Archive:Environmental protection expenditure

This text is in the process of being harmonised for use in the 2011 edition of the Eurostat Yearbook - the Excel content is being standardised to publication standards and the text is being reviewed. This work is scheduled to be complete for all articles by 26 NOVEMBER 2010. During this period (when all content for the 2011 edition is due to be finalised) please do not make any further edits to this article. Once finalised, authors will once again be able to revise and update their articles.

Data from October 2010, most recent data: Further Eurostat information, Main tables and Database.

Figure 1: EPE by sectors, EU-25, 2006 (% of GDP)

This article provides details on the expenditure carried out by our society with the purpose of protecting the environment. It refers to the money spent by general government, private and public specialised producers, and industry on activities directly aimed at the prevention, reduction, and elimination of pollution resulting from the production or consumption of goods and services. Nowadays, the protection of the environment is integrated into all policy fields with the general aim of reaching sustainable development. Clean air, water and soils, healthy ecosystems, and rich biodiversity are vital for human life, and thus it is not surprising that our societies devote large amounts of money to curbing pollution and preserving a healthy environment.

Figure 2: EPE's change by sector, EU-25, 200 and 2006 (%)

Figure 3: Public sector investments and current expenditures by environmental domain, EU 25, 2006 (% of total public sector investments and current expenditure)

Figure 4:Public sector investments and current expenditure for environmental protection, 2006 (% of GDP)

Figure 5: Public sector environmental protection investments and current expenditure, 2006 (% of total investments and current expenditure)

Figure 6: Public sector investments and current expenditure by environmental domain, 2006, share of total domains

Figure 7: Public and private specialised producers’ EPE, 2006 (% of GDP)

Figure 8: Public and private specialised producers’ EPE by environmental domain, 2006 (% of total EPE)

Figure 9: Industrial EPE, 2006 (% of GDP)

Figure 10: EPE by industrial subsector, 2006, (% of total industry’s EPE)

Main statistical findings

Public sector's expenditure

Both businesses and households pay to safely dispose of waste; production activities spend money to mitigate the polluting effects of production processes; governments pay to provide environmental public goods, such as the basic levels of sanitation required to safeguard health. Governments subsidise environmentally beneficial activities and use public funds to make it easier to borrow money on the financial markets for environmental projects, through measures such as risk sharing, credit enhancement, or subsidies to lower the costs of borrowing in communities that cannot afford the full costs of investments for environmental projects. The demand for goods and services to prevent or treat environmental damages due to socio-economic activities coming from the growing expenditure in all sectors of the economy encourages the supply of environmental goods and services and stimulates the development of a ‘greener’ economy. The analysis of spending on environmental protection has a strategic interest. For example, it allows the evaluation of the positioning of environmental policies already in place with respect to reference models such as the ‘polluter pays’ principle. For example, the growth of government-supported environmental expenditure can indicate a situation in which the government, rather than polluters, increasingly intervenes in the environment, and is therefore often indicative of a reality in which this principle is insufficiently applied. At the same time, a low level of expenditure does not necessarily mean that a country is not effectively protecting its environment. In fact, the indicator tends to emphasise clean-up costs at the expense of cost reductions which could be due to reduced emissions or more effective protection measures.

In order to compare expenditure in the different European countries as well as over time, Environmental Protection Expenditure (EPE) can be expressed in euros per capita and as a % of Gross Domestic Product (GDP) or Gross Value Added (GVA) – when discussing EPE in the industrial sector.
Total EPE is the sum of investments (Investments are further recorded in two distinct categories: pollution treatment or pollution prevention) and current expenditure for industry and specialised production sectors, and the sum of investments, current expenditure, and subsidies/transfers in the public sector.

When expressed as a share of GDP, EPE is an indicator of the total resources a sector is devoting to protecting the environment.
Figure 1 shows that in 2006, specialised producers spent the most on environmental protection. Their expenditure accounted for 0.86 % of GDP, which was equal to 214 euros per capita. Industry and public sector spent roughly the same (0.44 % and 0.52 % of GDP ), which is equal to 109 and 116 euros per capita respectively.
Summing up the expenditure of the three sectors gives a total of 1.82 % of the EU 25’s GDP allocated for protecting the environment in 2006.

