2. Environment Industry Draft Compilation Guide Working Group “Environmental Expenditure Statistics” ICEDD 12 May 2006

3. Table of Content 1.Introduction 2.Definition of Environment Industry (to establish extent and boundaries ) 3.Classification of Environment Industry (based on standard tables) 4.Environment Industry data requirements 5.A framework for data collection and analysis of environment industry (based on task force experiences) 6.Presentation and interpretation of results 7.Policy relevance

4. Introduction 1.1.Policy context Environment industry: Potential to contribute to growth while at the same time improving the environment Policy interest is high ( growth potential, employment creation, environmental technologies exports, competitiveness, research and development for cleaner technologies, products and processes, etc) From 1990ies: OECD, Eurostat, DG Environment 1.2.Scope, organisation and purpose Scope: Data collection relatively new + some countries have practical problems to obtain complete data Organisation: Task force + consulting group Purpose: To assist in developing new data collection and to enable more rigorous and improved cross- country comparison of data 1.3.Structure of the compilation guide

5. Definition of Environment Industry 2.1.A general definition as starting point The following definition of environment-related activities, which seems to encompass the most pertinent considerations, can be used as starting point: “Environmental protection consists of activities to measure, prevent, limit, minimise or correct environmental damage to water, air and soil, as well as problems related to waste, noise and eco-systems. This includes activities, cleaner technologies, products and services that reduce environmental risk and minimise pollution and resource use” (OECD/EUROSTAT, 1999).

6. Definition of Environment Industry 2.2.Environment industry actors There is a group of measurable goods and services which are widely agreed on as forming the “core” of the environment industry. Some enterprises of the industrial business sector produce environmental goods and services as a principal or secondary activity, others produce environmental services for their own internal use and others outsource this activity to the core of the environment industry. Non industrial business sectors such as agriculture, forestry or construction can offer also environmental goods and services. Some activities were previously and are being carried out by the public sector.

7. Definition of Environment Industry 2.3.Environment industry activities, goods and services Definition, goods and services for: 2.3.1.Pollution management activities 2.3.2.Cleaner technologies and products 2.3.3.Resource management activities Construction and installation of facilities have been considered as a service: Do you need to describe environment industry in good, services and construction, separately?

8. Definition of Environment Industry 2.3.1.Pollution management activities: Air pollution control, Wastewater management, Waste management, Remediation and clean-up of soil, surface water and groundwater, Noise and vibration abatement, Environmental monitoring, analysis and assessment, Environmental research and development and Other 2.3.2.Cleaner technologies and products: Cleaner/resource-efficient technologies and processes, Cleaner/resource-efficient products 2.3.3.Resource management activities: Indoor air pollution control, Water supply, Recycled materials, Renewable energy plant, Heat/energy saving and management, Sustainable agriculture and fisheries, Sustainable forestry, Natural risk management, Eco-tourism and Other Do you use legal definitions of the activities? Could you provide examples of goods/services for each activity? Could you provide a list of cleaner technologies and products?

9. Definition of Environment Industry 2.4.Environment industry structure Large number of SMEs Industry is highly diverse Regulations have been the traditional driving forces : as policies were tackling the immediate environmental problems, their implementation relied strongly on end-of- pipe solutions Demand is shifting to product substitution and process modification due to greater emphasis on pollution prevention policies and partly to strategic environmental planning, which drive new technological development and hence create new markets for EGS Degree of internationalisation, etc. This chapter is intended to give an overview of overall EU Eco-industry: Is it useful to provide this information?

