DISCUSSION SUMMARY


INTRODUCTION

Purpose

This discussion paper responds to the growing demand for environmental expenditure information identified within environmental domains. The ABS has previously produced Environmental Protection Expenditure statistics, Environment Protection, Mining and Manufacturing Industries, Australia, 2000-01 (cat. no. 4603.0) and Environment Expenditure, Local Government, Australia, 2002-03 (cat. no. 4611.0). However, a scarcity of available information and data priorities which focussed on other areas, such as water and energy environmental-economic accounts, has meant that regular environmental expenditure accounts have not been produced.

The tables contained in this discussion paper are based on the United Nations System of Environmental-Economic Accounting (SEEA) Central Framework for expenditure on environmental protection and natural resource management. The SEEA is an international statistical standard that the ABS uses to produce a range of environmental-economic accounts including the ABS Water Account, Australia (cat. no. 4610.0) and the ABS Energy Account, Australia (cat. no. 4604.0). More information about the ABS environmental-economic accounts programme and its relationship to the SEEA can be found in the ABS Information Paper: Towards the Australian Environmental-Economic Accounts, 2013 (cat. no. 4655.0.55.002).

Establishing accounts for environmental expenditure would identify and measure society’s response to environmental concerns through the supply and demand for environmental protection services and through the adoption of production and consumption behaviour aimed at preventing environmental degradation. An Environmental Expenditure Account (EEA) would provide information on the value of environmental protection specific services produced across the economy and on the expenditure of resident units on all services for environmental protection and natural resource management purposes.

As a first step, the ABS is seeking feedback on this discussion paper from stakeholders on how an EEA might be used by policy and research agencies and on any technical issues where readers have expertise. Feedback is also sought on the identification and accessibility of appropriate information and data sources for the accounts. Please see Discussion/Future work section.


Background

Transactions between institutions within the economy which concern the preservation and protection of the environment are generally assumed to be recorded within the Australian System of National Accounts framework as part of wider aggregates and so will not always be separately identifiable. An EEA would describe the resources allocated for preserving and/or protecting the environment by different categories of economic units as well as the financing of these resources and activities. The purpose of the EEA is to provide a framework and structure to identify these environmental components within the key aggregates of the System of National Accounts (SNA).

The scope of the EEA is "...those economic activities whose primary purpose is to reduce or eliminate pressures on the environment or to make more efficient use of natural resources." (Chapter IV, para. 4.11 SEEA 2012 - Central Framework). The various activities are grouped into two broad types of environmental activities - Environmental Protection and Natural Resource Management. The Classification of Environmental Activities (CEA) outlined in the SEEA is the functional classification used to classify environmental activities, environmental products, and environmental expenditures and other transactions (for more details see Explanatory Notes, Figure 1).


The System of Environmental-Economic Accounts (SEEA) and international statistics

The SEEA Environmental Protection Expenditure (EPE) Accounts are presented by economic sectors (government, corporations, households) and by the environmental domain that is being protected or managed (such as air, water, biodiversity etc).

The SEEA proposes four sets of tables as the basis for a full set of EPE Accounts:

• Production of environmental protection specific products by resident producers where aggregates such as gross value added and net operating surplus, being measured consistently with SNA accounting conventions, can be compared with macro-economic aggregates for the whole economy
• Supply and use tables for environmental protection specific services with supply including those goods and services supplied by resident producers and through imports and use encompassing domestic consumption and exports
• Total national expenditure on environmental protection representing the total outlay by the economy on these activities including capital formation
• Financing of national expenditure on environmental protection. This seeks to shed light on how the environmental protection expenditure is funded. For example, an investment grant or subsidy from government may be funding industry and household investments in capital.

Many countries regularly produce environmental protection expenditure statistics, particularly in EU and OECD countries. For some countries (e.g. France, Belgium, Austria, Italy), EPE Accounts are compiled and reported systematically on a regular basis. For most countries, however, EPE Accounts are only partially compiled, typically reflecting the specific environmental issues at hand in each region.

Fewer countries produce fully compiled EPE Accounts in the form of a series of inter-linked tables as outlined and presented in this paper. Additionally, this paper extends the coverage to include natural resource management statistics. These statistics and accounts are less well developed internationally, but may also be produced (in whole or in part) using the same principles as those described in the EPE Accounts.
AUSTRALIAN ENVIRONMENTAL EXPENDITURE ACCOUNTS (EEA) - WHAT WOULD THEY COVER?

