Environmental protection expenditure, UK: 2020

• For those UK businesses where environmental protection was not their primary purpose, environmental protection expenditure (EPE) in 2020 was an estimated £2.0 billion.

• Some £1.7 billion, around 84%, was spent by businesses in the manufacturing industry.

• For total UK EPE, around £28.8 billion was spent in 2019; this is from general government, businesses (including specialist businesses), and households.

• Businesses, including specialist businesses, provide the majority of environmental protection services output, and their contribution has increased between 2010 and 2019.

Environmental protection expenditure (EPE) is defined in the Eurostat EPE handbook as:

This bulletin includes estimates from the EPE accounts and the EPE survey.

The Office for National Statistics (ONS) produced UK EPE accounts as part of a legal agreement with Eurostat, which published these accounts on their database. Following the UK's departure from the EU, we will now publish full EPE accounts data on the ONS website. Estimates from the accounts are available from 2010 (and 2006 in some cases) to 2019.

The EPE survey is one of the data sources for the accounts. Estimates are available for 2015 to 2020.

Further information is available in the EPE survey QMI and the EPE accounts QMI.

For those UK businesses where environmental protection was not their primary purpose, environmental protection expenditure (EPE) in 2020 was an estimated £2.0 billion, compared with £2.1 billion in 2019. These businesses are those that operate in manufacturing, mining and quarrying, water collection, treatment and supply, or electricity, gas, steam and air conditioning supply.

EPE can be operating expenditure or capital expenditure. Operating expenditure relates to running costs incurred by businesses for environmental protection services that enable them to operate.

In 2020, operating expenditure accounted for £1.7 billion, or 84%, of all EPE by UK businesses. Some 75% (£1.3 billion) of this operating expenditure related to payments made to external organisations for providing them with environmental services.

Business expenditure on solid waste management activities (£0.9 billion) was the largest single category (around 45%) of all environmental protection expenditure (EPE) in 2020. This comes under Classification of Environmental Protection Activity (CEPA) 3.

In 2020, over 90% of expenditure on CEPA 3 was external operating expenditure.

The environmental protection expenditure (EPE) accounts cover three sectors - general government, businesses, and households. Estimates follow the UN System of Environmental Economic Accounting (SEEA) guidance. The EPE survey provides data for non-specialist businesses in the EPE accounts.

From 2010 to 2019, on average around half of total EPE was by general government. This share has decreased over the period, as businesses' contribution has increased from around 24% in 2010 to 35% in 2019.

The environmental protection expenditure (EPE) accounts provide estimates of total EPE by sector. Estimates of general government output, business output and household use of environmental protection services are also provided. Total EPE includes these output estimates along with capital investment and international trade and transfers. The Quality and Methodology Information report explains the structure of the accounts in more detail.

The estimates of output and use are available by Classification of Environmental Protection Activities (CEPA). In the UK, most activity is in wastewater management (CEPA 2) and waste management (CEPA 3). The latter excludes recycling activities where possible.

For output by general government, over 80% of output on average each year is in waste management. The second-largest contribution is from other environmental protection activities (CEPA 9). This category includes regulation, training and general administration and management.

For business output, activity is concentrated in wastewater management and waste management. The contribution from waste management is increasing over time.

Around 95% of households’ use of environmental protection services is related to wastewater management, the rest being waste management.

Environmental protection expenditure (EPE)

The definition of EPE is based on UN guidance via the System of Environmental Economic Accounting Central Framework. It is defined in the Eurostat handbook on EPE as: "the economic resources devoted to all activities and actions which have as their main purpose the prevention, reduction and elimination of pollution and of any other degradation of the environment."

Output

Output is the total value of the goods and services produced in the given time period, such as in one year.

Intermediate consumption

Intermediate consumption is the value of the goods and services consumed as inputs by a process of production. They may be transformed or fully used up during this process.

Gross fixed capital formation

Gross fixed capital formation (GFCF) is the acquisition less disposals of produced fixed assets; that is, assets intended for use in the production of other goods and services for a period of more than a year. Acquisition includes both purchases of assets (new or second-hand) and the construction of assets by producers for their own use.

Household use

Also known as household final consumption expenditure, household use is the value of a given good or service a household uses in a given time period. It is not a full measure of consumption as many services may be provided by the government as social transfers.

Transfers

Transfers are payments from one sector to another, often with one sector being general government. They can be current or capital transfers. In the EPE account, they capture EPE that may not be captured in the other tables in the account, such as payments from the government to the rest of the world.

The estimates in this bulletin are from a wide range of sources. One source is the Environmental Protection Expenditure (EPE) survey, which is used to estimate EPE by businesses where environmental protection is not their primary purpose. The survey samples around 3,000 businesses that operate in four industries, based on Standard Industrial Classification (SIC):

• SIC Section B - Mining and quarrying

• SIC Section C - Manufacturing

• SIC Section D - Electricity, gas, steam and air conditioning supply

• SIC Section E, Division 36 - Water collection, treatment and supply

In 2020, the response rate to the survey was around 60%. Potential activity in other industries is not captured by the survey. As with any survey-based estimates, these are subject to a margin of error and should be interpreted with caution. Standard errors around all published estimates are published in the dataset accompanying this release.

Estimates from this survey are presented in Sections 3 and 4 in this bulletin. A separate dataset is also available. Further information is available in the EPE survey Quality and Methodology Information report. Data from the survey are available from 2015 to 2020.

For the EPE accounts, other data sources include the Annual Business Survey, European System of Accounts data on government expenditure, the Blue Book, and Supply and Use Tables. Data on output, intermediate consumption and gross fixed capital formation are used.

The sources used for each table in the dataset and the methodology are available in the EPE accounts Quality and Methodology Information report. The EPE accounts are available from 2010 to 2019 (and from 2006 in some cases).

New accounts and survey estimates may include revisions to previous years. We incorporate new data and methodology where appropriate. Examples include revisions to previous submissions from businesses for the survey, and re-balancing exercises in Supply and Use Tables for the accounts.

The environmental protection expenditure (EPE) survey is more timely than the accounts and offers data on internal and external operating expenditure, and capital investment, on EPE by specific UK businesses.

The survey has a sample size of around 3,000, which makes detailed disaggregations difficult. As with other surveys, the estimates are subject to some uncertainty. Estimates of the level of uncertainty (standard errors and confidence intervals) reported are presented in the dataset.

Changes in the estimates reported in this statistical bulletin between 2018 and 2020 are not usually greater than the level that is explainable by sampling variability. This means movements in the estimates should be treated as indicative only.

The EPE accounts use National Accounts data, increasing the quality of the estimates and integrating them with other economic data. They are based on the UN's System of Environmental Economic Accounting, enabling comparability between countries.

There is a time lag of 2 or 3 years between the latest reference year in the estimates and publication because of availability of underlying data.