10. Classification of Environment Industry To ensure data comparability, a classification of the environment industry which allows identification of individual parts of the economic activities is proposed. The basic structure is as follows: 3.1.The core environmental industry 3.1.1.Definition of the core environment industry 3.1.2.Breakdown of core industries 3.1.3.Environmental activities by the core industry 3.2.Business sector 3.2.1.Definition of the business sector 3.2.2.Breakdown of the business sector 3.2.3.Environmental activities in the business sector 3.3.Public sector 3.3.1.Definition of the public sector 3.3.2.Breakdown of the public sector 3.3.3.Environmental activities by the public sector

11. Classification of Environment Industry 3.1.The core environmental industry Definition NACE Rev. 1 Divisions easy to identify and define as economic activities regarded in their entirety as environmental protection. The core industries consist of : NACE 25.12 “Retreading”, NACE 37 “Recycling”, NACE 41 “Collection, purification and distribution of water”, NACE 51.57 “Wholesale of waste and scrap” and NACE 90 “Sewage and refuse disposal, sanitation and similar activities”. Breakdown of core industries Private sector + Public-sector entities

12. Classification of Environment Industry 3.1.The core environmental industry Environmental activities

13. Classification of Environment Industry 3.2.Business sector Definition: The suppliers of the ‘goods’ (technology, equipment etc.) and services of the business sector are scattered over many NACE classes. Breakdown: For many enterprises the supply of environmental good and services is not the principal activity, but a secondary activity or an ancillary activity. Should we adopt the definition of principal activity depending on the value added?

14. Classification of Environment Industry 3.2.Business sector Environmental activities

15. Classification of Environment Industry 3.2.Business sector Environmental activities

16. Classification of Environment Industry 3.2.Business sector Environmental activities

17. Classification of Environment Industry 3.2.Business sector Environmental activities Most environmental manufacturing businesses (NACE D) are active in only one of the media (air, water, waste, etc), but some companies participate across all media segments. Most of the environmental consultants can be found in NACE 74 ”Other business activities” and are involved in environmental activity ”Environmental monitoring, analysis and assessment”. Agriculture, hunting and forestry (NACE A) will be involved in Sustainable agriculture and fisheries and in Sustainable forestry Would it be possible to test the standard tables in order to clean up activities and NACE groups?

18. Classification of Environment Industry 3.3. Public sector Definition The public sector is here defined as central, regional and local governments, authorities, communities and government agencies concerning legislation, supervision, control, research, information, education, etc. Public sector is mainly classified in NACE 75: Public administration and defence; compulsory social security. However, it can be also classified in NACE 70 “Real estate activities” and NACE 80 “Education”. Breakdown The European System of Accounts 1995 (ESA 95) gives the definition of the different level of government: General government, Central government, State government and Local government.

19. Classification of Environment Industry 3.3.Public sector Environmental activities Government entities at an executive level = core industries Here are included environmental activities by government authorities at a more indirect level: environmental policy making, law enforcement, control, co-ordination, research, granting environmental permits, etc. These activities are found at all government levels, central, regional and local. Furthermore the public sector includes nature protection activities of central government bodies. Although these activities are at least partly on a more executive level, for practical reasons, these activities are included in the public sector (and not in the core industries).

20. Classification of Environment Industry 3.3.Public sector Environmental activities Will it be more useful to have a breakdown of NACE Divisions?

21. Environment Industry data requirements 4.1.What are the variables of interest? Some examples: Contribution to economic growth: Turnover (domestic/foreign), employment (if possible by gender and by skill level, number of people employed and full-time equivalents, direct and indirect employment), value added, investments, sales, etc. Innovation and environmental technology development assessment: Environmental R&D expenditure, patents for environmental technology; end of pipe expenditure versus integrated expenditure, etc Barriers to international competition: Exports, Share of the market served by local suppliers or monopoly suppliers, ownership (domestic/foreign, public/private), mergers and acquisitions, taxes, subsides, sales and purchases by market (domestic/European/foreign), profit or loss, joint venture and licensing agreements, etc Costs of environmental goods and services: Price per unit of environmental good or service Ability to meet environmental protection goals: Link economic/non- economic data

22. Environment Industry data requirements 4.2.Data required by the standard tables Collecting all these data poses statistical and methodological difficulties related to problems of industry delimitation and data availability. For these reasons, a limited number of variables are proposed in the Eurostat standard tables for the environment industry: Turnover, Value added, Employment and Exports. They will allow to answer indirectly the following questions: what is the potential for growth ? what is the potential for employment creation? what has been the record in exporting environmental technologies? is there progress in research and development for cleaner products and processes? can we measure the impact on industrial competitiveness due to the application of cleaner technologies? how can environmental and economic policy be modified to encourage and support growth, job creation and trade in the environment industry? Which definitions are you currently using for these variables?

