Classification of physical flows: points for discussion UNSD

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

2. 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: • 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

3. 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) • Categories of CPC are both exhaustive and mutually exclusive • Classification based on physical properties and intrinsic nature • raw materials of which goods are made • stage of production • ways in which goods are produced or services rendered, • purpose or user category for which products are intended • prices at which they are sold.

4. CPC (2) Division: 39 - Wastes or scraps Breakdown: This Division is divided into the following Groups: • 391 - Wastes from food and tobacco industry • 392 - Non-metal wastes or scraps • 393 - Metal wastes or scraps • 399 - Other wastes and scraps This Group is divided into the following Classes: • 3991 - Municipal waste • 3992 - Sewage sludge • 3993 - Clinical waste, including pharmaceutical waste • 3994 - Waste organic solvents • 3995 - Wastes from chemical or allied industries • 3999 - Other wastes n.e.c.

5. 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?

6. Residuals in SEEA-2003 There is no agreed definition of residuals (or waste) in the SEEA-2003 • 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

7. 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.”

8. EWC-Stat (2) Waste EWC-Stat Residuals 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)

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

10. Option C (1) env.-eco within eco eco-env. ‘Inputs’ ‘Throughputs’ ‘Outputs’ CPC + CPC CPC (waste to Additional (including uncontrolled Materials flows into landfill) + ISIC 37, 38, 39 air emissions dissipative use

11. Option C (2) Advantages: • Complete alignment with MFA • No 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 time • Would simplify SUTs Disadvantages • Waste accounts based on CPC

12. 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)?