Climate Change Mitigation and Adaptation Expenditures in the Economy: Towards an Operational Definition

2024 OECD-UNECE SEEA Implementation Geneva, Switzerland

March 18-20, 2024

Julie L. Hass and Scott Wentland

Disclaimer: The opinions are those of the authors and do not necessarily reflect the official position of the Bureau of Economics Analysis, Department of Commerce, or United States Government.

Thematic accounts / “Special Topics”

• Thematic Accounts • “These supplementary statistics

allow in-depth analysis of special topics that aren’t easily seen within BEA’s core statistics… provide a deeper understanding of the U.S. economy.”

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2https://www.bea.gov/data/special-topics

Digital Economy

Small Business

Space Economy

Thematic accounts

• Primarily developed based on expert inputs, data availability, often established based on policy demand for these special topics.

• Difficult to put them into relation with one another since they are built in isolation.

• No definitive guidelines for how to decide what to include or exclude. • For example: There are overlaps between BEA’s

– “Outdoor Recreation” and the “Marine Economy” accounts;

– “Outdoor Recreation” and “Travel and Tourism” accounts

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How do we develop CC Expenditure Accounts?

Two ways forward: A. Based on the established criteria

for the SEEA-CF’s Environmental Protection Expenditure (EPE) and Resource Management(RM) Accounts and broaden to CCEA

B. Thematic/Special Topic – Based on experts and without consideration to the established criteria for the SEEA-CF EPE and RM accounts

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Is there a starting point in the SEEA-CF? Yes! Have EPE on mitigation Greenhouse gases

• Example from Statistics Norway Environmental Protection Expenditure, Reduce Greenhouse gas emissions, NACE B- E36: Mining, Manufacturing, Electricity and Water supply (NOK 1 000), 2019-2022.

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2019 2020 2021 2022

Environmental current expenditure 495 377 422 339 468 038 539 021

EP ancilliary ouput 384 478 283 022 253 200 234 052

Intermediate consumption of EP services 110 899 139 317 214 838 304 969

Investments 1 231 404 2 674 927 4 626 501 1 452 526

Source: https://www.ssb.no/en/statbank/table/13062/

Is there a starting point in the SEEA-CF? Yes! Research Agenda of SEEA-CF (Annex II)

Accounts and statistics relating to the minimization of natural hazards and the effects of climate change: • “A2.19 The SEEA Central Framework limits the scope of

economic activities considered to be environmental to environmental protection and resource management activity. However, it is recognized that there are a number of other economic activities that are related to the environment which may be of particular interest for policy and analytical purposes (see sect. 4.2). A specific set of activities encompasses efforts to minimize the impact of natural hazards (such as floods, cyclones and bush fires) and efforts to mitigate, or adapt to, the effects of climate change.”

(SEEA-CF, Annex II, pages 307-308, emphases added) 3/15/2024

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Is there a starting point thematic/Special Topic Accounts? Work related to Climate Change Expenditures

• UNECE: CES CC related statistics – Indicators but no definitions

• Eurostat: EPE/RM statistics + CC statistics

– Mitigation in EPE & expanded definition of mitigation but no data

– Ongoing project to delineate CC mitigation & adaptation activities – produce EU estimates

• OECD: CC Budget Tagging – Focus on projects and policy. Definitions no

more specific than “principal objective” and descriptions of expected results

• EU: Green Budgeting – Budgetary policymaking to achieve climate

goals

• EU: Taxonomy for Sustainable Activities – Unit of analysis is ‘projects’ – Currently only Mitigation Economic Activities are

described • IADB: Government CC Spending

– Proposes both main purpose and secondary tags which have no CC intent stated but have a measurable impact or are responses to CC impacts

– Proposes classification & methodology • Austrian project: Federal Government current

costs for CC Adaptation – Budget analysis & expert interviews – Provides some figures for 2014

• IMF Data Gaps Initiative 3: Recommendation 7 – Working definitions focus on impacts, adaptation

and resilience

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See London Group Paper for more detailed information and descriptions of these studies: https://seea.un.org/sites/seea.un.org/files/measuring_climate_mitigation_and_adaptation_exp enditures_in_the_economy_-_hass_and_wentland_u.s._bureau_of_economic_analysis_bea.pdf

Climate Change Mitigation & Adaptation Expenditures

• Are there internationally agreed upon definitions of Climate Change Mitigation and Adaptation Expenditures?

