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CHAPTER 7- GREEN GROWTH
DEFINING AND MEASURING GREEN GROWTH
The terms green growth and green economy have been used in a variety of ways and there remains some confusion about their definition. Internationally, the term green growth has been defined by the OECD:
'Green growth is about fostering economic growth and development while ensuring that the quality and quantity of natural assets can continue to provide the environmental services on which our well-being relies. It is also about fostering investment, competition and innovation which will underpin sustained growth and give rise to new economic opportunities'(footnote 1) .
Similarly the United Nations Environment Program (UNEP) defines a green economy as:
'An economy that results in improved human well-being and reduced inequalities over the long term, while not exposing future generations to significant environmental risks and ecological scarcities. It is characterised by substantially increased investments in economic sectors that build on and enhance the earth's natural capital or reduce ecological scarcities and environmental risks. These investments and policy reforms provide the mechanisms and the financing for the reconfiguration of businesses, infrastructure and institutions and the adoption of sustainable consumption and production processes. Such reconfiguration leads to a higher share of green sectors contributing to GDP, greener jobs, lower energy and resource intensive production, lower waste and pollution and significantly lower greenhouse gas emissions.'(footnote 2)
The conceptual underpinnings of both initiatives are similar, but there are some differences, particularly in emphasis, between the two.
This can be seen in UNEP's focus on defining "green sectors" of the economy, with a selection of industrial processes (e.g. those using less energy) and the production of particular goods (e.g. solar panels) identified as green. The separate identification of these activities allows the contribution of "green sectors" to the economy to be measured.
In defining the terms green growth and green economy the need for better information on the environment and its relationship with the economy to support policy development and to monitor progress has been highlighted. Both the UNEP and OECD advocate the wider use of environmental accounting for such measurement. The OECD explicitly says that measurement efforts should, where possible, be directly derived from the SEEA framework(footnote 3) .
The SEEA has a number of accounts that can be used to monitor green growth. The first are the natural resource accounts, which show the availability and use of natural resources, such as water, minerals and fossil fuels, and how this use varies over time and between different industries. Examples of this are presented later in the chapter.
The second type of account focuses on the production and use of goods and services in the economy that can be defined as being for the purpose of environmental protection or natural resource management or "green". The two accounts that can be used for measuring this are the Environmental Protection Expenditure Account (EPEA) and the Environmental Goods and Services Sector account.
The environmental goods and services sector account identifies the producers of a suite of goods and services that are defined as being for environmental purposes. Examples of these goods and services could include wastewater treatment, photovoltaic cells, recycled paper, water saving devices (e.g. dual flush toilets and reduced flow shower heads) and public transport systems. The producers of these goods and services form the "environment" industry and the contribution of this industry to the economy, for example gross domestic product, can be calculated. This type of approach is in line with the UNEP's notion of a "green" sector.
Environmental protection and resource management expenditures represent the use of all goods and services for the purposes of environmental protection. This includes the goods produced by the environmental goods and services sector, but also includes other goods and services which were not primarily produced for environmental protection, but which are used for this purpose. For example, the value of wire used to fence an environmentally sensitive area (e.g. river bank) would be counted in the environmental protection expenditure account as this is the purpose for which is was used. However, it would not be counted in the environmental goods and services sector account as the wire itself is not an environmental good.
Neither environmental protection expenditure accounts or an environmental goods and services sector account are produced by the Australian Bureau of Statistics (ABS) at present. Environmental protection accounts were produced in the past(footnote 4) (footnote 5) , and the ABS is currently investigating if it is possible to create these again.
The remainder of the chapter presents data for the indicators of green growth based on those suggested by the OECD. Additional indicators from environmental accounts and other data sources are also possible and a few of these have been identified and added. For example, measures of natural resource use efficiency, and expenditure on environmental research and development.
The themes identified by the OECD Green Growth strategy are separated into four dimensions, namely: environmental efficiency; natural resource base; environmental quality; and policy response and economic opportunities. These four dimensions are used to structure the remainder of the chapter.
Greenhouse gas emissions
For the Australian economy, direct greenhouse gas emissions' (GHG) rose by 33% between 1990 and 2009. Over the same period, the economic performance of the economy as measured by Gross Domestic Product (GDP) rose sharply, recording an increase of 83%. As a result, GHG intensity fell by approximately 28% between 1990 and 2009.
