Sacha Baud, Jasmin Guelden Sterzl, Eva Milota – Statistics Austria

Physical Environmental Accounts (PEA) European Statistical Training Programme (ESTP)
Sacha Baud, Jasmin Guelden Sterzl, Eva Milota – Statistics Austria Nina Eisenmenger – Institute of Social Ecology - University of Natural Resources and Life Sciences, Vienna (BOKU) Vienna, 28 – 30 Mai 2018 THE CONTRACTOR IS ACTING UNDER A FRAMEWORK CONTRACT CONCLUDED WITH THE COMMISSION

Round table Please introduce yourself, your experience and expectations on the course! You, your institution, your role in dealing with PEA (which modules) Your experience in PEA: Have you already collected/estimated data? Have you already gone through the manuals? Any experience in other modules of environmental accounts (monetary, ecosystems)? Knowledge of SEEA? Knowledge of the latest versions of handbooks? Your expectations on the course

Overview of the course 1 Introduction 2 Air Emission Accounts (AEA) 3
Point of the agenda Issue Day 1 Introduction 2 Air Emission Accounts (AEA) 3 Material Flow Accounts (MFA) 4 Physical Energy Flow Accounts (PEFA) 5 Common elements and compilation challenges 6 Communication and dissemination (use of PEA for policy needs) 7 AOB

Overview of the course - Day 1
Point of the agenda Issue Day 1 Introduction Introduction to SEEA and its physical environmental accounts modules Applications and political needs of environmental accounts Existing physical environmental accounts in the EU European Legislation 2 Air Emission Accounts (AEA) Methodological framework, Definitions Classifications Eurostat data requirements: AEA questionnaire and how to fill it, obligatory parts for Regulation 691/2011 and voluntary parts. Basic approaches to compile AEA. Source data. Compilation methods: inventory-first approach, energy-first approach. Bridge tables. Practical challenges. Practical examples

Point of the agenda Issue Day 3 Material Flow Accounts (MFA) Methodological framework for EW-MFA. Overview of set of tables. Concept. Definitions. Methodologies. Classifications Eurostat data requirements: questionnaire on EW-MFA accounts and how to fill it, obligatory parts for Regulation 691/2011 and voluntary parts Compilation of DE and direct trade: concepts, methods, data, estimations, challenges. Compilation of RME: concepts, methods, data, estimations, challenges. Compilation of DPO: concepts, methods, data, estimations, challenges MFA indicators: perspective and meaning 2

Point of the agenda Issue Day 4 Physical Energy Flow Accounts (PEFA) Methodological framework for PEFA. Overview of set of tables. Definitions. Methodologies Classifications. Delegated act 2016/172 on energy products for PEFA Eurostat data requirements: questionnaire on PEFA and how to fill it, obligatory parts for Regulation 691/2011 and voluntary parts Source data for PEFA (IEA/Eurostat annual questionnaires for energy statistics). Introduction to compilation tools (PEFA-Builder). Practical challenges Practical examples 3

Point of the agenda Issue Day 5 Common elements and compilation challenges Footprints (consumption-based accounting) Accounting of international flows Allocation of emissions and energy uses to NACE industries and households 3 6 Communication and dissemination (use of PEA for policy needs) Presentations and interpretations of physical environmental accounts data Environmental accounts data complementing other data sources about environment. 7 AOB

Day 1 – point 2 of the agenda
Introduction to SEEA and its physical environmental accounts modules

Outline The SEEA conceptual framework SEEA structure
General principles SEEA Volume 1 SEEA Volume 2 SEEA Volume 3 SEEA Volume 1 – Physical Modules What is SEEA and for what purpose has it been developed? Nearly everybody is familiar with the term GDP and most people even outside of the accountants community has heared about the SNA. So for most of the people it is clear, that when talking about GDP it is the same in China, Russia, Europe or elsewhere in the world. But what about environment statistics and accounts? There were a lot of methodological approaches but they had not been harmonised, so – UNSD initialised the development of a common standard for environmental accounting, based on the rules of – and complementary to the SNA – the SEEA, the system of environmental economic accounts.