Between 2000 and 2006, EPE grew in the three sectors in absolute and per capita terms, but decreased as a share of GDP for the public sector and industry. For specialised producers, on the other hand, the EPE grew as a share of GDP (Figure 2). These trends have to be interpreted with caution due to the fact that the share of GDP tends to fall if data on EPE are not adjusted for inflation.
Nevertheless, the increase of specialised producers’ EPE as a share of GDP and the corresponding decrease for the public sector (– 17 %) and industry (– 5 %) could be due to the privatisation or semi-privatisation of some environmental activities such as wastewater treatment or waste collection in some countries. These environmental activities were mainly carried out by municipalities, and were then turned into private and semi-public corporations so that they now fall into the specialised producers group.

The scope of environmental protection is defined according to the Classification of Environmental Protection Activities (CEPA 2000), which distinguishes nine different environmental domains: protection of ambient air and climate; wastewater management; waste management; protection and remediation of soil, groundwater and surface water; noise and vibration abatement; protection of biodiversity and landscape; protection against radiation; research and development and other environmental protection activities
In 2006, 42 % of investments and current expenditure made by the public sector in the EU-25 towards protecting the environment against pollution were devoted to non-core domains, 40 % to waste management activities and 17 % to wastewater management (Figure 3). Only a fraction of all general government expenditure went towards air protection activities. These activities are in fact mainly carried by industry, since they mostly have to do with changes in the industrial production processes to reduce and prevent air emissions. Generally speaking, current expenditure has the biggest share in EPE compared to investments and subsidies/transfers. Investment expenditure: includes all outlays in a given year (purchases and own-account production) for machinery, equipment and land used for environmental protection purposes and is the sum of two categories: end-of-pipe (pollution treatment) investments, investments in integrated technologies (pollution prevention investments). Total current expenditure: is the sum of internal current expenditure and fees/purchases. Subsidies/transfers (given or received): include all types of transfers financing environmental protection activities in other sectors, including transfers to or from other countries.

These constitute expenditure for the paying sector (public sector), and revenue for the receiving sector (business/ industry sector and specialised producers sector.

In most of the European countries, the public sector spent between 0.2 and 0.6 % of GDP in 2006 in terms of environmental protection investments and current expenditure. The Netherlands, in 2005, devoted almost 1.4 % of its GDP, while in the same year Latvia allocated only 0.06 % of its GDP (Figure 4) expenditure and investments in most of the new Member countries is well above the 25 % EU-25 average (Figure 5). This is probably due to the high level of expenditure in fixed assets needed to start off activities required by the more stringent EU environmental legislations. For EFTA countries and Turkey, the share of investments in total investments and current expenditure is more or less close to the EU-25 average, while in Croatia it is over 95 %.

Wastewater treatment and waste management are generally the main domains in which the public sector spends. However, according to Figure 6, some countries’ public sectors spent the most in other domains. This is the case, for example, in Spain, where the public sector principally spent on the protection of biodiversity and other environmental domains. Several countries, like Italy, Cyprus and Spain classified a relevant part of their general government expenditures as ‘other’: this includes general environmental administration and management, education, training and information for the environment as well as activities leading to indivisible expenditure and activities not elsewhere classified. Another interesting trend can be seen in Croatia, where more than 95 % of the public sector’s investments and current expenditure were devoted to soil and groundwater protection.

Specialised producers’ expenditure

In 2006, specialised producers’ EPE (public and private) represented around 0.9 % of the EU-25’s GDP. The increase in the share of expenditure of this sector in GDP in 2006 compared with 2000 was almost 8 %. The expenditure of specialised producers in the European countries in 2006 varies quite a lot (Figure 7). Slovakia and Finland are the only countries where specialised producers spent less than 0.1 of GDP. Conversely, in Austria and Romania, the expenditure of specialised producers represented more than 1.7 % of GDP. This varying trend might be due to the fact that in some countries some environmental activities are carried out by specialised producers, whereas in other countries the same activities are still carried out by the public sector. Another reason for the differing levels of expenditure as a share of GDP can be the degree of internalisation of some environmental activities, such as waste and wastewater management by the industry. This is particularly the case for industrial activities which have set in-house waste management services aiming to recycle part of the discarded materials for reintroduction and reuse in the production process. In 21 of the 24 countries for which data are available, expenditure for waste management and wastewater management accounted for 90 % or more of specialised producers’ EPE (Figure 8). The rest of the EPE were for soil and groundwater protection (for example for soil decontamination activities) or have been classified in the ‘other’ domain.