Total direct greenhouse gas emissions refer to emissions generated from sources within the boundary of, and as a result of, the reporting organisations' activities(footnote 6) . Emissions are reported under the Kyoto accounting rules and exclude net CO2 emissions from land use, land use change and forestry (LULUCF)(footnote 7) .
Greenhouse gas emissions' intensity is calculated by dividing total GHG emissions by annual GVA. It measures greenhouse gases in gigagrams (Gg) emitted to produce one unit of economic output.
Emissions are categorised based on the Intergovernmental Panel on Climate Change (IPCC) approach. The method attributes emissions to countries according to where the emissions physically occurred. This is known as the territory approach. An alternative approach is the residence approach, which is used in the SEEA and System of National Accounts (SNA). In the residence approach emissions are attributed to the country where the economic owner of the unit making the emissions is resident. For example, emissions by aircraft owned by an Australian company but located in another country would be attributed to Australia in the residence approach, but to the other country in the territory approach. This example also highlights two other differences between the Kyoto accounting and the SEEA accounting approaches.
Firstly, international transport is excluded from Kyoto accounting, but included in the SEEA. Secondly emissions from transport are defined on an activity basis in Kyoto accounting, but an industry basis in the SEEA. As an example, emissions from trucks owned by manufacturers and used for distributing products would be attributed to transport in the Kyoto approach, but would be attributed to the manufacturing industry in the SEEA. These differences may be small, but they mean that direct comparison of economic data for industries from the SNA cannot strictly be made with the data from Kyoto based reporting.
The ABS is working with Department of Climate Change and Energy Efficiency, and other data producers and data users to overcome this discrepancy via the production of a SEEA greenhouse gas emission account to bridge between the System of National Accounts (SNA) and the Kyoto accounting approach.
The energy intensity of an industry is the energy consumed to produce one unit of economic output. Energy intensity is measured in petajoules of energy consumed per million dollars of Gross Value Added(footnote 8) (GVA). A decline in energy intensity is viewed as an improvement, as it indicates that less energy is used per unit of GVA.
Since the early 1990s, growth in energy consumption by industry has remained below the rate of economic growth. Over the period 1989-90 to 2008-09, energy consumption by industry grew 39%. In comparison, economic growth as measured by GVA grew by 84%. The 24% decline in the ratio of energy consumption to economic activity in the Australian economy during the 20 years to 2008-09 represents an improvement in energy intensity.
The overall improvement in the energy intensity of Australian industry can be attributed to a number of factors. These include energy efficiency improvements associated with technological advancement as well as a structural change in the Australian economy towards less energy-intensive industries such as commercial and financial services.
Disaggregating the Australian economy into industries enables more comprehensive analysis. A high intensity figure does not necessarily imply that an industry is using energy inefficiently. By nature, most industries engaged in the physical transformation of raw materials will use more energy than service industries.
The direction and magnitude of change in energy intensity has varied between industries since the early 1990s. The majority of industries have recorded an improvement in energy intensity. The industries that showed the greatest improvement were Construction (70%) and Transport (21%). The energy intensity of the Mining, and the Water Supply and Waste industries increased between 1989-90 and 2008-09, with each recording rises of 48% and 64% respectively.
Manufacturing was the largest absolute consumer of energy over the period, followed by the Transport industry. Both of these industries recorded improvements in energy intensity over the period. Agriculture recorded a slight increase in the amount of energy it consumed per unit of economic production (2%), although its impact on the overall energy intensity of Australian industry was minimal since it was a relatively small consumer of energy.
Australia has abundant and diverse energy resources that supply domestic and world markets. Australia's total domestic primary energy supply was 5945 PJ, in 2009-10(footnote 9) . As Figure 7.4 shows, the majority of this (95%) came from non-renewable sources, with the remaining 5% sourced from renewables.
Between 1989-90 and 2009-10, net energy consumption(footnote 10) in Australia rose from 3946 PJ to 5945 PJ, an increase of 51%. The bulk of this rise was due to an increased use of fossil fuels, which rose from 3713 PJ to 5657 PJ or 52%. Energy from renewable sources also experienced an increase (23%), but its contribution to Australia's total net energy consumption remained largely unchanged at around 5%.
