/ EUROPEAN COMMISSION
EUROSTAT
Directorate E: Sectoral and regional statistics
Unit E2: Environmental accounts and climate change /
Background document
Background document:
Document on environmental activity and expenditure classifications as presented at the meeting of the Task Forces on environmental transfers and on RUMEA (18-20 October 2011 in Stockholm)
Eurostat – Unit E2
Subgroup on environmental activity and expenditure classifications
(Subgroup of the Task Forces on environmental transfers and on RUMEA)
Meeting of 1-2 March 2012
Luxembourg, Room BECH A2/139
/ EUROPEAN COMMISSION
EUROSTAT
Directorate E: Sectoral and regional statistics
Unit E7: Environmental accounts and climate change /
Doc. ENV/ERT-RUMEA/TF/04 (2011)
Task forces on environmental transfers and on RUMEA
Classifications of activities and expenditure related to environmental protection, resource management and resource use
Eurostat – Unit E7
Task Forces on environmental transfer and on RUMEA
of the Working Group on
Environmental expenditure statistics
Meeting of 19 October 2011
Stockholm

1. Background

This document gives an overview of the current situation regarding a number of functional classifications related to the environment that are relevant for monetary environmental accounting. It lists a series of possible issues for discussion at the TF meeting and has as objective to get comments on outstanding issues. The classifications covered are:

  • Classification of environmental protection activities and expenditure(CEPA 2000)
  • Classification of resource management activities and expenditure (CReMA 2008)
  • Classification of resource use and management activities and expenditure (CRUMA – latest London Group draft of 2010[1])
  • Classification of environmental activities (CEA – latest draft of May 2011[2])

The CEPA 2000(or CEPA for short) is a generic, multi-purpose, functional classification for environmental protection (EP). It is used forclassifying activities but also products, actual outlays (expenditure) and other transactions. Theclassification unit is often determined by the units of the primary data sources that are being classified andby the presentation formats used for results. For example, the analysis of government budgets andaccounts requires the coding of items of government environmental protection expenditure into CEPA.Some of these expenditure items will be transfers such as subsidies or investment grants whereas otherswill be inputs into an environmental protection activity (e.g., wages and salaries). The compilation ofenvironmental expenditure accounts requires determining environmental protection activities and theiroutput of environmental protection services by categories of CEPA.

CEPA is designed to classify transactions and activities whose primary purpose is EP.The use and management of natural resources (e.g., water supply) and the prevention of natural hazards (landslides,floods, etc.) are not included in CEPA.

The CReMA 2008 is based on a 2007 version of the CRUMA developed by Istat and currently adopted in Italy[3]. It includes only the resource management (RM) part of CRUMA and has been developed within the European Statistical System for compiling statistics on the environmental goods and services sector (EGSS). The CReMA is presented in Annex 1.

The CReMA has been developed consistently with the SERIEE framework and the structure and classification principles of the CEPA. Categories are built complementarily with CEPA and without any overlapping with CEPA classes.As the CReMA has been developed in 2008 by the TF on the EGSS, it does not reflect the subsequent changes to the 2007 draft version of the CRUMA and the CEA.

The CRUMA covers both RM and resource use (RU). It has been accepted by the London Group in April 2009 and was submitted to the United Nations Expert Group on International economic and social classifications in September 2009. The UN Expert Group asked a few changes that have been incorporated – as part of the process of revision of the 2003 SEEA - in the Outcome paper on Natural resource use and management expenditure accounts[4].

At the May 2011meeting of the UN Expert group a draft of the Classification of Environmental Activities (CEA) was presented as an information paper[5]. The CEA consists of the CEPA and of the CRUMA where the CRUMA has been separated into two main areas, one for RM and one for RU. The RM part of the latest version of CEA is not identical to the CReMA. See Annex 2 for a summary overview of the draft CEA.

For a correspondence table showing the relation among these 4 classifications please see Annex 3. The CEA is currently being discussed within the context of the SEEA 2003 revision[6]. A draft version of the CEA (a reordered version of the one presented to the UN Expert group in 2011) was included in the draft Chapter 4 (Monetary flow accounts) which was subject to a global consultation process in June-July 2011.[7] A number of countries and international organisations (including Eurostat) commented that e.g. high sea fishing, copper mining or crude oil extraction should not be put within a classification entitled 'environmental activities'. Rather, such a classification should include only activities that were beneficial for the environment. At the 17th meeting of the London Group in Stockholm on 12-15 September 2011, the idea to remove RU from the CEA received further support. There was also some discussion at this meeting about the restriction of RM to only non-produced natural resources (e.g. only natural forests are covered whereas cultivated forests are excluded).

Within the EU, the EP and RM parts are of most relevance and where agreed high quality classifications are needed for regular production of statistics. A classification for RU is needed for the work on the RUMEA.

2. Issues for possible discussion at the TF meeting

No standard international classification for RM and RU is available as yet

At present only the CEPA is an internationally agreed classification. In the area of RM and RU developments are still ongoing.