23. A framework for data collection and analysis of environment industry 5.1.Supply-side approaches Characterised by the collection of data on the supply of goods and services for environmental protection, mainly by means of the implementation of targeted surveys, by adding questions to existing surveys or by using data from business associations, research institutes and statistical offices. Here, some countries have provided their method to identify the enterprises and economic activities that fall within the environment industry. Could you provide your experience on how to estimate the variables for the non core industry sectors (multi-product and multi- services enterprises and sectors such as agriculture)?

24. A framework for data collection and analysis of environment industry 5.2.Demand-side approaches Characterised by the use of information that allows to quantify the demand for environmental goods and services. This is generally done from data on expenditure for environmental protection and resource management. 5.3.Combined supply- and demand-side approaches 5.4.Other approaches Could you please provide a detailed description of your method if you are using a demand-side approach or if you are using a completely different approach?

25. Presentation and interpretation of results 6.1.Analysis by individual sector 6.1.1.Core industries In order to be able to describe the full importance of public ownership in different environmental activities and NACE classes, the owner category of the enterprises and the number of employees of the core industries can be combined. This approach has value because environmental businesses differ widely in their goals, frameworks for decision making, and other characteristics depending on whether they are in the public or private sector. 6.1.2.Business sector Analysis of data on the producers of environmental good and services in the business sector allows to know which are the NACE groups who are carrying out an environmental protection activity as their principal, secondary or ancillary activity and in which environmental domains. 6.1.3.Public sector The government sector has one of the most significant roles to ensure the sustainable development of the economy. Analysis of public sector by government institution (central, regional, local) will provide information on how environment is organised in a country.

26. Presentation and interpretation of results 6.2.Comparison of the different sectors The cross-classification of sectors (NACE groups) and environmental activities shows which parts of environmental industry concentrate the largest employment, turnover, value added or exports, who dominates the production of clean technologies, etc. 6.3.Comparison of the different environmental domains Comparison of data by environmental activitiy can give an indication of the type and level of goods and services that the country provides for the different environmental domains (for example, waste management) and the relative importance that it attaches to the domain in relation to other goods and services.

27. Presentation and interpretation of results 6.4.Analysis by variable Turnover : The volume of turnover by environmental domain and actors show the largest environmental activities and NACE groups in terms of turnover. It is also important to analyse the distribution of turnover recorded by markets (internal and external inside and outside Europe). Value added: The volume of value added by environmental domain and actors show the largest environmental activities and NACE groups in terms of value added. The shares of value added per employee can indicate how capital-intensive are the sectors and the environmental activities. Employment : The number of employees by environmental domain and actors show the largest environmental activities and NACE groups in terms of employment. In order to see what skills could be required from employees in the environment industry and the level of knowledge content in a branch or its development potential, data about the level of education can be analysed. A somewhat different question is whether the environment industry can provide jobs for low educated and/or unemployed persons. A complementary analysis could be done from gender data in order to know the gender patterns of the environment industry in the country.

28. Presentation and interpretation of results 6.4.Analysis by variable Exports Analysis of exports helps to know the position of the country in terms of percentage of environmental industry revenues generated from exports, if it is industry-wide or is confined to certain sectors, etc. The share of exports and turnover in the largest environmental activities gives information on the industry trade performance. The analysis of exports by countries can show the size of environment industry exports to different countries and the largest countries inside and outside Europe where the majority of the exports go. Other data As the core industries consist of all enterprises within separate NACE groups, it is possible to present a time series of the number of enterprises to analyse the development for the core industries and the growth rate compared to the average development of a country. The share of SMEs in the environmental activities and the evolution of the relative importance of larger enterprises. Analysis of regulations evolution and other factors like demand linked to evolution of collected data provide information on the forces and factors shaping the industry.

29. Policy relevance 7.1.Integrating the environment in all policies 7.2.The Sixth Action Programme for the Environment 7.3.Environmental Technologies Action Plan (ETAP)

30. Environment Industry Draft Compilation Guide