A large proportion of Australia's total primary energy supply is used in the production of electricity. In 2009-10, 8% of electricity generated in Australia came from renewable sources (see Figure 7.6).
Hydro-power is by far the largest renewable energy source used to generate electricity in Australia, contributing 64% of the total amount in 2009-10. Despite this, drought conditions through the mid-to-late 2000s resulted in a fall in the amount of hydro-electric energy produced, dropping to 45 PJ in 2009-10 compared to an average of 58 PJ from 1989-90 to 1999-2000. In 2009-10 wind power overtook biofuels and biomasse to become the second largest renewable energy source for electricity generation contributing 24%.
The location of renewable energy facilities in Australia reflects the climatic characteristics of different regions. Hydroelectricity capacity in Australia is mostly located in New South Wales, Tasmania and Victoria. Wind farms are most common in South Australia and Victoria. Almost all bagasse fuelled energy production facilities are located in Queensland, where sugar is grown and the refining plants are located.
The Agricultural industry is the largest consumer of water in Australia, representing 60% of all water consumed by industry in 2009-10. Water consumption by Agriculture fell significantly between 1996-97 and 2009-10 declining 55%. Some of the fall is explained by drought conditions through the early-to-mid 2000s. While water consumption by other industries also fell slightly over the same period (-5%), the value of agricultural production did not fall by the same amount, meaning an increase in agricultural water use efficiency from an economic point of view. This could be an example of Agriculture's relatively higher level of elasticity to water availability, as farmers move to less water intensive products in reaction to strained water supplies (e.g. in dry years they do not grow cotton or rice).
Water intensity is a measure of the water consumed to produce one unit of economic output. It is calculated by dividing total water consumption by Industry Gross Value Added (GL/$m IGVA). A decline in water intensity is an improvement in water efficiency. The number of GL required by the Agriculture industry to produce one unit of economic output fell by 66% between 1996-97 and 2009-10 to 0.29 GL. The water intensity of all other industries also declined over the period, although to a lesser extent, recording a fall of 39%.
Water consumption by households posted an increase of 25% between 1996-97 and 2000-01, but severe drought conditions through the early-to-mid 2000s meant that household water consumption fell, decreasing 18% between 2000-01 and 2009-10.
Household water intensity is a measure of the water consumed annually per head of population. Australia's population grew 20% between 1996-97 and 2009-10 to reach 22.2 million people. In this same period the water intensity of Australian households fell 15%, meaning less water was needed for households per head of population in 2009-10 than in 1996-97.
Water consumption in the Australian economy needs to be viewed in the context of Australia's climate. Mean annual rainfall in Australia varies substantially across the continent. Large areas of the country have annual rainfall levels comparable with Europe and North America. However, a key feature of Australia's rainfall is its variability from year-to-year, season-to-season and region-to-region. Annual rainfall variability for Australia is greater than in any other continental region (Smith, 1998). Across the country as a whole, rainfall in 2001-02 and 2004-05 was significantly less than 1999-2000 and 2009-10; 2001-02 in particular recorded less than half the levels of the higher rainfall years. The below average rainfall through the early-to-mid 2000s also led to drought conditions in some parts of Australia, the consequences of which included urban water restrictions and reduced availability of water for irrigators.
Between 1996-97 and 2006-07, the volume of waste produced per person in Australia grew at an average annual rate of 5.4%. Australians generated approximately 1,200kg of waste per person in 1996-97 and this increased to 2,100kg per person in 2006-07.
The day-to-day management of waste is primarily the responsibility of the state, territory and local governments. The role of the Australian Government in waste management has evolved in recent years and it is now increasingly engaged in national waste policy development. A particular focus is on developing harmonised national approaches for significant waste issues, which provide cost effective, fit for purpose solutions.
Landfills can have impacts on air, water and land quality. Emissions of gas (mainly the greenhouse gas methane) from landfill sites are caused by decomposing organic waste. Water moving through landfill waste has the potential to contaminate nearby surface and ground water. Potentially hazardous substances can also be transported by water or air to the surrounding soil.