The SEEA Conceptual Framework
Environment Natural Resources (stocks) -Land -Water -Ecosystems -Soil -Etc. Natural Resource flows -Materials -Energy -Ecosystem services Economy Activities -Production -Consumption -Accumulation Instruments -Financial/Monetary -Taxes/subsidies -Financing -Resource rent -Permits Actors Enterprises Households Government Non-profit institutions Analytical and Policy Frameworks -Productivity analysis -Natural resource management -Climate change -Green Growth/Green Economy Land/ Resource use/ Ecosystems Emissions/waste Outside territory of reference Outside territory of reference The System of Environmental-Economic Accounting (SEEA) is a statistical system that brings together economic and environmental information into a common framework to measure the contribution of the environment to the economy, and the impact of the economy on the environment. The SEEA contains an internationally agreed set of standard concepts, definitions, classifications, accounting rules and tables to produce internationally comparable statistics. The SEEA framework follows a similar accounting structure to the System of National Accounts (SNA). The SEEA uses concepts, definitions and classifications consistent with the SNA in order to facilitate the integration of environmental and economic statistics. The SEEA does not propose particular indicators, but is instead a holistic multi-purpose information system that can generate a wide range of statistics and indicators with varying potential analytical applications. Source: UNSD

Experimental Ecosystem Accounting
SEEA Structure General Principles Concepts Classifications Accounting rules Valuation principles (where applicable) SEEA Central Framework Experimental Ecosystem Accounting General Principles SEEA is an organising framework for an integrated system of stocks and flows accounts from which policy relevant statistics and indicators can be derived that measure interactions between the economy and the environment and the quality of environmental assets The stocks and flows can be measured in both physical and monetary terms SEEA sets out the underlying concepts, definitions, classifications and accounting rules that underpin the stocks and flows accounts As such, SEEA can provide guidance in the setting up of a program of basic environment statistics in terms of scope, coverage and underlying concepts SEEA Applications and Extensions Source: UNSD

General Principles: SEEA as an organizing framework
Indicators Accounts SEEA Basic data Econ. Stats|Env. Stats Source: UNSD

General Principles: SEEA accounts and aggregates
Asset accounts Physical flow accounts Monetary accounts Environmentally-adjusted aggregates Asset accounts: record stocks and changes in stocks (flows) of natural resources such as land, forest, water and minerals Physical flow accounts: provide a systematic physical description of production and consumption processes, including their natural resource inputs, product throughputs and outputs i.e. wastes. Link the physical information to the economic accounts Monetary accounts: separately identify environmentally- related transactions presented in the existing SNA flow accounts in order to make them more explicit for analysis Environmentally-adjusted aggregates: combine modules of SEEA to form a full-sequence of accounts from which aggregates such as depletion-adjusted net domestic product and net saving can be derived.

SEEA Central Framework
is predicated on established statistical standards embodied in the SNA. It complements the SNA by elaborating those concepts and classifications that better measure the relationship between the economy and the environment. The SEEA Central Framework (2012), was adopted by the UN Statistical Commission as the first international standard for measuring the environment and its relation to the economy and thus for environmental-economic accounting in 2012.

SEEA Central Framework
Measures in physical terms the flows of goods and services Accounts for natural resources Uses and expands standard national accounting concepts and classifications Measures depletion of natural assets The Central Framework Measures in physical terms the flows of goods and services of energy, water and materials that cross between the economy and the environment and circulate within the economy Accounts for natural resources and their using up by the economy It uses standard national accounting concepts and classifications and expands on them to better measure the relationship between the economy and the environment The one extension to the SNA is that Volume 1 provides guidance on how to calculate measures of depletion of those natural assets that are within the asset boundary of the SNA (e.g. subsoil assets) As such, national accounts aggregates such as net domestic product and net national saving can be adjusted for the “using up” of those natural assets in the production process

SEEA Experimental Ecosystem Accounting
The development of SEEA Experimental Ecosystem Accounting reflects the recognition that measurement of the environmental-economic relationship should encompass the understanding that the environment is a system capable of self-regeneration and degradation. This systems perspective, embodied in the breadth of research on biodiversity, ecosystems and the link to human activity, is one that complements the perspectives concerning the measurement of the environment and the economy described in the SEEA Central Framework and the System of National Accounts (SNA). At its forty-fourth session in 2013, the United Nations Statistical Commission welcomed SEEA Experimental Ecosystem Accounting as representing an important first step forward in the development of a statistical framework for ecosystem accounting and encouraged the use of SEEA Experimental Ecosystem Accounting by international and regional agencies and countries wishing to test and experiment in this new area of statistics.