• Do we know what is included/excluded?

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IMF Data Gaps Initiative 3: Recommendation 7

• Climate Change Expenditure Accounts – CCEA • Claim: ‘Consistent with SNA, SEEA-CF and GFSM’ (i.e. boundaries)

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• “Working” definition for climate change mitigation expenditure: • Climate change mitigation expenditures are expenditures aimed at making the impacts of climate change less severe by preventing or reducing the emission of greenhouse gases (GHG) into the atmosphere and enhancing sinks of greenhouse gases.

• “Working” definition for climate change adaptation expenditure: • Climate change adaptation expenditures are expenditures aimed at adapting and building resilience of human and ecological systems to the changing climate conditions, reducing vulnerability, and minimizing the negative climate change impacts.

Source: IMF Concept Note for Recommendation 7. January 2024

Note: Emphases in red have been added

SEEA-CF uses ‘primary purpose’ to define EPE/RM

• SEEA-CF 4.15 While some economic activities may be undertaken only for a single purpose, many activities are undertaken for a variety of purposes. Following general principles of classification, activities are deemed to be environmental activities only if the primary purpose of the activity is consistent with the definitions of the two types of environmental activity listed as environmental, i.e., environmental protection and resource management. In practice, the primary purpose must be attributed to particular transactions or groups of transactions as recorded in the accounts.

• Definition of Environmental Protection Expenditure (EPE)

4.12 … Environmental protection activities are those activities whose primary purpose is the prevention, reduction and elimination of pollution and other forms of degradation of the environment.

• Definition of Resource Management Expenditures (RM)

4.13 Resource management activities are those activities whose primary purpose is preserving and maintaining the stock of natural resources and hence safeguarding against depletion.

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Decision criteria – Are NOT the same! SEEA (CEA), SNA (ex. COFOG): Primary Purpose • Primary purpose – used in different

statistical classification systems such as COFOG, SEEA-CF

• Easier to determine • Can make decision criteria

for what is ‘in’ or ‘out’

IMF: Reducing impacts of climate change • Impacts

– implies causality – not known for a long time – how to determine this?

• Further analyses are needed. Estimating net impacts on climate require expertise outside of what national statistical offices typically do.

• Comparability  will this create greater scope for some NSOs to disagree? (one NSO determines a net impact as positive and another determines the same activity as negative?) Will this reduce international comparability?

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IPCC Definition of Climate Change

• Mitigation A human intervention to reduce emissions or enhance the sinks of greenhouse gases.

• Adaptation In natural systems, the process of adjustment to actual climate and its effects; human intervention may facilitate adjustment to expected climate and its effects.

In human systems, the process of adjustment to actual or expected climate and its effects, in order to moderate harm or exploit beneficial opportunities.

(Source: https://apps.ipcc.ch/glossary/)

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Mitigation expenditures – included in EPE Reduce GHG emissions • Included in CEA 1: Protection of ambient air and climate

– Expenditures for the reduction of GHG emissions (technology, process improvements, etc.)

– Includes expenditures (human interventions) for Carbon Capture & Storage • Technically these should also be included:

– Expenditures on GHG emissions tradeable permits/credits – Expenditures imposed by Carbon taxes – Technically, expenditures on offsets should be included but these are not

always reliable projects – so need to take care when including => but often are not currently included due to data collection challenges

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Mitigation: “enhance the sinks of greenhouse gases”

Currently NOT included in EPE mitigation expenditures definitions

• What does “enhance the sinks” of GHGs include? – GHG sinks: sequester or store carbon

• Resource management expenditures that improve or preserve “GHG sinks” would also be CC mitigation expenditures.

• Examples include expenditures that improve or preserve: - Forested areas - Wetlands - Mangroves - Topsoil – soil carbon - Tropical ecosystems

• These types of RM expenditures would also be CC mitigation expenditures

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Climate Change mitigation and EPE/RM expenditures

• What is new to EPE/RM when GHG reduction focus is broadened to include CC mitigation?