INTEGRATING ENVIRONMENT AND SOCIO-ECONOMIC MEASURES
Figure 7.13 integrates readily available socio-economic data with some measures of environmental pressure. The socio-economic data used is population and GVA(footnote 11) . Indicators of environmental pressure are greenhouse gas emissions, water consumption, energy consumption, and waste production. The water and energy data are drawn from the ABS environmental accounts and the greenhouse gas emissions' data are from the Department of Climate Change and Energy Efficiency.
Australia's economic production as measured by GVA rose by 51% over the period. At the same time, the measures of environmental pressure all increased, with the exception of water consumption. Energy consumption rose 21%, greenhouse gas emissions increased 19% and waste production(footnote 12) by 93%. In contrast, water consumed by industry experienced a notable fall of 43% over the period, which can be partly explained by the reduction in the availability of water due to natural events (i.e. the drought).
Figure 7.14 charts the change in a given measure of environmental pressure per unit of economic production (GVA). It illustrates a close correlation between Australia's greenhouse gas emissions' intensity and energy intensity. This is unsurprising, given that the majority of Australia's emissions can be attributed to energy production from fossil fuels.
Waste intensity was the only measure of environmental pressure to increase over the period (35%). International evidence suggests that economic growth contributes to growth in waste generated per person(footnote 13) . Australians are among the highest users of new technology, and waste from obsolete electronic goods (e-waste) is one of the fastest growing types of waste(footnote 14) .
Specific industries - Mining
Environmental accounts can be used to examine the economic and environmental aspects of particular industries. As an example of this we present in brief some information for the mining industry. Similar information is available for other industries (e.g. the agriculture, manufacturing, transport).
Figure 7.15 looks at the relationship between several economic and environmental measures not the mining industry.
Economic growth in mining, as measured by IGVA, has risen steadily between 1997 and 2009 from $65bn to $91bn. The mining industry's portion of total GVA rose to represent 8.4% in 2009. Mining is now the third largest industry in Australia. The increase has been accompanied by a larger rise in the number of employed persons working in the industry, from 86,000 in 1990 to 170,000 in 2009.
The environmental measures for the mining industry present a mixed picture. The energy consumed per unit of economic production (energy intensity) has risen by 26% since 1997. A number of factors contribute to the increase. Firstly, Australia's mining industry is increasingly dominated by relatively low value (dollar per tonne) commodities, such as coal, iron ore and bauxite. This requires a greater level of energy for extraction and processing than commodities with higher unit values (e.g. more tonnes have to be removed in order to achieve the same value of sales). Part of this is due to the higher proportion of production coming from open cut mines, which require the removal of large quantities of overburden to expose the commodity. Greenhouse gas emissions intensity has remained largely unchanged between 1997 and 2009. The intensity of water consumption initially fell between 1997 and 2001, but remained largely unchanged thereafter.
THE NATURAL RESOURCE BASE
The total area for hard wood (broad-leaved) and soft wood (coniferous) plantations almost doubled to reach 2 million hectares between 1994 and 2010. As Figure 7.16 shows, the majority of this change was due to the expansion in the area of broadleaved plantations. Between 1994 and 2000 hard wood timber plantation areas increased from 159,000 hectares to 973,000 hectares. The area of soft wood plantations remained relatively stable. A fall in price led to the market value of Australia's soft wood resource falling by 45% between 1994 and 2010.
Australia has the world's third largest economic exclusion zone covering 11 million square kilometres. Figure 7.18 summarises biological and economic information for Australia's wild fish stocks, species or groups of species (all referred to as 'stocks' hereafter) during the period of 1992-2009. The number of stocks assessed increased considerably over the period, starting at 56 in 1992 to 101 in 2009. Fish stocks are classified into categories: not overfished or subject to overfishing, overfished and subject to overfishing, and uncertain statuses, with reference to their respective biomass(footnote 15) .
The number of overfished stocks peaked at 19 (or approximately 30% of the total number of stocks) in 2005. This was followed by a recovery in the number of fish stocks 'not overfished' to 56 in 2009. The number of stocks classified as uncertain fell from 1999 onwards and 22 stocks were removed from the uncertain status between 2007 and 2009.
Australia has abundant energy resources. The country holds an estimated 38% of world uranium resources, 9% of the coal stocks and 2% of the planet's natural gas resources(footnote 16) .
