FEATURE ARTICLE: TOWARDS AN ENVIRONMENTAL EXPENDITURE ACCOUNT


INTRODUCTION

An Environmental Expenditure Account (EEA) describes 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 System of Environmental-Economic Accounting 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.


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).


Australian Environmental Expenditure Accounts (EEA) - what would they cover?

This article explores the compilation of selected environmental protection and natural resource management transactions for Australia, utilising the SEEA framework for compiling EPE accounts.

Data presented are considered experimental, and are used to illustrate the type of information that can be derived from a suite of environmental expenditure accounts such as those described in the SEEA Central Framework. Estimates have been compiled to align conceptually 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 production of environmental services may be broken down to present output by type of environmental service supplied or by the type of producer (Graph 1).

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 Goods 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.

National expenditure on, and financing of, environmental goods and services 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 or purchasing environmental goods and services (Graph 4), and which units are financing these expenditures (Graph 5). For a full list of the statistics contained in this articles refer to: Discussion paper: Towards an Environmental Expenditure Account, Australia, August 2014 (cat. no. 4603.0.55.001).


RESULTS

Production of Environmental Services, Australia

The output of environmental-specific services by the type of environmental service being supplied 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 $31.9b. Solid waste management ($10.4b, almost 33% of the total) and Waste water management ($6.1b, or 19% of the total) are the largest environmental services supplied to the economy.

Other environmental domains separately identified were services for Air and climate protection ($3.1b), Water management ($2.3b) and environmental Research and Development ($2.9b). A further $7.1b 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.

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 1). Waste and Waste water 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.



Use of Environmental Services, Australia

Three-quarters 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 accounting for around 30% of environmental services consumed by manufacturing). Mining expenditure was primarily on Other environmental protection and natural resource management (64% of the mining total), and the construction industry consumed primarily Solid waste management services (47% of the construction total), and Other environmental protection and natural resource management (37% of the construction total). Households and general government as final consumers were the largest consumers of Waste water management services (68% of the 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 information and graph 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 (Graph 2 below) broadens 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 the Australian 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 or minimise their impacts on the environment ($14.1b).

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

Households and Non-profit institutions serving households spent $6.3b 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 section draws on the National Expenditure tables to show the financing of national expenditure on environmental protection and natural resource management.

Graph 3 takes into account transfers such as grants and subsidies between economic units to present the financing of national expenditure on environmental protection and natural resource management.

Australian industry financed over three-quarters ($27.5b or 77%) of the expenditure on goods and services related to environmental protection and natural resource management. Households financed $6.1b, or around 17% of this expenditure, and government funded around 6%.



Future Work

This article presents experimental estimates to illustrate the potential of producing EEA for Australia, and highlights some statistics which may be derived from these estimates. These estimates are experimental and some information is based on partial estimates and modelled data. The statistics contained in this publication should be used as indicative only and for the purpose of understanding the type of information that can be produced.

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 Added (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.