This paper explores the compilation of selected environmental protection and natural resource management transactions for Australia, utilising the SEEA framework for compiling EPE accounts. Experimental data is presented in the tables in the Downloads section of this publication. Table 1 in the Downloads section of this publication summarises the scope and coverage of the estimates provided.

Data included in this paper are considered experimental, and are used to illustrate the type of information that can be presented and derived from a suite of environmental expenditure accounts such as those described in the SEEA Central Framework. Estimates have been compiled to conceptually align with:

• Production (Output) of environmental services
• Supply and Use tables for environmental services
• National expenditure tables for selected environmental goods and services
• Financing of selected environmental goods and services.

The full suite of EEA tables is designed primarily to provide information on the output of environmental-specific services produced across the economy and the consumption (expenditure) on all services for environmental purposes.

The production of environmental services may be broken down to present output by type of environmental service supplied (Graph 1), or by the type of producer (Graph 2).

It should be noted that the EEA does NOT provide a complete view of the supply side for all relevant environmental goods and services. In particular it omits data on the production of connected products and adapted goods for environmental purposes. The Handbook on Environmental Good and Services Sector (Eurostat, 2009) describes the full range of environmental goods and services necessary to create a complete view.

The use (intermediate and final consumption) of these environmental services are also presented, and may be viewed by the type of service purchased, or by who is using the service (Graph 3), depending on policy or the interest of the data user.

The remaining tables (National Expenditure and Financing tables) are defined from a demand perspective, and broaden the scope to include connected products and adapted goods purchased by units undertaking environmental protection and natural resource management activities. This information may be used to show which economic units are investing in/purchasing environmental goods and services (Graph 4), and which units are financing these expenditures (Graph 5).


RESULTS

Production of Environmental Services, Australia

Graph 1 shows the output of environmental-specific services by the type of environmental service being supplied. This is the total output that includes both income generated by sales of these services and the provision of services by government departments. The total supply (and use) of environmental-specific services for Australia in 2010-11 was estimated at $31.9 billion. Solid waste management ($10.4 billion, almost 33% of total) and Waste water management ($6.1 billion, or 19% of total) are the largest environmental services supplied to the economy.

Other environmental domains separately identified were services for Air and climate protection ($3.1 billion), environmental Research and Development ($2.9 billion) and Water management ($2.3 billion). A further $7.1 billion of environmental services were produced for a variety of environmental protection and natural resource management activities including protection of biodiversity; protection and remediation of soil, groundwater and surface water; and other natural resource management activities.

For more information on supply/production of these services, see Tables 2.1, 2.3, 2.5 and 2.7 in the Downloads section of this publication.

It may also be of interest to understand which entities in the economy are producing these services. The EEA are structured to identify the type of economic units supplying the various environmental services.

Specialised producers are those producers whose primary activity is the production of environmental services. Non-specialised producers are those units that produce environmental services only as a secondary activity.

Most environmental services are provided by specialist producers (around 88% - see Graph 2, and Tables 3.3 and 3.4 in Downloads section of this publication). Waste and Wastewater management activities are primarily served by the private sector while government plays a larger role in providing services relating to all other environmental protection and natural resource management activities (roughly equivalent to the services supplied by the private sector for these activities).

In 2010-11, around 12% of the value of environmental services were provided by units undertaking environmental activities as secondary activities.

Tables 3.3 and 3.4 present a broader range of production-related variables including intermediate consumption, value added, and compensation of employees related to the supply of some of these services.

This information would allow any shifts in the provision of services across the economy (eg government to private sector, increased environmental services undertaken as secondary activity) to be monitored and measured over time and assessed for their relevance to environmental and economic policies.

Use of Environmental Services, Australia

Graph 3 and Tables 2.2, 2.4, 2.6 and 2.8 in the Downloads section of this publication present information on the use of the environmental services in the economy. Three-quarters (75%) of environmental services were consumed by Australian industry, with the bulk of the remainder used as final consumption by Households and General government.

Industries differed in the type and level of environmental service consumed. Manufacturing expenditure was dominated by Solid waste management and Other environmental protection and natural resource management (each around 30% of environmental services consumed by Manufacturing). Mining expenditure was primarily on Other environmental protection and natural resource management (64% of Mining total), and the Construction industry consumed primarily Solid waste management services (47% of Construction total), and Other environmental protection and natural resource management (37% of Construction total). Households and General government as final consumers were the largest consumers of Waste water management services (68% of total value of Waste water services, and 58% of Total final consumption on environmental services).