In terms of economically demonstrated resources (EDR)(footnote 17) , Australia's largest energy stocks by value in 2011, are black coal ($145 b), followed by natural gas ($124 b) and uranium ($3.1 b). Figures 7.19 to 7.24 show the trend in the economically demonstrated reserves of black coal, uranium and natural gas resources in Australia. The series profiles physical volumes with economic values(footnote 18) .
The economic value of the stock of black coal more than doubled during the period 1998 to 2011, from $67 b to $145 b. This is largely as a result of price increases.
As at the end of 2008, Australia had 6% of the world's recoverable black coal EDR and ranks sixth behind the United States of America (31%), Russia (21%), China (13%), India (8%) and South Africa (7%).
Black coal is primarily used for electricity generation and the production of coke, which is integral to the production of iron and steel. Black coal is also used as a source of heat in the manufacture of cement and food processing.
Australia has the world's largest economically demonstrated stocks of uranium and is the third largest producer of uranium internationally. Between 1998 and 2001, the value of Australia's uranium deposits increased from $1.81 b to $3.1b. This was driven by rising market prices and new EDR discoveries.
Major uses for uranium are as fuel in nuclear power reactors to generate electricity, in the manufacture of radioisotopes for medical applications and in nuclear science research using neutrons from reactors.
Australia has significant gas resources, and it represents the country's third largest energy resource after coal and uranium (Geoscience Australia, 2010).
The economically demonstrated volume of natural gas in Australia was around 3000 billion cubic metres in 2011. At current production rates, there are sufficient gas resources to last 86 years.
Australia has about 0.3 per cent of world petroleum reserves. Most of Australia's petroleum resources are condensate and liquefied petroleum gas (LPG) associated with offshore gas fields. In 2011, Australia's identified petroleum resources were made up of 340 GL of condensate, 147 GL of crude oil and 151 GL of LPG.
Australia's resources of crude oil represent a small proportion of world resources (less than 5%). Stocks of crude oil decreased between 1995 and 2011. The value of this resource peaked in 1995 at around $76 b in 1995 and declined afterwards to be $42 b in 2011.
Australian condensate resources were around 340 GL in 2011. The value of condesate stocks increased from $20bn in 1997 to reach $39bn in 2011.
Domestic stocks of liquefied petroleum gas (LPG) rose from 87 GL in 1985 to 156 GL in 2011.
Air quality in Australia is assessed using national ambient air quality standards, which are set for pollutants in the National Environment Protection Measure (NEPM). The Air Quality Index (AQI) rates air quality using these standards and categorises air quality in different areas from the highest 'Very Good' and the lowest rating 'Very Poor'(footnote 19) .
Ozone is one of five gases commonly used by governments internationally to test air pollution. Ozone levels in the state capitals profiled remained largely stable over the assessment period. Occasionally peak ozone levels approached or exceeded the national standards in some Australian cities.
Sydney generally experienced higher ozone levels than other major cities in Australia. Levels exceeded the NEPM standards in most years during the assessment period meaning Sydney generally achieved a poor AQI rating for peak ozone concentrations.
Other cities only occasionally experienced ozone levels close to or exceeding the NEPM standard. These cities largely achieved a good to fair AQI ratings, but Melbourne achieved a poor AQI rating in some years.
POLICY RESPONSE AND ECONOMIC OPPORTUNITIES
Environmental research and development
Gross expenditure (investment) on environmental research and development (R&D) as a percentage of total gross expenditure within all sectors of the Australian economy fell from 7% in 1992-93 to 5% in 2008-09. In absolute terms, however, investment in environmental R&D has recorded a steady rise over the same period, with spending by government (both commonwealth, and state and territory) increasing by over two and a half times and investment by business jumping by over 400%. Spending by other institutions (higher education and non-profit organisations) also rose sharply increasing by over 400% between 1992-93 and 2008-09.
Australian authorities have provided broad based support for R&D, notably through tax breaks, which have proved beneficial to environmental R&D investment. In May 2007, the Australian government further boosted R&D investment with a 10-year, $1.4 b package. The initiative was particularly supportive of environmental research, due to the government's focus on helping the country's industries become more sustainable, and with it more internationally competitive.