Question to the TF: How urgent is it to complete these developments for EU purposes and what would be needed first (e.g. in terms of RU and/or RM, in terms of natural assets to be covered, in terms of activities to be covered)?

CReMA versus RM part of CEA (and the need to update CReMA)

CReMA was built at an earlier stage than the current draft CRUMA and CEA. Annex 3 presents among others, a correspondence table between the CReMA and the RM as reflected in CEA. In general CReMA is identical with the CEA, except that CReMA groups 10, 12, 14, 15 and 16 do not include any breakdown of the main groups into classes, but only a first level heading. On the other hand, the CReMA has main headings for the important areas of energy saving and of renewable energy. Specifically, the differences between the two classifications are:

  • name and breakdown of CReMA/CEA group 11:
  • CReMA 11 is called 'management of forest resources' and is formed of two classes: management of forest areas and minimisation of the intake of forest resources.
  • CEA group 11 is called 'management of natural forest resources' and is formed of the following six classes: reduction of the intake of natural forest resources (class 11.1); reduction of the consumption of forest (wood and non-wood)-related products (class 11.2); reforestation and afforestation (class 11.3); forest fires (class 11.4); measurement, control, laboratories and the like related to natural forest resources (class 11.5); other activities for the management of natural forest resources (class 11.6).
  • name, breakdown and coverage of CReMA/CEA group 13:
  • CReMA 13 is called 'management of energy resources' and is formed of three classes: production of energy from renewable sources, heat/energy saving and management and minimisation of the intake of fossil resources for raw materials for uses other than energy.
  • CEA group 13 is named 'management of fossil energy' and is formed of the following four classes: reduction of the intake of fossil energy (class 13.1); reduction of heat and energy losses, and energy saving (class 13.2); measurement, control, laboratories and the like related to fossil energy (class 13.3); and other activities for the management of fossil energy (class 13.4).
  • In CReMA, the production of energy from renewable sources is always classified in group 13, while in CEA it is classified according to its main purpose and therefore it can belong to either CEPA 1 (as long as the main purpose is reducing air pollution), or CEA 13 (as long as the main purpose is reduction of the intake of fossil energy resources)

Coverage of RM (and RU) is limited to non-produced assets

The limitation to only non-produced assets could be reviewed from two perspectives: the conceptual justification and usefulness; and the effects this limitation has on data collection.

The 1994 SERIEE manual states: “Only those natural resources corresponding to non-produced natural assets whose use takes the form of goods, are dealt with in the natural resource use and management account. Hence, produced natural resources (livestock, plants) are excluded as well as those environmental services which result from uses of certain functions of natural assets (assimilation of pollutants, aesthetic value, etc.)” (SERIEE 1994 §§ 10043-10045). This principle has been taken over into the CRUMA, the CReMA and the CEA.

So far the main justification and usefulness of this restriction relates to the need of controlling and contrasting the possible depletion of natural resources (first perspective). A similar need does not seem to exist for cultivated resources which, in principle, can be ‘continuously’ produced by the man.

Question to the TF: do you think there is any reason to enlarge the focus to produced natural assets?

Therefore, the RUMEA (and EGSS) where they follow the currentclassifications will comprise expenditure and activities related to the following resources:

  • timber resources, only natural forests are covered – cultivated forests are excluded. In the existing version of the classifications (CRUMA, CReMA) the IEEAF view of non-cultivated forests is adopted (as it was discussed at the TF meeting of Lisbon, 2010; see the table below).

Kinds of forests and classification adopted by the IEEAF Manual and CEPA/CRUMA

Kinds of forests and other wooded land / Classification adopted within IEEAF Manual and pilot applications / Classification proposed after pilot applications / CEPA/ CRUMA
available for wood supply: “Forests and other wooded land on which there are no legal, economic or technical restrictions on wood production”. / cultivated (including planted) forests, / (regularly) managed / Neither CEPA nor CRUMA
non-cultivated (natural) forests. / Over-mature (without any human intervention for e.g. 30 years) / CRUMA 11
not available for wood supply: “Forests and other wooded land on which there are legal, economic or technical restrictions on wood production” / protected forests, i.e. forest with severe legal restriction on wood production (e.g. national parks, nature reserves and other protected areas such as those of special scientific, historical or cultural interest). / protected / CEPA 6
non-protected forests, i.e. forest where physical productivity is too low or harvesting and transportation costs are too high to warrant wood harvesting. / Not protected / CRUMA 11

Source: presentation at the TF meeting of Lisbon

  • fish resources, only wild fish is covered – aquaculture is excluded
  • other flora and fauna, only wild flora and fauna – cultivated plants and animals are excluded
  • energy resources, although the CEA class 13 is called 'Management of fossil energy', it includes all energy sources (see thereafter the discussion on activities and explanatory notes).
  • For minerals and for water, there are no limitations of coverage of this sort and all of the resources are included– including water in artificial reservoirs

Some problems could arise for translating the restriction related to non-produced natural assets into operational criteria for data collection (second perspective), i.e. how to separate activities and expenditure that relate to natural resources from those that relate to cultivated resources – see e.g. the case of forests above.

