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)
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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
16
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
17
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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- Climate Change Mitigation and Adaptation Expenditures in the Economy: Towards an Operational Definition ��
- Thematic accounts / “Special Topics”
- Thematic accounts
- How do we develop CC Expenditure Accounts?
- Is there a starting point in the SEEA-CF? �Yes! è Have EPE on mitigation Greenhouse gases
- Is there a starting point in the SEEA-CF?�Yes! è Research Agenda of SEEA-CF (Annex II)
- Is there a starting point thematic/Special Topic Accounts?�Work related to Climate Change Expenditures
- Climate Change Mitigation & Adaptation Expenditures
- IMF Data Gaps Initiative 3: Recommendation 7
- SEEA-CF uses ‘primary purpose’ to define EPE/RM
- Decision criteria – Are NOT the same!
- IPCC Definition of Climate Change
- Mitigation expenditures – included in EPE
- Mitigation: “enhance the sinks of greenhouse gases”
- Climate Change mitigation and EPE/RM expenditures
- CC mitigation in human and natural systems + �CC Adaptation in natural systems in relation to EPE&RM Expenditures
- 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
- Climate Change Adaptation
- CC Adaptation – Nature-based solutions included in RM
- Human systems: Adaptation / Resilience Examples
- Primary Purpose and Baselines?
- SEEA-CF Environmental Expenditure Accounts
- Next Steps
- Next steps for USA – Learning by doing
- Thank You!
- Some Definitions of CC Mitigation and Adaptation
- EPE/RM + Climate Change + Disaster Expenditures
