Abstract
The description of Environmental Protection Expenditure (EPE) is a building block in any comprehensive system of integrated environmental and economic accounting. Data on EPE have been collected since the 1970s in a number of countries. Quality1 and availability of data has improved in recent years and the ‘value-added of accounting’ (Weber 1996) has become apparent.’ However, although discussed for a long time, opinions remain divided on the interpretation of EPE accounts and, underlying that, how EPE are actually represented in national accounts.
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Notes
Measurement problems of course exist, e.g. with a view to quantifying in an internationally comparable way investment in integrated (`cleaner’) technologies. For a critical overview see Björsell (1994).
Especially with regard to avoiding double counting, identifying and filling data gaps and producing meaningful aggregates. See the results from the applications of the SERIEE’s Environmental Protection Expenditure Account (EPEA) in the Netherlands, France, Germany, Finland, Sweden, Switzerland or the United Kingdom (CBS 1995, IFEN 1996, Statistisces Bundesamt 1996, Statistics Finland 1996, Statistics Sweden 1996, INFRAS 1996, ECOTEC 1996, as well as US Environmental Protection Agency 1995a, or Schäfer and Stahmer 1989 ).
The 1993 SNA recommends the use of `GDP at constant prices’ or `GDP volume’. The use of the term `real GDP’ should be avoided (cf. Commission of the European Communities et al. 1993, para. 16. 71 ).
The idea of deducting defensive expenditure has been most clearly formulated in relation to aggregates of national accounts in nominal terms. Also, some authors have misunderstood the concept of intermediate consumption in a sense that this means an `automatic deduction’. EPE are more or less fully contained in nominal GDP no matter whether they are part of intermediate consumption or not. However, when EPE translate into intermediate consumption (and internal uses, which is the same) they tend to be recorded in nominal GDP only, i.e. they simply lead to inflation when occurring for the first time.
Of course, EP activities result in a reduction of pollution. If e.g. a system of marketable pollution permits existed, then prices could be assigned to the emitted pollution. As a consequence, pollution abatement activities would have a separately measured output.
Assumptions needed for this are that EPE translate into domestic final uses (either directly or via price increases in other products) and that trade in EP services and goods needed for EP (including for environmental investment) is balanced. The aggregate of national expenditure contains some double counting which occurs when EPE translate into additional costs of products which are in turn used for EP activities (e.g. a flue gas scrubber at an electric power plant translates into price increases of the electricity sold; this electricity may then be used as an input for other EP purposes). However, this double counting is very small.
Figures are based on the applications of the SERIEE’s EPEA (see note 2 above) and supported by OECD (1996) and US Environmental Protection Agency (1995a). Note that due to differences in the financing of municipal EP activities, via fees or via taxes, the importance of collective consumption can differ substantially amoung countries.
This is one of the areas of work in the context of the ongoing EU-project `Methodological problems in the construction of environmentally adjusted national income figures’; see also Radermacher (1995).
The treatment of current account EPE as gross capital formation in natural assets would solve the problem conceptually. See Leipert (1995) who reviews the positions of Harrison (1989) and of Carson and Landefeld (1994).
See Schäfer and Stahmer (1989) and personal communications from Schäfer and Gie.
If there are quality changes upstream, e.g. through the improved sealing of waste dumps, then a corresponding price increase (e.g. of dump charges) would be fully taken into account in the price index for downstream disposal services (e.g. refuse collection), too. When the trend in dump charges is measured, the (part of) the charge corresponding to the improved sealing of the dump would in this case be calculated separately as a quality improvement. Dump charges may not however be recorded at all in price statistics.
The effects depend on the deductibility of a value-added tax, as intermediate consumption is shown without the deductible value-added tax in national accounts.
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Steurer, A., Gie, G., Leipert, C., Pasurka, C., Schäfer, D. (1998). Environmental Protection Expenditure and its Representation in National Accounts. In: Uno, K., Bartelmus, P. (eds) Environmental Accounting in Theory and Practice. Economy & Environment, vol 11. Springer, Dordrecht. https://doi.org/10.1007/978-94-017-1433-4_17
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DOI: https://doi.org/10.1007/978-94-017-1433-4_17
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