CHAPTER 1 INTEGRATED ACCOUNTS



Introduction

Information Paper: Towards the Australian Environmental-Economic Accounts showcases the range of environmental-economic accounts (‘environmental accounts’) produced by the Australian Bureau of Statistics (ABS) and describes the power of these accounts in informing various environmental and socio-economic policy questions. A number of the critically important policy issues now faced within Australia relate directly to the effects of human activity on the environment. Environmental policy decisions are particularly challenging because they typically need to consider both the contribution of the environment to the wellbeing of humankind; and the way in which human interaction with the environment affects its capacity to support humanity’s future wellbeing. Environmental accounts provide the information to support a consistent analysis of the contribution of the environment to the economy and of the impact of the economy on the environment. They provide information of relevance to both economists and physical scientists and thus support a multidisciplinary approach in addressing environmental problems.

ABS environment accounts are based on the System of Environmental-Economic Accounting (SEEA). The SEEA Central Framework was adopted as an international statistical standard by the United Nations Statistical Commission in 2012. The adoption of the SEEA by the United Nations’ peak statistical body is a significant milestone in the ongoing development of information to support the needs of government, industry and the general public in the area of environmental policy.

The ABS publication Completing the Picture: Environmental Accounting in Practice(footnote 1) was released following the adoption of the SEEA and was designed to inform government decision makers, policy analysts, scientists, economists, industry and other groups on how environmental accounts could be used and further developed in Australia. Information Paper: Towards the Australian Environmental-Economic Accounts has grown out of Completing the Picture: Environmental Accounting in Practice but places greater emphasis on the information contained within environmental accounts (and related data) being produced by the ABS and others. In turn, a new publication Australian Environmental-Economic Accounts (AEEA) will be released later this year and will be a more data-focussed publication. It will also emphasise the capacity of environmental accounts to integrate data across the various environmental themes of water, energy, waste and so on. AEEA will more closely reflect the presentational structure of the accounts of the SEEA Central Framework - a style and structure similar to that of the Australian System of National Accounts (ASNA)(footnote 2) . It will represent the first stage of a fully integrated (though limited) set of environmental accounts for Australia.

Environmental accounts are, compared to the System of National Accounts (SNA), at the early stages of development and use. As such, Information Paper: Towards the Australian Environmental-Economic Accounts devotes considerable attention to explaining environmental accounts and describing their use in informing contemporary issues of environmental policy. It is expected that the amount of commentary included in the AEEA will be much less and, over time, will be further reduced as users become more familiar with the way environmental accounts are structured and come to understand how they can be applied to particular issues.

The development of the SEEA was driven by a desire to have more complete and robust information on the economy and the environment and to better understand the interactions between the two. It reflects an increasing realisation that economic prosperity is dependent on the ability of the environment to supply natural resources and to absorb pollution, and that environmental policies impact on economic activity. The report “Beyond GDP” by the Stiglitz Commission noted:

‘What we measure affects what we do; and if our measurements are flawed, decisions may be distorted. Choices between promoting GDP and protecting the environment may be false choices once environmental degradation is appropriately included in our measurement of economic performance. So too, we often draw inferences about what are good policies by looking at what policies have promoted economic growth; but if our metrics of performance are flawed, so too may be the inferences that we draw.’ (footnote 3)

The SEEA is a measurement framework that provides a range of metrics that link information on the economy and the environment. This integration of information is achieved by the use of common frameworks, classifications and standards, providing an integrated database for policy analysis and decision making. Appendix 1 provides a more complete discussion of the SEEA, including a detailed description of the features and uses of this framework, as well as a report on the current state of SEEA development and implementation.

This publication provides an overview of the various environmental accounts currently produced by the ABS. Chapter 1 provides a summary of ABS achievements in implementing various environmental accounts. It also highlights the application of ABS environmental accounts and, in particular, the capacity of this framework to integrate information across environmental, economic and social domains to support various analyses.