Question to the TF: Are there problems in the practical measurement (separation of activities and expenditure that relate to natural resources from those that relate to cultivated resources)?

Coverage of activities related to RM is not often clear from explanatory notes

The activities related to the management of these resources are described in the CEA, CReMA and CRUMA as follows:

  • activities aimed at reducing withdrawals of non-produced natural assets (recovery, reuse, recycling, saving or substitutions of resources),
  • replenishment activities: increases/ recharges of natural resource stocks (for renewable resources, i.e. inland waters, forest and wild flora and fauna)
  • administration and regulatory activities and in general activities of natural resource management authorities,
  • monitoring, control and surveillance, data collection and statistics,
  • R&D activities in the field of natural resource management, teaching, training, information and communication activities

The currently available explanatory notes (see Annexes4 and 5 for the explanatory notes to the CEA and CRUMA) are not entirely clear what activities and expenditure exactly should be included in RM and RU. The following are some examples of questions that could arise from the CEA/CRUMA explanatory notes. An answer for clarification purposes follows each question:

  • Management of forests: is government surveillance and control (e.g. forestry inventories, department of forestry in the agriculture ministry) fully included or only the part that relates to non-cultivated forests? If the latter, how in practice could this share be estimated?

In the existing version of the classifications (CEA, CRUMA, CReMA) administrative, regulatory, surveillance, control R&S activities in the area of natural resources are always considered as RM. This means that e.g. administrative and regulatory activities concerning wild fish are considered entirely as RM even if indeed they concern also the use of the resource. The delimitation of the scope to non-cultivated/non produced natural assets applies too. So there could be a need to estimate a share.

  • Substitution: is aquaculture or the management or use of cultivated forests included because they are substituting for the wild fish and non-cultivated forest?

As the CEPA, also the RM classifications adopt the main purpose criterion. By adopting this criterion, for including an activity in the scope of RM (or EP) one should not analyse all the possible positive or negative impacts of the activity, but whether the activity is carried out with the main purpose of RM (or EP). In order to investigate the main purpose one should regard first the technical nature of the activity and secondly other aspects. Do aquaculture and forestry have RM as their main purpose? In general while these activities could have a beneficial impact with respect to the depletion of natural stocks, it seems that this is not their main purpose. If one can find any specific RM reason for some forestry or aquaculture activities to exist, they should be included (see the following part discussing the main purpose criterion)

  • Energy: it is accepted that renewable energy production is included. For energy, the existing classifications put a focus on fossil energy. In the CEA, the corresponding class (13) is called: Management offossilenergy. Renewable energy is included on the grounds that it substitutes fossil energy. For energy saving, is it accepted (and clear from the classifications and explanatory notes) that all energy saving is included (not only the saving of fossil energy).

Class 13, covers all kinds of energy, including renewable energy which, in a perspective of RM, is seen as substitute of non-renewable energy. This class could be renamed as Management of energy sources.

  • Borderline between resource management and resource use. Renewable energy production and the desalination of seawater is both part of resource management whereas the two activities appear to be rather close to resource use. Furthermore, there is a general expectation that RM is somehow beneficial for the environment whereas these activities can have rather negative effects from an environmental perspective.

Sea water desalination and renewable energy production seem to be RM because they are substitution whereas other activities of the same nature (normal water abstraction, production of energy from fossil sources) are RU.

Water resource class refers to inland waters (excluding sea). However the activities included in each class assumes always a mono-resource point of view as in the CEPA where each class adopts a mono-domain view: an activity beneficial for inland water resources (e.g. desalination of sea water) is included even if it can have an impact on another resource or environmental domain; this is as in the CEPA where an activity beneficial for a domain has an impact for another domain (e.g. air pollution produced by waste incineration).

Question for the TF: Can you point out other issues which are not clear from the explanatory notes of the CEA/CRUMA/CReMA and which would deserve further attention and explanation?

The main purpose criterion

EP, RM and RU are defined with regard to the main purpose of the activities and expenditure. While for EP and RU this seems to work rather well, for RM there are some problems.

RM groups together all actions and activities that are aimed at preserving and maintaining the stock of natural resources safeguarding against depletion phenomena. This includes actions and activities aiming at reducing the withdrawals of natural resources (recovery, reuse, recycling, savings, substitution of natural resources) as well as restoring natural resource stocks (increases/ recharges of natural resource stocks).

However, in reality a large number of RM activities and expenditure are aimed at saving or substitution which do not seem to have as their main purpose the protection of the stock of natural resources. An alternative to the main purpose criterion is to look at the main (environmental or resource management) effect. This is for example done with a view to environmental taxes which are not defined with respect to the main purpose but with respect to the effect they have.

The following discussion provides some elements for consideration with regard to the definition and purpose of RM.

The reference point for these issues is § 1.3 of Eurostat’s General Government and Specialised Producers data collection handbook (2007). The discussion should take into account what this paragraph states. In particular the following passages seem crucial: