Subsidies from SEEA Viveka Palm and Nancy Steinbach

Subsidies from SEEA Viveka Palm and Nancy Steinbach, Statistics Sweden. Ute Roewer, Eurostat. Thanks to the Eurostat subsidy reflection group and the participants at the UNEP meeting in Geneva 2008

The environmental accounts Environm. statistics National Accounts Environmental Accounts

State of the art • Many international definitions of environmentally related subsidies. Regular reporting is not in place. • The SNA subsidy definition is narrow in that only current transfers to industry is included. • Capital transfers to industry (inv grants) and transfers to households needed in the SEEA subsidies • On-budget subsidies measured in several studies (Sweden, Norway, Denmark, Germany, Netherlands, EU). Both environmentally motivated and environmentally harmful. • Off-budget subsidies such as preferential tax treatments and external costs are of interest.

SEEA subsidies • Three categories: Environmentally motivated subsidies, Potentially damaging subsidies and Other subsidies • On-budget subsidies: from the state to industry (as SNA subsidy definition), but also including transfers to international beneficiaries, households as well as capital transfers (investment grants) • Off-budget subsidies: internationally harmonized data for the calculation of preferential tax treatments and external cost

On-budget Environmentally motivated subsidies • The budget lines are searched for the main motive of the transfer. Typical areas include biodiversity, monitoring of environment, R&D for new energy technology or for energy efficiency. • The funding for buses and trains is allocated to ‘other subsidies’ as it is mainly funded for other motives than environment.

On-budget Potentially environmentally damaging subsidies • The environmental accounts are used to calculate the emission intensities for the different sectors to which transfers are allocated. • For the sectors where the intensity is above the mean emission intensity of the region studied, the transfers are labeled potentially environmentally damaging. • As a complement to this method, the transfers to the fuels mentioned in the list that constitutes environmental tax bases are labeled as PEDS.

Other subsidies on budget • The main part of the budget lines will not be labeled as EMs or PEDs. Instead, they are noted as Other subsidies, but can of course be presented in a disaggregated form.

Off-budget potentially environmentally damaging subsidies • Preferential tax treatments can be visually presented in the environmental accounts: already in the SEEA • External costs of emissions needs valuation. Still the underlying data, like emissions of health hazardous substances, that are needed for the valuations could be provided from the accounts, even if the valuation is not made by the statistical offices.

Preferential tax treatment: Energy tax and fuel use by industry

Environmental tax bases • • • Emissions to air and water Pesticides, fertilizers Waste Energy products (fuels, electricity, heat) Transport Resources

Discussions at the UNEP meeting • Lack of international subsidy data hampers analysis • Many definitions from international organizations but not always clear what transfers are to be included • Important for analysts to be able to track the detailed info (e. g. budget lines) of the subsidies • Can ‘environmentally motivated’ be mistaken for environmentally effective? Example bio fuels. • Off-budget subsidies: Known to be of importance and therefore part of the picture, but in need of reliable methods to be credible.

SEEA subsidy reflection 1 • Agreement to widen the SNA focus to take on also other transfers: On-budget subsidies from the state to industry (as SNA subsidy definition), but also including investments, households and international transfers • Need for testing of the three categories: Environmentally motivated subsidies, Potentially damaging subsidies and Other subsidies • Off-budget subsidies: internationally harmonized data for the calculation of preferential tax treatments and external cost. Valuation to be made outside of the official statistics realm.

SEEA subsidy reflection 2 • Wish for a full array of environmental pressure categories in assessment of the potentially damaging subsidies – However, then lack of data will likely hamper the collection of data, particularly in developing countries. Stepwise approach recommended. • Wish for a category where the effect of the subsidies were accounted for. To assess the effects, assumptions on reference situations must be taken, and such modeling lies outside of most statistical offices ordinary activities. Instead, the available data can be used for such analysis by users.

A tentative table for SEEA subsidy reporting Nace/ final demand categories Agric, fishing, forestry Indus Ene try rgy Trans port Public expenditure Private consumption A. On-budget Current transfers -EM -PED Capital transfers -EM -PED B. Off-budget Preferential tax treatments -EM -PED Data for external cost reference value EM: Environmentally motivated, PED: Potentially environmentally damaging

SEEA subsidy proposal 1 • A 1. The SEEA subsidies are formed by adding the SNA-subsidies, the transfers to public authorities and to households, and the capital transfers. • A 2. Both on-budget and off-budget items are covered. • B 1. The environmentally related subsidies are divided into two groups: The environmentally motivated subsidies and the potentially environmentally damaging subsidies. • C 1. It is the motive behind the subsidy that is taken as the criteria for the inclusion of a subsidy or investment grant as part of environmental policies.

SEEA subsidy proposal 2 • D 1. That the emission intensity of an industry, as compared to the country mean, or to a region mean, is used to single out what subsidies should be regarded a PEDS. • D 2. For payments from the government to price controlled products, the same list that defines what is regarded as an environmental tax is suggested to be used. • E 1. It is recommended that the country make an estimate of the emission quantity and the financial size of the tax exemptions. • E 2. To calculate the estimates two reference levels are used. One country specific and one internationally agreed reference.

SEEA subsidy proposal 3 • Work in progress. Not proposed as part of official statistics. • F 1. It is proposed that a standard set of statistics be available for users that want to estimate the external costs. As a start the Extern. E values could be studied. In the longer time perspective the statistical community should aim towards recommendations of a methodology to estimate the external costs in a harmonised way.

Transfers to be included • In the production: Government owned enterprises, municipal companies, private companies and economic associations, State companies, individuals*, organisations, municipalities, county councils, international activities, EU-activities • For investments: same list. *D 62