Classification of physical flows: points for discussion UNSD 13 th Meeting of the London Group (Brussels, 29 September – 3 October)

Background SEEA-2003: natural resources, ecosystem inputs, products, and residuals. 3 separate classifications of flows: 1 NR + EI (following asset classification) 2 Products (CPC) 3 Residuals (solid waste [EWC-Stat] + air emissions + emission to water, dissipative use/loss + balancing items) LG meeting Rome 2007:LG meeting Rome 2007: waste products (market value) and waste residuals (no market value) align CPC with EWC-Stat assumptions: CPC is restricted to products where products are defined as having postive value Important to understand underlying principles and definitions used in the classifications in CPC and EWC-Stat

CPC (1) Covers all products that can be the object of transactions or that can enter into stocks In general follows the definition of products within the SNA result of production; exchanged and used for various purposes; inputs in the production of other goods and services as final consumption or for investment (2008 SNA para 2.36)result of production; exchanged and used for various purposes; inputs in the production of other goods and services as final consumption or for investment (2008 SNA para 2.36) Categories of CPC are both exhaustive and mutually exclusiveCategories of CPC are both exhaustive and mutually exclusive Classification based on physical properties and intrinsic natureClassification based on physical properties and intrinsic nature raw materials of which goods are maderaw materials of which goods are made stage of productionstage of production ways in which goods are produced or services rendered,ways in which goods are produced or services rendered, purpose or user category for which products are intendedpurpose or user category for which products are intended prices at which they are sold.prices at which they are sold.

CPC (2) Division: 39 - Wastes or scraps Breakdown: This Division is divided into the following Groups: Wastes from food and tobacco industry391 - Wastes from food and tobacco industry Non-metal wastes or scraps392 - Non-metal wastes or scraps Metal wastes or scraps393 - Metal wastes or scraps Other wastes and scraps399 - Other wastes and scraps399 This Group is divided into the following Classes: Municipal waste Municipal waste Sewage sludge Sewage sludge Clinical waste, including pharmaceutical waste Clinical waste, including pharmaceutical waste Waste organic solvents Waste organic solvents Wastes from chemical or allied industries Wastes from chemical or allied industries Other wastes n.e.c Other wastes n.e.c.3999

CPC (3) CPC broader than what is defined as „product“ (positive value) in the SEEA-2003 CPC includes waste that is the result of consumption e.g. municipal waste, sludge etc.. The main reason is to maintain complete link to HS No reference is made to commercial or market value in defining products: The SNA recognizes that some products are transacted at economically insignificant prices (e.g. water): positive price cannot be a necessary condition to be a product During the development of the CPC rev2 it was decided to keep the value discussion outside the CPC scope EU: “it is immaterial to the legal definition of waste whether a substance or object may have a commercial value or is capable of economic reutilization" (Case C-359/88 [1990] ECR I-1509) Do our assumptions hold?

Residuals in SEEA-2003 There is no agreed definition of residuals (or waste) in the SEEA A: Residuals are all the outflows from the economy which use environmental media as a disposal sink (para 1.67); B: Residuals are the incidental and undesired outputs from the economy which generally have no economic value and may be recycled, stored within the economy or (more usually at present) discharged into the environment (para. 2.31) The current SEEA-2003 classification mixes A [outflows to the environment] and B [flows within economy + outflows to the environment] Waste seems to refer to either a subset of residuals (solid) or to those residuals that have the destination land

EWC-Stat Substance oriented statistical classification of waste as well as a classification of treatment (recycling, disposal etc.) An aggregation of the European List of Waste (LoW) „Waste refer here to materials that are not prime products (i.e. products produced for the market) for which the generator has no further use for own purpose of production, transformation or consumption, and which he discards, or intends or is required to discard. Wastes may be generated during the extraction of raw materials during the processing of raw materials to intermediate and final products, during the consumption of final products, and during any other human activity. Are excluded: residuals directly recycled or reused at the place of generation (i.e. establishment); waste materials that are directly discharged into ambient water or air.”

EWC-Stat (2) Waste EWC-StatResiduals By-products Waste residuals LG?Waste Waste products Different use of the word ‘residual’ Different use of the word waste Also coverage can be different (incidental and undesired vs no further use for own purpose)

Possible solutions: Tighten definition of residuals and waste:Tighten definition of residuals and waste: A: Use EWC-Stat definitions and classificationsA: Use EWC-Stat definitions and classifications B: Tighten existing definition BB: Tighten existing definition B C: Define residuals explicitly as flows from the economy to the environmentC: Define residuals explicitly as flows from the economy to the environment

Option C (1) env.-ecowithin ecoeco-env. ‘Inputs’‘Throughputs’‘Outputs’ CPC +CPCCPC (waste to Additional(includinguncontrolled Materialsflows intolandfill) + ISIC 37, 38, 39air emissions dissipative use

Option C (2) Advantages: Complete alignment with MFAComplete alignment with MFA No inconsistenciesNo inconsistencies As multipurpose system, need to develop correspondences with EWC-Stat (both ‘supply to ISIC 38’ and ‘use by ISIC 38’) but SEEA 2012 not in jeopardy if not ready on timeAs multipurpose system, need to develop correspondences with EWC-Stat (both ‘supply to ISIC 38’ and ‘use by ISIC 38’) but SEEA 2012 not in jeopardy if not ready on time Would simplify SUTsWould simplify SUTsDisadvantages Waste accounts based on CPCWaste accounts based on CPC

Questions to the LG Does the LG agree that the definition of residuals should be tightened to flows from the economy to the environment i.e. with respect to the boundary? Does the LG agree that the CPC is capable of capturing all physical flows within the economy both products and residuals? Does the LG agree that CPC categories of waste are also used in the classification of residuals as ‘solid waste to uncontrolled landfill’ instead of a classification based on the EWC-Stat? Does the LG see value added in developing one single list of materials (CPC with add-on)?