National Expenditure on Environmental protection and natural resource management

The graphs and tables referred to so far are limited to the supply and use of environmental protection and natural resource management related services. National expenditure on environmental protection and natural resource management (Tables 4.1, 4.2 in Downloads section of this publication and Graph 4 below) broaden the scope of the EEA to include connected products and adapted goods purchased by those undertaking environmental activities. It also includes capital formation for environmental activities by producers, and relevant environmental transfers. The inclusion of these additional flows are intended to provide an estimate of total outlays by an economy on environmental protection and natural resource management, and present environmental expenditure from a demand perspective.

Over three-quarters (78%) of Australia's estimated national expenditure on environmental services and connected/adapted goods was by the corporate sector. The bulk of this was intermediate consumption of environment related services by Australian businesses (non-specialised producers plus other industries) to mitigate/minimise their impacts on the environment ($14.1 billion).

With regard to connected and adapted products for environmental purposes, including recyclable materials, rainwater tanks, solar panels etc, the corporate sector spent around $5 billion on the consumption of these goods.

Households and Non profit institutions serving households spent $6.3 billion on environmental goods and services, around 18% of Australia's national expenditure on environmental good and services.

Financing of Selected Environmental Goods and Services

The final tables in the full suite of EEA are an extension of the National Expenditure tables to show the financing of national expenditure on environmental protection and natural resource management. These are presented in Tables 5.1 and 5.2 in the Downloads section of this publication.

While the columns of the Financing tables resemble those in the National Expenditure tables, the rows present the financing units, taking into account transfers flowing between economic units such as grants and subsidies.

Tables 5.1 and 5.2 and Graph 5 below show that Australian industry financed over three-quarters (77% or $27.5 billion) of the expenditure on goods and services related to environmental protection and natural resource management. Households financed $6.1 billion, or around 17% of this expenditure, and government funded around 6%.

DISCUSSION/FUTURE WORK

This paper presents experimental estimates to illustrate the potential of producing a full suite of EEA for Australia, and highlights some statistics which may be derived from these estimates. It should be acknowledged that these estimates are experimental and some information is based on partial estimates and modelled data (for a more detailed description see Table 1 in the Downloads section of this publication and Explanatory Notes) and, as such, tables and graphs should be used as indicative only and for the purpose of understanding the type of information that can be produced.

Most data presented in this paper are highly aggregated as detailed disaggregations of information are presently unavailable. Better quality and more disaggregated information would result in more detailed information relating to, for example, further industry breakdowns and detailed industry estimates, and/or further breakdowns of information for different environmental domains eg biodiversity and landscape protection; protection and remediation of soil, groundwater and surface water; management of various (specific) resources etc.

In addition to deriving indicators to highlight change in key areas over time, using accounting conventions of the SNA means that data derived from the EEA may be compared to and combined with various macro-economic aggregates such as Gross Domestic Product (GDP) and Gross Value Add (GVA). Additional analyses would be supported by linking EEA data to physical data, such as quantities of waste to landfill, recovery rates, air emissions data etc to help analyse and review the effectiveness of environmental policies and expenditures.

Recent cuts to the ABS' environmental statistics programme (in particular the ABS Waste Account, Australia (cat. no. 4602.0.55.006)) will impact on the availability of data sources to compile a comprehensive EEA in the future.

Feedback is sought from potential users and providers of data on all aspects of an Australian Environmental Expenditure Account (EEA) including:

• What are the key policy issues that your organisation is facing which would be supported by environmental expenditure information?
• What data do you hold, or are aware of, that could be used in the compilation of an EEA?
• What classifications and standards do you use relating to environmental expenditure?
• Should the scope of EEA focus on environmental protection; certain components of environmental protection; or Australian industry?
• What tables did you find the most useful?
• Do you have any other suggestions or comments about the production of an EEA?

Feedback can be forwarded to <mark.lound@abs.gov.au> or in hardcopy to Director, Centre of Environment Statistics, ABS, Locked Bag 10, Belconnen, ACT, 2616. Please provide comments by Friday, 6 September 2014. Alternatively, please contact Mark Lound on (02 6252 6325) during business hours. The ABS Privacy Policy outlines how the ABS will handle any personal information that you provide to the ABS.