The following eight chapters relate to specific themes:

• Water (Chapter 2)
• Energy (Chapter 3)
• Waste (Chapter 4)
• Greenhouse Gas Emissions (Chapter 5)
• Land and Ecosystem Accounting (Chapter 6)
• Natural Capital (Chapter 7)
• Households and the Environment (Chapter 8)
• Environmental Instruments and Economic Opportunities (Chapter 9)

Each chapter can be read as a stand-alone chapter and hence there may be some overlap in the data presented. For ease of reading, chapters 2 to 9 do not contain large tables of data. Instead, a number of links to further reading are provided which identify more complete information on specific ABS environmental accounts. For example, links are provided to the ABS Water Account, Australia and ABS Energy Account, Australia, and to the natural resources appearing on the national balance sheet of the ASNA. In some cases, the information presented within ABS environmental accounts is labelled as ‘experimental’ - this is the case, for example, for estimates related to environmental taxes, waste and greenhouse gas emissions embedded in categories of final demand. The label ‘experimental’ explicitly acknowledges that the output is the product of recent development work and the results should be treated with some caution. Over time and as the data sources and methods improve the experimental labels should be removed.
Environmental accounts produced by the ABS

The ABS commenced compilation of environmental accounts in the early 1990s by developing monetary estimates for a number of environmental assets within scope of the SNA asset boundary. In particular, estimates for subsoil assets(footnote 4) ; forests and land were developed within the national accounts area of the ABS and these are now an established part of the balance sheet within the ASNA. A dedicated environmental accounts area provides continuing momentum for the development of these accounts within the ABS and other agencies.

Figure 1.1 summarises the range of ABS environmental accounts used in this information paper. It indicates, by environmental domain, the broad types of accounts used. Stock measures describe a particular item at a point in time, for example, the economically demonstrated reserves of coal resources as at 30 June 2012 measured in physical terms (e.g. tonnes or petajoules) and/or monetary terms ($ million). Flow measures record an item for a period of time, again, in physical and/or monetary terms, for example, gigalitres of water used by hydroelectric power producers, or millions of dollars paid by manufacturers for electricity, during 2011-12.

In addition to the stock and flow information summarised in figure 1.1, this information paper has used various ABS estimates of environmentally related transactions. These transactions are not stock or flow measures of natural resources but nevertheless relate closely to the environment and can be expressed in monetary terms only. This publication presents ABS estimates for a number of such transactions, in particular, environmental taxes, environmental research and development expenditure and capital expenditure undertaken to reduce GHG emissions to air.

Figure 1.1 summarises the current state of environmental accounts, as described in this information paper. For example, monetary estimates of flows of water and of energy have been produced by the ABS in the past but are excluded because they do not appear in the most recent editions of Water Account, Australia and Energy Account, Australia. Nevertheless, the ABS aims to include monetary estimates of flows as a standard part of future editions of these publications. Over time, the ABS aims to extend the range and frequency of stock and flow information (in both monetary and physical terms) identified in figure 1.1.

Figure 1.1 Summary of ABS environmental accounts
		Stock		Flow
	Frequency	Physical	Monetary	Physical	Monetary
Water(a)	Annual
Energy(b)	Annual
Natural Capital	Annual
Waste	First issue
GHG Emissions	Under development
Land	(c)Annual
(a) Monetary flow estimates for water products will be published late in 2013.
(b) Monetary flow estimates for use of energy products will be published late in 2013.
(c) The land account for a given state or territory is expected to be updated every 3 to 4 years.

Integrating Environmental and Socio-economic statisticsThe remainder of this chapter provides a brief demonstration of how the SEEA supports the integration of environmental and socio-economic information. A number of presentations are offered to demonstrate that environmental, economic and social data can be meaningfully integrated into a cohesive framework to provide analysts with an informed picture of Australia’s progress against various areas of policy interest.

The measures presented in this chapter draw upon a range of assessment tools, methodologies and research by various Australian government and international agencies. At present the data are compiled by a number of agencies for a variety of purposes using a range of concepts, data sources and methods. Typically, the data being used were designed for a particular purpose and possible uses beyond the original purpose have not been considered.