• Human systems – Reducing GHG emissions – Tradeable permits & carbon

taxes – GHG offsets

(carbon/biofuel credits) • Natural Systems

– Enhance natural carbon sinks

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Environmental Protection Expenditure (EPE) Resource Management Expenditures (RM) Classification of Environmental Activities (CEA) Classification of Environmental Activities (CEA)

HUMAN SYSTEMS NATURAL SYSTEMS

CEA 1: Protection of Ambient Air & Climate CEA 10-16

CEA 1 Climate Change Mitigation Activities CC Mitigation Activities include expenditures on: include expenditures on:

1) Reducing GHG emissions Enhancing natural sinks for carbon 2) Carbon Capture & Sequestration 3) Tradeable permits 4) Carbon Taxes 5) Carbon offsets

CC mitigation in human and natural systems + CC Adaptation in natural systems in relation to EPE&RM Expenditures

Environmental Protection Expenditure (EPE) Resource Management Expenditures (RM) Classification of Environmental Activities

(CEA) Classification of Environmental Activities (CEA)

HUMAN SYSTEMS

NATURAL SYSTEMS

CEA 1: Protection of Ambient Air &

Climate CEA 10-16

CEA 1 Climate Change Mitigation Activities CC Mitigation Activities include expenditures on: include expenditures on: 1) Reducing GHG emissions Enhancing natural sinks for carbon 2) Carbon Capture & Sequestration 3) Tradeable

permits

4) Carbon Taxes

Mixed CC Mitigation & Adaptation Activities 5) Carbon offsets

include expenditures on: - Increase natural systems' resiliance for dealing with changes in environmental conditions

CC Adaptation Activities include expenditures on: - Increase natural systems' resiliance for dealing with changes in environmental conditions

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SEEA EPE&RM Expenditures as starting point for CC Expenditure Accounts

CC mitigation in human and natural systems + CC Adaptation in natural systems + CC Adaptation in Human systems

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Environmental Protection Expenditure (EPE) Resource Management Expenditures (RM)

Classification of Environmental Activities

(CEA) Classification of Environmental Activities (CEA)

HUMAN SYSTEMS

NATURAL SYSTEMS

CEA 1: Protection of Ambient Air & Climate CEA 10-16 CEA 1 Climate Change Mitigation Activities include expenditures on: CC Mitigation Activities 1) Reducing GHG emissions include expenditures on: 2) Carbon Capture & Sequestration Enhancing natural sinks for carbon

3) Tradeable

permits

4) Carbon Taxes

5) Carbon offsets

Mixed CC Mitigation & Adaptation Activities include expenditures on: - Increase natural systems' resilience for dealing with changes in environmental conditions HUMAN SYSTEMS CC Adaptation Expenditures CC Adaptation Activities Related to human systems include expenditures on: - Increase natural systems' resilience

(NOT part of EPE/RM expenditures) for dealing with changes in environmental

conditions

Climate Change Adaptation

• In natural systems… • The process of adjustment to actual

climate and its effects; human intervention may facilitate adjustment to expected climate and its effects. (IPCC definition)  should find these “human interventions” as part of RM expenditure since it has to do with ‘natural systems’

• In human systems… • In human systems, the process of

adjustment to actual or expected climate and its effects, in order to moderate harm or exploit beneficial opportunities. (IPCC definition) most applicable human systems are outside of EPE and RM expenditures

 need to identify and define what these are

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CC Adaptation – Nature-based solutions included in RM

• “Nature-based solutions” – part of resource management expenditures & ecosystem improvement and resilience

• For example: – In Coastal areas, the planting of mangroves or

other wetland species—can reduce the threat of inundation while also providing a habitat for marine life and improving water quality.

– Climate-smart agriculture, preserving and enhancing topsoil

– Decreasing deforestation – Constructing terraces on hillsides, using

vegetation at critical points to control soil erosion, increase soil moisture, and reduce runoff.

