102@gmail.com Materials adapted from: Sokol Vako (UNSD; Chiba, Japan; Feb. 23, 2016) Sjoerd Schenau (Statistics Netherlands and Eurostat course on Environmental Taxes) SEEA-CF - Environmental activity accounts