In this chapter various data have been combined and presented even though some of these data sets may not be strictly consistent at the present time. However, by mapping the available data into the SEEA framework, over time a more reliable, consistent and comprehensive set of data for measuring sustainable development, as well as other issues of interest to policy analysts and decision makers, can be achieved. The process of compiling the data for this and other chapters in this publication demonstrates how changes to the way data are collected, processed, presented or accessed could result in a capacity to produce an improved and/or expanded set of environmental accounts.

The notion of decoupling used throughout this information paper is consistent with that used by the environment programs of both the United Nations and the Organisation for Economic Co-operation and Development (OECD)(footnote 5) . Decoupling is a notion that is applied in many fields, from algebra to electronics, but applies here specifically to sustainable development, both to resource decoupling, which means reducing the rate of resource use per unit of economic activity; and impact decoupling, which means reducing the amount of negative environmental impact per unit of economic activity. Absolute decoupling is said to occur when, over time, the environmentally relevant variable remains stable or falls, while the relevant measure of economic activity is growing. Relative decoupling occurs when the growth rate of the environmentally relevant variable is positive, but is less than the growth rate of the economic variable.

In figure 1.2 below, the growth index for ‘environment factor 1’ exceeds that of the measure of economic growth and no decoupling occurs. ‘Environment factor 2’ records growth over the time series, but at a lesser rate than for economic growth and so decoupling is said to be relative. The measure of ‘environment factor 3’ is reducing over time, while positive growth is recorded for economic growth and therefore decoupling is said to be absolute.

Figure 1.3 integrates selected socio-economic data with selected measures of environmental pressure.

All the selected indicators of environmental pressure recorded increases in pressure over the period 2002-03 to 2010-11; with the sole exception of water consumption. Net energy use rose 15%, while greenhouse gas (GHG) emissions(footnote 6) increased by 9%. Of the selected indicators, waste recorded by far the largest increase over the period, rising 68%. In contrast, water consumption in Australia recorded a fall of 34% between 2002-03 and 2010-11. Therefore, for the period 2002-03 to 2010-11, net energy use and GHG emissions both showed relative decoupling from economic growth; water use recorded an absolute decoupling from economic growth; and waste recorded no decoupling.

Figure 1.4 plots changes in selected intensity measures of environmental pressure in Australia. In this instance, intensity is expressed in terms of population, so that an increase in intensity represents an increase (or worsening) in measured environmental pressure per head of population. Between 2002-03 and 2010-11, Australia’s resident population grew approximately 12% to 22.3 million. Figure 1.4 reveals a close correlation between Australia's per capita GHG emissions and per capita energy use over the same period(footnote 7) . This is unsurprising, given that the majority of Australia's GHG emissions can be attributed to energy production from fossil fuels.

The level of waste generated per capita recorded the largest increase of any of the selected measures of environmental pressure per capita over the period, rising by over 50%. In 2010-11, 73% of waste generated came from industry, with the remainder coming from the household sector.

Per capita water use was the only selected indicator to record a fall between 2002-02 and 2010-11. Drought conditions of much over the period, led to restrictions on domestic water use, as well as a shift towards less water intensive crops by the agriculture industry.

Figure 1.5 focuses on Australian industry (i.e. it excludes energy, water, etc. used by households) and compares employment with various measures of intensity of use of environmental resources. In this case, the intensity measure represents the amount of a given resource consumed (or emissions generated) to produce one unit of economic production, i.e. gross domestic product (GDP). An increase in intensity therefore represents a decline in the efficiency of resource use.

Between 2002-03 and 2010-11, Australia’s economic production as measured by GDP grew 27%, while the total number of people employed across all industries in Australia rose 12%. The decreasing trend in the intensities of energy and GHG emissions over the same period, were closely correlated, falling 7% and 12% respectively(footnote 8) . Of the selected measures of intensity, the level of water consumed per unit of economic production recorded the largest fall between 2002-03 and 2010-11, decreasing by almost 50%. The majority of the decline can be explained by a sharp fall in water consumed by the agriculture industry, which remains that the biggest consumer of water of any industry in Australia.

Environmental accounts can be used to jointly examine economic and environmental aspects of various issues for particular industries. The following provides examples for selected industries.