SEEA Experimental Ecosystem Accounting
complements the conceptual framework and accounts presented in SEEA Central Framework looks at the ecosystems in their capacity to provide services to current and future generations at which all assets discussed in the central framework as individual assets are seen as jointly producing services serves as a measurement framework tracking changes in ecosystems and linking those changes to economic and other human activity offers a synthesis of current knowledge in ecosystem accounting

SEEA Applications and Extensions
illustrates to compilers and users of SEEA Central Framework based accounts how the information can be used in decision making, policy review and formulation, analysis and research. The SEEA Applications and Extensions shows compilers and users of SEEA-based environmental-economic accounts how the information gathered can be applied to decision making, policy review and formulation, analysis and research. SEEA Applications and Extensions bridges the divide between compilers and analysts, allowing members of both groups to recognize the potential uses and the related measurement considerations. There are many topics to which data from the SEEA Central Framework may be applied. This breadth of application is attributable to the range of accounts that make up the SEEA Central Framework and the linkages between those accounts. These linkages enable the analysis of related data sets and the subsequent compilation of indicators. White Cover Version of 2017 available.

SEEA Applications and Extensions
Information pyramid The figure shows the relationships between different types of information in the context of the SEEA. The figure highlights that basic statistics and data are organised using accounting frameworks and that indicators can be sourced from accounts. While it is the case that indicators can be sourced directly from basic statistics, the filter of an accounting framework lends significantly to the coherence of the indicators. Further, in the case of the SEEA, its alignment with the SNA provides a consistency between economic and environmental information that provides a robustness to indicators that are sourced from accounts. Indicators, aggregates and totals may serve many purposes depending on the scale at which they are applied, on the audience to be reached, and on the quality of the underlying data. Indicators are useful tools for tracking progress with respect to the environment and sustainable development, and for raising the profile of these issues in the public debate. They help promote accountability by forming the basis for policy targets and by informing about how well policies are performing, and they support policy development and integration by drawing attention to major trends and structural change. Among the main audiences are the general public, journalists, managers and decision makers in the business and government sectors, policy-makers including parliamentarians, and stakeholders from non-government organisations. Most of these audiences are not statistical experts. It is therefore important that the indicators are communicated in a way that is understandable and meaningful, and that reduces the complexity and level of detail of the original data. Thus, a key function of indicators is to simplify the communication process by which the results of analysis and accounting are provided to the users and to adapt the information provided to users' needs. Source: UNSD

SEEA Volume 1: The Central Framework

Physical flow accounts
An economy cannot function without using natural resources and other inputs from the environment and using the environment to absorb the unwanted by-products of economic production. Measuring the flows of natural inputs into and releases of residuals from the economy can therefore provide instructive information. This measurement is generally carried out using physical units of measure. The usefulness of accounting for physical flows is considerably strengthened when they are organized using the same framework used to assess economic flows in monetary terms.

The physical supply and use table approach
The intent in physical flow accounting is to record the physical flows underpinning the transactions recorded in the monetary supply and use tables, primarily with respect to goods, and to then extend the monetary supply and use table to record physical flows from the environment to the economy (such as flows of natural resources) and physical flows from the economy to the environment (such as emissions to air and water).

