Towards expressing information need on environmental expenditure and finance Green Budgeting Virtual Meeting - 17 March 2020.

1. Towards addressing information needs on
environmental expenditure and finance
OECD Green Budgeting Virtual Meeting
17 March 2020, OECD Headquarters, Paris
OECD Environment Directorate
● Mauro Migotto & Myriam Linster: Environmental Performance and Information Division
● Raphaël Jachnik & Mireille Martini: Climate, Biodiversity and Water Division

2. Data
Indicators
Reporting
2
International data collection and classifications
Data
provided
by
countries
Eurostat EGSS
CEPA
CReMA
ISIC/NACE CPC HS
Economic activities Products Goods
NATIONAL ACCOUNTS
Possiblemerge
National
Accounts –
economic
data
SEEA
EU Taxonomy for
sustainable activities
OECD Rio
Markers (ODA)
OECD ERTR
(taxes)
OECD Inventory
on Fossil Fuels
COFOG

3. Data
Indicators
Reporting
Substantially contribute to at least
one of the six environmental
objectives
Do no significant harm to any of
the other five environmental
objectives
Comply with minimum
safeguards
Technical Screening Criteria Technical Screening Criteria OECD MNE Guidelines + UN
Principles + ILO
Six environmental objectives:
In order to be taxonomy eligible, an activity must:
EU taxonomy regulation: defining environmentally
sustainable activities
International
co-operation and
interaction with
other jurisdictions

4. Data
Indicators
Reporting
4
Policy needs to more broadly assess
climate consistency investments and financing
Work by the OECD-led
• Focus on real economy investments ( GFCF benchmark)
• Non-prescriptive pilot studies at level of countries (Norway,
Latvia, UK) and sectors (industry, transport, buildings)
• Potential to inform UNFCCC Global Stocktake and OECD
work on Green Growth indicators
Source: Natixis (2019)
Reference points for climate consistency?
• Taxonomies and classifications
• Performance thresholds
• Climate-related scenarios
• Quantified and time-bound objectives
• Technological roadmaps

5. ADVANCING STATISTICAL DATA COLLECTION ON
ENVIRONMENTAL EXPENDITURE
5

6. Data
Indicators
Reporting
6
International data collection
• OECD/Eurostat collect EPEA (Environmental Protection Expenditure
Accounts) data, which is:
– coherent with the SEEA
– based on national accounts (NA) principles
• Measuring the value added of the EP (Environmental Protection)
activites
• EPEA covers services only (bulk of EP) and uses the CEPA
classification (Classification of Environmental Protection Activities).
• EGSS (Environmental Goods and Services Sector) use CReMA
(Eurostat)

7. Data
Indicators
Reporting
7
Environmental Protection Expenditure Accounts (EPEA)
ADVANTAGES
– Fully coherent with National Accounts (and so GDP)
– Internationally standardised; collected for EU and OECD countries
– Subject to periodic international revisions
DISADVANTAGES
– It’s not expenditure but value added (though it can be disaggregated by
institutional sectors, e.g. general government)
– Data is scarce, at least for the moment, especially for non-EU countries
– Using CEPA (and not CReMA) it only covers part of what would be considered
relevant (e.g. not renewable energy) and only environmental “goods” and not
“bads” (e.g. subsidies to fossil fuels)

8. Data
Indicators
Reporting
8
Options to advance the EPEA measurement agenda
• Assist countries in compiling and documenting data
• e.g. by sharing the experience of countries having provided data (Germany, Ireland, the
Netherlands, etc.)
• Progressively expand data collection beyond Environmental
Protection
• e.g. starting with resource management activities of relevance for climate mitigation and
biodiversity. Pilot-test additional modules. [But this may take time]
• Sharing experience and information on good practices
• develop guidelines; regular WP meeting and workshops; draw on parallel projects and
activities like green budgeting, CBD, climate and biodiversity finance, ODA
• Eurostat Task Force on clarifications and eventual merging of CEPA
and CReMA classifications
• e.g. suggests to include CREMA 12 on management of wild flora and fauna under CEPA 6
on biodiversity

9. REFLECTIONS FOR GREEN BUDGETING WORK
9

10. Data
Indicators
Reporting
10
Green budgeting practices
• National methodologies and classification/tagging systems, while
suited to national needs, preclude international comparability.
• The inevitable result is lack of comparability across countries and an
increased level of “subjectivity”: methods and classification systems
may vary across space and evolve in time. There are no guarantees
that countries are willing, or have the resources to update them.
• The advantage of adopting standardised international approaches
and classifications is international comparability, stability and
adaptation to evolving needs (agreed by countries).

11. Data
Indicators
Reporting
11
Implications for green budgeting
– We would encourage countries to use existing classifications (notably CEPA and
CReMA), i.e. no need to re-invent the wheel each time
– This would cover EP “goods”. For EP “bads” countries may use the OECD
Inventory on Fossil Fuels, as well as the well-established ERTR (Environmentally
related tax revenue) and PINE (Policy Instruments for the Environment) database on
tax instruments.
– Use Rio Markers (e.g. to expand on CEPA/CReMA for biodiversity and climate
change) and EU Taxonomy (e.g. to identify specialised producers) to feed into EPEA
– For other expenditure (budget) negatively affecting the environment, there are
no international classifications. The question then it’s what do we want to capture?
For which objectives? E.g. a realistic approach would be to flag the expenditure
(budget) with a direct negative impact on GHG emissions (with respect to set targets),
for flagging all expenditures having a negative environmental impact may be too
ambitious (and ambiguous), but see France’s example

12. BACK UP SLIDES
12

13. Data
Indicators
Reporting
REPORTING CHALLENGES
• Many countries face difficulties in compiling data. Replies are often
incomplete. The quality of some of the data remains weak.
• Environmental Protection (EP) versus Resource Management
(RM). Demands for data do not always distinguish the two, and
respondents have also difficulties; borderline cases
• Reporting on the detailed breakdown by CEPA class is challenging
• This begs the question of the focus of the data collection. i.e. go
beyond CEPA? For both climate change and biodiversity, CEPA may
be too narrow (cf Eurostat TF on merging CEPA and CReMA).
13

14. Data
Indicators
Reporting
Expenditure on climate change
• Data availability remains low (EPEA covers mainly mitigation). Eurostat’s
database includes only very few data on climate mitigation, i.e. for Germany,
Ireland and the Netherlands.
• Activities may be classified as either EP and/or RM, e.g. distinguishing between
emission reduction activities and energy saving activities is not always easy; or
resource efficient transport (GHG reducing or energy saving?)
• Because of its transversal nature, climate change related expenditures tend to
be scattered across different CEPA and CReMA domains.
• Data on expenditure on climate change adaptation is even more difficult to
mobilise and the CEPA classification is not designed to capture it. Also, should
we consider adaptation an EP activity?
14

15. Data
Indicators
Reporting
Expenditure on biodiversity
• The coverage of CEPA 6 is partial and insufficient for covering Aichi
targets.
• CEPA 6 does not consider expenditure on the sustainable use of
biodiversity resources (under the CReMA). Countries find it difficult to
distinguish between protection of biodiversity from sustainable
management of forests and other biological resources.
• OECD has looked at COFOG data (insufficient) and CBD reporting
(neither consistent nor comparable)
• Thus there might be the need to broaden the scope beyond CEPA and
include some RM aspects.
15