Agriculture

Figure 1.6 reports that energy intensity within the agriculture industry declined by 18% between 2002-03 and 2010-11. While economic production as measured by gross value added (GVA), within the agriculture industry grew by some 50%, its energy consumption rose 23%. Unlike most industries, agricultural energy consumption and output are not closely coupled. While energy consumption by the agriculture industry is relatively stable from year to year, shifts in weather conditions and prices can impact dramatically on the value of production in a given year, which explains the typically volatile time series of measured energy intensity seen for this industry.

Water intensity for the agriculture industry recorded a significant fall between 2002-03 and 2010-11, decreasing by 64%. Australian irrigators are highly responsive to changing patterns of water availability, for example, crops that require greater quantities of water to ensure production, like cotton and rice, are grown in lesser quantities in dry years. Furthermore, as figure 1.6 shows, the decline in total use of water by the agriculture industry has been accompanied by an increase in the GVA of agricultural production.


Mining

The value of economic production by the mining industry rose 26% between 2002-03 and 2010-11. This rise has also increased the industry's share of total economic production and in 2010-11 mining was the second largest industry in Australia(footnote 9) . Nevertheless, as figure 1.7 illustrates, growth in number of people employed by this industry has risen at a much faster rate than that recorded for GVA.

The measured intensities of water, energy and GHG emissions for the mining industry all increased between 2002-03 and 2010-11. Energy intensity rose 23%, with a number of factors contributing to this increase. Australia's mining industry is increasingly dominated by relatively low value (dollar per tonne) commodities, such as coal, iron ore and bauxite. This generally means that a greater level of energy is needed for extraction and processing than for commodities with higher unit values (e.g. more tonnes have to be removed in order to achieve the same value of production). This is partly due to the higher proportion of production now coming from open cut mines which require the removal of large quantities of overburden.

The recorded GHG emissions intensity remained largely unchanged between 2002-03 and 2010-11, while the intensity of water use rose by 16%. During this time water consumption by the mining industry increased by 47%.


Manufacturing

Integrating socio-economic data with measures of environmental pressure for the manufacturing industry reveals a mixed picture. Manufacturing, which has the highest energy intensity of any industry, recorded relatively little movement in energy intensity between 2002-3 and 2010-11. The value of economic production for the manufacturing industry was largely flat over the period. However, the manufacturing industry is diverse, consisting of many different processes with varying energy requirements. Changes in its energy intensity therefore depend heavily on changes in the structural makeup of the industry, in addition to changes in energy efficiency. For example, a shift away from basic primary processes towards less energy intensive transformations of primary materials would lead to a decline in overall energy intensity.

Figure 1.8 shows that, for the manufacturing industry, GHG intensity was largely consistent with energy intensity figures in recording little movement between 2002-03 and 2009-10. Water intensity for the manufacturing industry was the only measure of environmental pressure to rise over the period, increasing 14% in the eight years to 2010-11. The number of people employed by the manufacturing industry declined 8% over the same period.

1 Completing the Picture – Environmental Accounting in Practice, May 2012. (ABS cat. no. 4628.0.55.001) <back
2 Australian System of National Accounts, November 2012. (ABS cat. no. 5204.0) <back
3 Stiglizt, Sen and Fitoussi. 2009. Report of the Commission on the Measurement of Economic Performance and Social Progress. http://www.stiglitz–sen–fitoussi.fr/documents/rapport_anglais.pdf. <back
4 SNA’s 'subsoil assets' fall within the SEEA category of 'mineral and energy resources' <back
5 http://www.unep.org/resourcepanel/decoupling/files/pdf/Decoupling_Factsheet_English.pdf; http://www.oecd.org/environment/indicators–modelling–outlooks/1933638.pdf <back
6 GHG emissions data are sourced from the Department of Climate Change and Energy Efficiency (DCCEE) and then adjusted onto a SEEA basis in order to ensure full comparability with the ASNA and related economic data. Chapter 5 provides a more complete explanation <back
7 DCCEE GHG emissions data are only available to 2009–10 <back
8 Period ending 2009–10 <back
9 According to relative size of gross value added by industry, current prices (ABS cat. no. 5204.0) <back