Principles of physical flow accounting
Gross and net recording of physical flows Treatment of international flows Treatment of goods for processing Gross and net recording of physical flows The PSUT framework presented in section 3.2 records all flows between the environment and the economy, and between different economic units, and, where applicable, records flows within economic units. This recording of flows is referred to in the SEEA as gross recording. The key advantage of a gross recording approach is that a full reconciliation of all flows at all levels of the supply and use table, for example, by industry and by product, can be made. It is noted that the terms “gross” and “net” are used in a wide range of accounting situations. In the SNA, the term “net” is used to indicate that an accounting aggregate has been adjusted for consumption of fixed capital (depreciation). In other situations, the term “net” is used simply to express the difference between two accounting items. The terms “gross” and “net” are also used to describe aggregates that have related but different measurement scopes. Generally, care should be taken when using and interpreting the terms “gross” and “net” and clear definitions of inclusions and exclusions should be sought and provided. Treatment of international flows The treatment of physical flows to and from the rest of the world needs a careful articulation. An underlying principle applied in the SEEA is that relevant flows are attributed to the country of residence of the producing or consuming unit. This differs from the territory principle of recording, which is applied in a number of statistical frameworks. The territory principle attributes the relevant flows to the country in which the producing or consuming unit is located at the time of the flow. Treatment of goods for processing It is increasingly common for goods from one country to be sent to another country for further processing before being (a) returned to the original country, (b) sold in the processing country or (c) sent to other countries. In situations where the unprocessed goods are sold to a processor in a second country, there are no particular recording issues. However, in situations where the processing is undertaken on a fee-for-service basis and there is no change of ownership of the goods (i.e., the ownership remains with the original country), the financial flows are unlikely to relate directly to the physical flows of goods being processed. Generally, information on the physical flow of goods between countries is available in international trade statistics. However, it is necessary to identify those flows of goods where the ownership has not changed and to apply a different treatment in monetary terms compared with that of the international trade data. Depending on the products and industries that are of interest, reconciliation entries may be required if accounts combining physical and monetary data are to be compiled.

Physical flow accounts for energy
are a subsystem within the general physical flow framework record, in physical units, flows of energy from the environment into the economy, within the economy and, finally, the flows of energy back to the environment consist of flows of energy from natural inputs, flows of energy products and energy residuals flows of air emissions and solid waste generated by energy production and use are not included, although all types of waste used as inputs in the production of energy are included. Energy flow accounts are a subsystem within the general physical flow framework. Energy accounts data are compiled by converting physical measures of mass and volume such as tons, liters and cubic meters into a common unit representing energy content in net calorific terms. Energy flow accounts record flows of energy, in physical units, from the initial extraction or capture of energy resources from the environment into the economy; the flows of energy within the economy in the form of the supply and use of energy by industries and households; and, finally, the flows of energy back to the environment. Energy flows consist of flows of (a) energy from natural inputs, (b) flows of energy products and (c) energy residuals. Flows of air emissions and solid waste generated by energy production and use are not included, although all types of waste used as inputs in the production of energy are included.

Physical flow accounts for energy
Three different ways to provide information on energy supply and energy use Energy statistics Energy balances Energy accounts Physical Energy Flow Accounts (PEFA) are one of three modules of the regulation (EC) No. 538/2014 amending regulation (EC) No. 691/2011. Energy statistics result from collecting and compiling information on production, imports, exports and domestic use of energy products on the basis of specific surveys and from using, for example, business statistics and international trade statistics. Energy balances reorganize these basic statistics by confronting and consolidating supply and use, and by highlighting the transformation of energy within the economy. Energy accounts, which primarily use national accounts classifications and definitions, can be seen as a reorganization and broadening of scope of energy statistics. Both energy balances and energy accounts apply the principle that supply equals use; however, supply and use are defined in different ways in these two systems. The compilation of energy flow accounts allows for a consistent monitoring of the supply and use of energy by energy type. Indicators of energy intensity, efficiency and productivity can be derived from the accounts in combination with monetary information. One main difference between the energy balances and the energy accounts is reflected in how activities are classified and the treatment of various activities within the national boundary. The energy accounts use the concept of residence to determine whether a specific energy flow should be included, for instance, as imports and whether it is to be included as part of energy use. The boundary of the energy balances follows the territory principle of recording. We will deal with this topic on day three.

