Environmental activity accounts Expenditures, taxes and EGSS

1. Environmental activity accountsExpenditures, taxes and EGSS

2. Outline 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

3. 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 Think about links to climate change: Mitigation, adaptation, impact reduction, early warning… SEEA-CF - Environmental activity accounts

4. 1. Review of basics SEEA: Stocks and flows Environment Economy Production Consumption Accumulation Imports Exports P = Price (monetary value) Q = Quantity (physical) Ecosystems & Oceans

5. 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 • Technologies to reduce impacts • Resource management • Taxes, subsidies and permits How to decide on primary purpose? Primary purpose: intended, major use SEEA-CF - Environmental activity accounts

6. 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

7. 1. Review of basics Environmental Activities in SEEA-CF 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

8. 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) 14.6 Fisheries subsidies: Are they good or bad? 13 Links to climate action? SEEA-CF - Environmental activity accounts

9. 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

10. 2-1 Protection Expenditures Protection expenditure accounts (EPEA) Why exclusions? because primary purpose is not “environmental protection” SEEA-CF - Environmental activity accounts

11. 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

12. 2-1 Protection Expenditures EPEA: Who produces? • Resident producers • Generation of income • “Specialist” = primary activity + + Examples? Waste disposal, sewage treatment… SEEA-CF - Environmental activity accounts

13. 2-1 Protection Expenditures EPEA: Supply and Use Basic prices = purchase price + (taxes) –(subsidies) Total supply = resident + imports Total use = consumption + exports SEEA-CF - Environmental activity accounts

14. 2-1 Protection Expenditures EPEA: National expenditures Adds • connected products • adapted goods • Capital formation (investment) What are households paying for? Environmental protection (waste disposal, air purification, more efficient technology etc.) SEEA-CF - Environmental activity accounts

15. 2-1 Protection Expenditures EPEA: Who pays for it? Government + corporations + households Example: transfers for international cooperation (e.g., ROTW subsidizes sewage treatment in country) “Rest of the world” pays residents? SEEA-CF - Environmental activity accounts

16. 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

17. 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

18. 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 Possibilities for mis-interpretation? Could be misinterpreted as “raise GDP by stopping EPE” SEEA-CF - Environmental activity accounts

19. 2-1 Protection Expenditures EPE Accounts • Challenges • Small sample  limit detail released • Harmonizing government & private expenditures SEEA-CF - Environmental activity accounts

20. 2-2 Goods and services 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 SEEA-CF - Environmental activity accounts

21. 2-2 Goods and services 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) • 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

22. 2-2 Goods and services Environmental Goods and Services Sector (EGSS) SEEA-CF - Environmental activity accounts

23. 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

24. 2-2 Goods and services 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

25. 2-2 Goods and services Environmental Goods and Services • Netherlands data sources SEEA-CF - Environmental activity accounts

26. 2-2 Goods and services Environmental Goods and Services Canada Goods SEEA-CF - Environmental activity accounts

27. 2-2 Goods and services Environmental Goods and Services Canada Services SEEA-CF - Environmental activity accounts

28. 2-2 Goods and services 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

29. 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 Why resource consumption/depletion tax? Resource consumption/depletion tax to reduce consumption of depletable resources SEEA-CF - Environmental activity accounts

30. 2-3 Taxes and subsidies Environmental taxes SEEA-CF - Environmental activity accounts

31. 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 SEEA-CF - Environmental activity accounts

32. 2-3 Taxes and subsidies Environmental subsidies SEEA-CF - Environmental activity accounts

33. 2-3 Taxes and subsidies Environmental taxes & subsidies • Data sources • SNA • Tax department (administrative data) • Surveys • Country examples • EU SEEA-CF - Environmental activity accounts

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

35. Group Exercises Group Exercise • 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

36. 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 Gross vs net? SEEA-CF - Environmental activity accounts

37. 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

38. 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=1903 • 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

39. Acknowledgements Acknowledgements • Materials prepared by: • Michael Bordt • Regional Adviser on Environment Statistics ESCAP Statistics Division bordt@un.org • Hye Kyeong Choi • Consultant on Environment Statistics ESCAP Statistics Divisiongracechoi0102@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