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Human systems: Adaptation / Resilience Examples

• Example: Miami, Florida “Beyond water management strategies, Miami must also develop considerably new or reinforced zoning and building codes. Homes, commercial buildings, and urban infrastructure will bear the brunt of climate effects, and there’s a host of potential solutions…” (Source: https://slate.com/technology/2022/05/miami-climate-change-survival.html)

• “Two Florida communities prove the power of climate adaptation” Punta Gorda: after 2007 storm…updated, climate-resilient building codes. Babcock Ranch: “is a new community designed with climate resilience as an underlying principle. …Strong building codes, floodable streets, native plantings in prolific greenspaces, building outside of the floodplain, undergrounding vulnerable utilities, and providing microgrids and energy independence” (Source: https://www.geiconsultants.com/thought_leadership/power-of-climate-adaptation/)

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Primary Purpose and Baselines?

• Consider a bridge built to higher specifications due to climate change. – The “primary purpose” of the bridge is for

transportation, but should we consider the additional expenditure above and beyond the old (baseline) standards as climate change adaptation?

• The primary purpose of this additional (but not entire) expenditure is climate change related.

– Is it the baseline that matters for primary purpose? • Similarly, we consider electric cars as mitigation-related

because the baseline car (or the standard alternative) is an internal combustion engine running on fossil fuel (emitting GHGs)… But what if the electricity production is from coal fired power plants?

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SEEA-CF Environmental Expenditure Accounts

Two pathways to development…

• SEEA-CF EPE/RM Expenditure accounts can form the foundation for Climate Change Expenditure Accounts (CCEA)

• Better to have CCEA related to the SEEA Environmental Expenditure Accounts than as separate, unrelated thematic accounts – especially since we already find parts of the CC Expenditures in the established SEEA-CF EPE/RM Expenditure accounts Must use same criteria: primary purpose and not impacts.

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Next Steps

• Need to further develop criteria for determining what to include / exclude from the different topics.

• Is “primary / main purpose” a good enough criterion? How should we consider secondary purpose and/or technical aspects?

• “Impacts” of expenditures are not useable for developing expenditure statistics.

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Next steps for USA – Learning by doing

• Develop preliminary criteria for what is in and out of CC expenditures – The Eurostat study may be helpful in this work.

• See how far we can get examining the different statistics and data sources to see what could be useable. – Examine products and services in the SUT internal system – Examine the construction and/or housing cost data – Examine the relevant federal government Agency budgets

For example: FEMA (Federal Emergency Management Agency)

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Thank You!

Additional questions/comments? Julie L. Hass

[email protected] Scott Wentland

[email protected] . .

Some Definitions of CC Mitigation and Adaptation

• Intergovernmental Panel on Climate Change (IPCC) IPCC. 2022. Annex I: Glossary. In: P Shukla, J Skea, R Slade, et al. (eds.). Climate Change 2022: Mitigation of Climate Change.

• OECD-Development Assistance Committee (DAC) OECD DAC Rio Markers for Climate: Handbook

• Multilateral Development Banks (MDBs) MDB-IDFC 2021, Common principles for climate mitigation finance tracking, version 3; MDB-IDFC 2015, Common principles for climate change adaptation finance tracking

• International Development Finance Club (IDFC) IDFC. 2021. IDFC Green Finance Mapping Report 2021

• Climate Policy Initiative (CPI) Buchner et al., 2021. Global Landscape of Climate Finance 2021.

• Climate Bonds Initiative (CBI) CBI 2019. Climate Resilience Principles: A framework for assessing climate resilience investments

• EU Sustainable finance taxonomy EU Commission. 2020. Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a framework to facilitate sustainable investment, and amending Regulation (EU) 2019/2088

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26Source: Table 1. of IMF Concept Note for Recommendation 7. January 2024

EPE/RM + Climate Change + Disaster Expenditures

• Putting all three concepts together show that there are areas overlapping – even though the terminology use can be different.

• Disaster preventive/adaptive activities are relevant for both natural and human systems

• Same for Disaster recovery activities • There are also Non-Climate Change

disasters in both human and natural systems

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UNECE Conference, Geneva Switzerland

4 March – 6 March, 2024

The Federal Interagency Forum Model &

America’s Children: Key National Indicators of

Well-Being

TRACI COOK, FORUM STAFF DIRECTOR UNITED STATES UNECE WORKGROUP ON CHILD STATISTICS REPRSENTATIVE

• Mission and Overview

• Model

• Collaboration Process

• Participating Agencies

• America’s Children

- Visuals - Domains and Data Findings

• Forum Social Media

Forum Presentation Summary

The Children’s Forum

To foster coordination, cooperation, and collaboration among Federal agencies and improve federal data

related to children and families.