Physical flow accounts for water
Describe, in physical units, flows of water from the environment into the economy, within the economy and finally, flows of water back to the environment The focus of the SEEA is the inland water system, with provision for the inclusion of sea or ocean water abstracted for production and consumption (e.g., saline water for desalinization or cooling). Water flow accounts describe flows of water, in physical units, encompassing the initial abstraction of water resources from the environment into the economy, to the water flows within the economy in the form of supply and use by industries and households, and finally, flows of water back to the environment. For the purposes of water resource management, the compilation of data for a river basin or other hydrologically relevant area may be appropriate. It is noted, however, that while physical data may be available for such geographical areas, corresponding economic data will generally be available only for administrative regions; therefore, these two geographical boundaries may not align. The focus of the SEEA is the inland water system, with provision for the inclusion of sea or ocean water abstracted for production and consumption (e.g., saline water for desalinization or cooling).

Physical flow accounts for materials
accounting for air emissions accounting for emissions to water Solid waste accounts Economy-wide material flow accounts In contrast to energy and water, materials are a far more diverse set of natural inputs, products and residuals. Consequently, although in principle a complete accounting for material flows on the basis of the mass of each type of material may be accomplished, in practice accounting for materials tends to focus either on particular materials or on specific types of flows. For the management of specific products, it may be useful to trace the physical flows of an individual material from the environment, through the economy, and back into the environment. As materials flow through the economy, they may become embodied in products that are more complex. These material flows can be analysed by combining the physical flow data with the economic relationships in standard supply and use tables. In this way, it is possible to estimate the quantity of specific materials required to yield final products. Such information is relevant for demand-based analysis of material flows and for the calculation of the upstream requirements of production which are necessary for life-cycle analysis and related analytical techniques. A particular example of this type of material flow accounting is the compilation of nutrient balances. Nutrient balances track the flows of soil nutrients (nitrogen (N), phosphorus (P) and potassium (K)) from the soil through various products. Nutrient balances, particularly if calculated at a broad scale, necessarily require the use of multiple coefficients for the estimation of not only the total quantity of inputs, but also the extractions of nutrients embodied in products (e.g., harvested crops and fodder used for livestock).

Accounting for air emissions
The SEEA air emissions account records the generation of air emissions by resident economic units, by type of substance. Boundary issues that have to be taken into consideration: Economic boundary with respect to air emissions Emissions from economic production processes vs. Emissions from natural processes Air Emission Accounts are one of the first set of three modules of the regulation (EC) No. 691/2011. Emissions to air are gaseous and particulate substances released to the atmosphere by establishments and households as a result of production, consumption and accumulation processes. We will deal with this topic this afternoon.

Solid Waste Accounts Solid waste accounts are useful in:
organizing information on the generation of solid waste and the management of flows of solid waste to recycling facilities, to controlled landfills or directly to the environment. Measures of the amount of waste in aggregate or of quantities of specific waste materials may be important indicators of environmental pressure. The construction of solid waste accounts allows these indicators to be placed in a broader context with economic data in both physical and monetary terms.

Economy-wide material flow accounts (EW-MFA)
provide an aggregate overview, in tons, of the material inputs and outputs of an economy, including inputs from the environment, outputs to the environment, and the physical amounts of imports and exports. constitute the basis for material flow-based indicators may be a useful starting point for the development of a fully articulated PSUT for the whole economy. This module one of the first set of three modules of the regulation (EC) No. 691/2011. The purpose of economy-wide material flow accounts (EW-MFA) is to provide an aggregate overview, in tons, of the material inputs and outputs of an economy, including inputs from the environment, outputs to the environment, and the physical amounts of imports and exports. EW-MFA and associated balances constitute the basis for derivation of a variety of material flow-based indicators. Given their generally close alignment with PSUT, EW-MFA may be a useful starting point for the development of a fully articulated PSUT for the whole economy. This Accounts will be presented tomorrow in more detail.