The main areas of environmental R&D included environmental policy frameworks, and environmental knowledge and management of the environment. Another element of R&D in the area relates to environmental protection expenditure (EPE). EPE is spending, mainly by companies, where the primary aim is to decrease damage to the environment. This includes expenditure to reduce or prevent emissions to air or water, to dispose of waste materials, to protect soil and groundwater, to prevent noise and vibration, or to protect the natural environment.
A significant by-product of waste disposal is gas emissions into the atmosphere. When organic waste decomposes in landfills, it releases methane and other greenhouse gases, contributing to climate change. Similarly, greenhouse gases can also be emitted during the treatment and processing of wastewater and sewage, or during the incineration of waste.
Recent years have seen significant declines in the total volume of greenhouse gases emitted by the waste sector. Between 1990 and 2008, net emissions from the waste sector declined by 20%. The waste sector's contribution to Australia's total greenhouse gas inventory has also declined, from 4.3% in 1990 to 2.6% in 2008(footnote 20) .
Declines in waste emissions have been largely due to increases in the volume of greenhouse gases captured at Australia's landfills. In 1990, less than one per cent of all landfill emissions were recovered. By 2008, this figure had increased to 28%. During this same period, the total volume of emissions being generated at Australian landfills only experienced a moderate increase (8%). Consequently, net emissions from Australian landfills have fallen by 22% between 1990 and 2008 (from 14.2 million tonnes of carbon dioxide equivalent emissions to 11.1 million tonnes).
Gas captured at Australian landfills can be utilised for many different purposes. Most is used as a fuel for electricity generation, but it can also be used to fuel nearby industrial facilities, or purified and sold to gas providers.
1 OECD, 2011. Towards green growth: Monitoring Progress. OECD Indicators <back
2 UNEP, 2011. Green Economy Report. <back
3 OECD, 2011. Towards green growth: Monitoring Progress. OECD Indicators <back
4 ABS, 2002. Environment Protection, Mining and Manufacturing Industries, Australia, 2000–01, (cat. no. 4603.0). <back
5 ABS, 2004. Environment Expenditure, Local Government, Australia, 2002–03, (cat. no. 4611.0). <back
6 The National Inventory accounts for emissions from electricity at the point where the emissions occur, which means the power station where electricity is produced, not the point where the electricity is used. Therefore, emissions associated with electricity used in the industry, residential and commercial sectors are included under energy production. <back
7 While the exclusion of LULUCF removes the majority of sink categories from the data, it should be noted that net emissions are reported for the waste sector when accounting for methane captured. <back
8 ABS gross value added is sourced from the Australian System of National Accounts (ASNA) and is based on the Australian and New Zealand Standard Industrial Classification (ANZSIC ) 2006. <back
9 Figure includes imports. <back
10 Total net energy consumption is equal to total primary energy supply at an aggregated level. As such, total net energy consumption and total primary energy supply are used interchangeably. <back
11 GVA used in place of GDP to ensure consistency with other datasets such as the intensity measures, which use GVA in their composition. <back
12 Waste data recorded over four periods (1997, 2000, 2003 2007) from 1997 to 2007. <back
13 Productivity Commission, 2006, Inquiry Report No. 38. <back
14 ABS, 2010, Measures of Australia's Progress, Waste generated per person. <back
15 Not overfished: The stock's biomass is deemed adequate to sustain the stock in the long term; Overfished: The stock's biomass may be inadequate to sustain the stock in the long term; Uncertain: There is an inadequate level of stock specific information for which to determine a status. <back
16 Geoscience, Oil and Gas Resources of Australia (OGRA) Report 2009. <back
17 EDR is a measure of the resources that are established, analytically demonstrated or assumed with reasonable certainty to be profitable for extraction or production under defined investment assumptions. Classifying a mineral resource as EDR reflects a high degree of certainty as to the size and quality of the resource and its economic viability. <back
18 Economic value is determined using NPV of future cash–flows from the resource. This approach values value to asset as a whole, in terms of the EDRs, production, cost including normal return to capital, mine production and so on. <back
19 Very Good if pollution levels are less than a third of the standard; Good if levels are between one–third and two–thirds of the standard; Fair if levels are between two–thirds and 99 per cent of the standard; and Poor to Very Poor if levels are 100 per cent of the standard or more. <back
20 Department of Climate Change and Energy Efficiency, National greenhouse gas inventory, May 2010. <back
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