On average, over 60 % of the specialised producers’ environmental protection expenditure in EU, EFTA and candidate countries are directed towards waste management.
Wastewater treatment expenditure comes in second place, while in Latvia, Poland and Finland, this domain is the principal beneficiary of environmental expenditure of specialised producers.
A particular case is Spain where around 40 % of the specialised producers’ environmental expenditure is devoted to domains other than waste and wastewater.

Industry's expenditure

Industrial expenditure for environmental protection in the European countries varied a lot in 2006 as it depends on the industrial structures of each country (Figure 9). In any case, in most of the countries, the industrial EPE is between 0.2 and 0.8 % of GDP.
In 6 countries industry spent more than 0.8 % of GDP for environmental protection activities: Slovakia, Estonia, Czech Republic, Poland, Italy and Bulgaria. On the other hand, in 3 countries industrial EPE was below 0.2 % of GDP: Cyprus, Latvia and France.

Important differences among countries also emerge when looking at the repartition of the EPE in the three main industrial sectors. The manufacturing sector is the biggest spender in all the countries with more than 48 % of the total, except in Slovakia where the biggest spender is the electricity, gas, and water supply sector. The manufacturing sector accounted for more than 90 % of industrial EPE in Belgium (Figure 10).

Most of the new Member States, except Hungary, Estonia and Romania, had a share of EPE in the electricity, gas and water sector higher than the EU 27 average. This is mainly due to the effort they made to improve their electricity generation sector by reducing emissions. The weight of the electricity, gas, and water sector was the lowest in Belgium and the Netherlands (only 10 % of total industry’s EPE).

Romania, Poland and the Czech Republic were the countries with the biggest share of EPE from the mining and quarrying sector. In particular, in Romania the mining and quarrying sector accounted for 24 % of total industrial EPE, compared to the EU 27 for which the contribution of this sector was just 4 %. The countries where the share of the mining and quarying sector was negligible are Belgium, Latvia and Hungary.

It is worth noting that most of the EU-25 countries were also devoting a larger share of EPE to current expenditure rather than investments. Italy, Belgium, and the Netherlands spent more than 80 % of their total EPE on current expenditure. The exception to this trend is Portugal which spent only 35 % of its industrial EPE on current expenditure.

Data sources and availability

Data on environmental expenditure are collected from European countries through the joint OECD/Eurostat questionnaire on environmental protection expenditure and revenues (EPER).

The Member States are free to decide on the data collection methods for the data compiled in the EPER. The general options are: surveys, administrative sources, statistical estimations, and use of already existing sources or some combination of methods. Data availability has been traditionally the best for the public sector as many countries have collected data for this sector since a number of years. However, problems concerning data comparability across countries exist and these problems are related to the structure of expenditure in the countries. Regarding the Industry sector (Mining and quarrying, Manufacturing, Electricity) most of the countries provided data for this sector and the comparability of the data is good. For the Public and private specialised producers (mainly NACE Rev. 37, 90) data availability is satisfactory, but improvement needs to be done by countries that are not yet in the position of delivering data.

The data currently published on Eurostat' s website covers:

four economic sectors (public sector, business sector, specialized producers and households)
several economic variables (environmental protection expenditure, investments for environmental protection, pollution treatment investments, pollution prevention investments, internal current expenditure for environmental protection, fees and purchases, receipts from by-products, subsidies/transfers and revenues)
nine environmental domains: protection of ambient air and climate; wastewater management; waste management; protection and remediation of soil, groundwater and surface water; noise and vibration abatement; protection of biodiversity and landscape; protection against radiation; research and development and other environmental protection activities.

Context

For many years, European statistical services have collected data on air pollution, on energy, water consumption, wastewater, solid waste, and their management, in addition to environmental data of an economic nature, as environmental expenditure. The links between all these data enable policy makers to consider the environmental impacts of economic activities (resource consumption, air or water pollution, waste production) and to assess the actions (investments, technologies, expenditure) carried out to limit the causes and risks of pollution.

Eurostat has worked towards systematising the gathering of environmental statistics about the activities of all economic sectors within the EU. These statistics are used to assess the effectiveness of new regulations and policies. The second use of these statistics is for the analysis of the links between the pressures on the environment and the structure of the economy. Harmonised, comparable, and comprehensive statistics about environmental expenditure and the sectors funding that expenditure should help to improve policy-makers’ decisions.