Policy relevance and uses of environmental accounts
Policy needs for data on the interactions between the economy and the environment International initiatives such as the UN Sustainable Development Goals are to be served Environmental accounts-based indicators are increasingly being used for policy purposes at EU level Users are getting increasingly aware of the accounts existence and their possibilities During the last years policy needs were mainly driven by the Europe 2020 strategy on smart, sustainable and inclusive growth (including among others targets for climate change and progress reviewed under the European Semester to coordinate economic policies, encompassing also environmental dimensions), the resource efficiency flagship initiative supporting the shift towards a resource-efficient, low-carbon economy to achieve sustainable growth and the 7th Environmental Action Programme to 2020. In recent years, there were other important initiatives which are solidly anchored in the policies: the UN Sustainable Development Goals and related initiatives at EU level, the European Commission circular economy package, the Paris Agreement and the 2030 framework for fight against climate change, the shift to low-carbon economy and the European Commission initiative on Energy Union and climate. As a result, there is more data available on the six modules included in the Regulation. Environmental accounts-based indicators are increasingly being used for policy purposes at EU level, such as environmental tax revenue and environmental employment for the European Semester, resource productivity for the resource efficiency scoreboard and the circular material use rate for the monitoring framework on the circular economy. Some indicators derived from the accounts are already in the EU SDG indicator set since 2017 and others are expected to be included in the next years. Users are getting increasingly aware of the accounts existence and their possibilities, however much remains to be done about the communication of the accounts. European environmental accounts must play a greater role organising thematic information in cross-cutting frameworks and in multidimensional topics such as sustainable development, circular economy and natural capital, and for derivation of indicators ensuring relevance of concepts, interlinkages and consistency across areas. The accounts must be in a position to continue supporting current policy needs in the next years and, at the same time, must be able to adapt in a flexible way to new ones.

Existing physical environmental accounts in the EU
Legally obligated Air Emission Accounts (AEA) Economy wide Material Flow Accounts (EW-MFA) Physical Energy Flow Accounts (PEFA) Voluntary Water Accounts (based on EU Water Framework Directive ) Waste Accounts (based on Regulation 2150/2002 on waste statistics) Forest Accounts (based on statistics on forestry measures under the Rural Development Regulation 1305/2013) Asset Accounts (e.g. subsoil assets) Ecosystem Service Accounts Water Accounts are not collected by Eurostat at current, there are some activities from EEA and DG ENV. Main Problem is, that the term “water accounts” is not harmonised.

Legally obligated accounts
Air Emission Accounts Material Flow Accounts Environmental Taxes Environmental Goods and Services Accounts Environmental Protection Expenditure Accounts Physical Energy Flow Accounts In 2011, regulation 691/2011 made its first obligation to report on three accounts – Air Emissions, Material Flows, Environmental Taxes and included a list of further modules to become obligatory at a later time. Regulation 538/2014 amended the regulation 691 and expanded the group of modules with reporting obligations by EGSS, EPEA and PEFA.

European Strategy for Environmental Accounts
ESEA 2014 covering the period New ESEA for ESEA 2014 is based on the ESP, the European statistical programme , the Europe 2020 strategy, the resource efficiency flagship initiative and the 7th Environment Action Programme to 2020. It is consistent with the proposals of the ESSC Sponsorship on Measuring Progress Well-Being and Sustainable Development in 2011 which followed the Stiglitz-Sen-Fitoussi report. And it is the EU plan for SEEA implementation. Regulation 538/2014 amending regulation 691/2011 is one of the outcomes of the strategy. New ESEA will cover the years 2019 – A first draft has been presented at the meetings of both, the Environmental Accounts WG and the Monetary Environmental Statistics and Accounts WG (MESA). There will be a second draft by the end of May There will be a discussion process during summer and the results will be presented to DIMESA in October this year. The final draft is planned to be presented to ESSC in February Special effort will be made in: Future quality improvements – esp. expand the usefulness of the accounts already established Communication strategy to improve the use of the accounts Develop existing areas and support measures Define new development areas Including new modules in Regulation Other technical amendments to the Regulation like revision of the classifications, anticipate reporting dates to improve timeliness, streamline production across different modules

Questions?

Physical Environmental Accounts (PEA) European Statistical Training Programme (ESTP)
Please address queries to your trainers: Sacha Baud Jasmin Guelden Sterzl Eva Milota Nina Eisenmenger

Sacha Baud, Jasmin Guelden Sterzl, Eva Milota – Statistics Austria

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