Founded in 1994 by six Federal member agencies and OMB

Formally established in April

1997 through Executive Order

13045

Currently includes 23 Federal

Agencies and Departments

Mission

Overview

The Forum Model: Federal Interagency Collaboration

July 8, 2015

Memo to Heads of Federal Agencies from Office of Information and Regulatory Affairs

• Establish frameworks for identifying report domains and key indicators

Reaching Consensus

Collaboration extends beyond the science

Standard Operating Procedures

• Establish frameworks for identifying report domains and key indicators

• Establish criteria for evaluating data measures

• Establish technical report guidelines and report parameters

Guiding Principles

• Broaden the scope of the report to extend beyond the usual population

• Modify data measures to reflect changes in methodology or to address more timely and relevant topics

• Engage for agency consensus

Forum Agencies

America’s Children Key National Indicators of Well-Being, 2023

Highlights selected indicators across the following domains:

Health

Family and Social Environment

Economic Circumstances

Physical Environment and

Safety

Behavior Education

Healthcare

Demographic Background

NUMBER OF CHILDREN AGES 0-17 IN THE UNITED STATES, 1950-2022 AND PROJECTED 2023-2050

Source: U.S. Census Bureau, Population Division

Family and Social Environment

NUMBER PERCENTAGE OF CHILDREN AGES 0-17 BY PRESENCE OF PARENTS IN HOUSEHOLD, 2010-2022

Source: U.S. Census Bureau, Current Population Survey, Annual Social and Economic Supplement.

Economic Circumstances

PERCENTAGE OF CHILDREN AGES 0-17 LIVING IN POVERTY BY RACE AND HISPANIC ORIGIN, 2000-2021

Source: U.S. Census Bureau, Current Population Survey, Annual Social and Economic Supplement.

Health Care

PERCENTAGE OF CHILDREN AGES 0-17 BY HEALTH INSURANCE COVERAGE STATUS AT THE TIME OF INTERVIEW, 2011-2021

Source: National Center for Health Statistics, National Health Interview Survey.

Physical Environment and Safety

PERCENTAGE OF CHIDLREN AGES 4-11 WITH SPECIFIED BLOOD COTININE LEVELS, SELECTED YEARS 1988-1994 THROUGH 2017-MARCH 2020

Source: National Center for Health Statistics, National Health and Nutrition Examination Survey

Behavior

NUMBER PERCENTAGE OF 8TH, 10TH, AND 12TH GRADE STUDENTS WHO REPORTED SMOKING CIGARETTES DAILY IN THE PAST 30 DAYS BY GRADE, 2000-2022

Source: National Institute on Drug Abuse, Monitoring the Future Survey.

Education NUMBER PERCENTAGE OF CHILDREN AGES 3-5 WHO WERE READ TO THREE OR MORE TIMES IN THE LAST WEEK BY A FAMILY MEMBER BY

MOTHER’S EDUCATION, SELECTED YEARS 1993-2019

Source: U.S. Department of Education, National Center for Education Statistics, National Household Education Surveys Program.

Health

PERCENTAGE OF INFANTS BORN PRETERM AND PERCENTAGE OF INFANTS BORN WITH LOW BIRTHWEIGHT, 2011-2021

Source: National Center for Health Statistics, National Vital Statistics System.

Outreach

Joint Forum Innovation Workgroup

• Collaborations with Forum Agencies

• America’s Children @childstats

Social Media Staff Director

Federal Interagency Forum on Child and Family Statistics

“The 2020 edition of America’s Children in Brief focuses on differences across indicators of children’s well-being by metropolitan status.”

Access the full report at childstats.gov.

• Charter, Mission & Vision

• Current and prior year reports, special publications and project deliverables

• Up-to-date data tables for each indicator

• Information on Forum members agencies and Forum committees

Closing Thoughts

THANK YOU I look forward to staying connected with you!

+1-301-458-4082

[email protected]

Traci Cook | Forum Staff Director

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