STU 02-02 : Special Topic - Sectoral air pollution and eco-efficiency in Belgium [ Short Term Update 02-02 - 12/06/2002]

During recent months it has become clear that the turning point in the business cycle has been passed both in the US and in the euro area. Attention has shifted since then to the question of how strong the recovery will be and what will be the forces driving it. A substantial improvement in the labour market situation is now the missing link to ensure a seamless transition from a more technical inventories-led upturn to a broader demand-led recovery and to avoid the risk of a double dip scenario, both in the US and in the euro area. As the labour market situation reacts to economic activity with a certain time lag, it is crucial that the business cycle upturn should remain sufficiently strong to persuade entrepreneurs to increase their staff.

According to the FPB’s leading indicator, the Belgian GDP cycle should only begin to climb in the second half of 2002. As a result, GDP should record an average annual increase this year which is almost identical to last year, i.e. 1.0%. Its composition and dynamics should, however, be quite different. The economic upturn should only have a positive impact on employment by the end of the year. The full positive impact of the economic recovery will become visible in 2003, with an expected GDP growth rate of 3.0%. In April 2002, national consumer price inflation fell below 2% (yoy) and it should stay below that level on average in 2002 and 2003.

Within the Belgian Institute for the National Accounts the Federal Planning Bureau (FPB) has been assigned responsibility for the satellite accounts. One of these accounts is the National Accounting Matrix including Environmental Accounts for air (NAMEA Air). The FPB has been working on the NAMEA Air for four years now, with the support of the European Commission (DG Environ-ment), Eurostat, and the regional environmental administrations. This special topic aims to provide the reader with a concise overview of this work and a sense of the kind of results obtained thus far.

The NAMEA Air for Belgium (1994-1998) contains sectoral data on air pollution. These environmental data are combined with economic data in order to distinguish those sectors that are major air polluters because of the kind of activity they carry out from those that are major polluters because of their size, as well as to compare the performance of the different sectors in the field of eco-efficiency.

Air pollution

We have investigated the percentage contribution of pri-vate consumption and production, both aggregated and disaggregated, considering four environmental themes. Two of these themes are related to the health of our planet. These are “the greenhouse effect”, which looks at the contribution to atmospheric warming, and “acidification” showing the potential for the formation of acid rain. The other two themes are directly related to human health. These are “photochemical pollution” showing the potential for tropospheric ozone formation and “carbon monoxide pollution”, the former mainly affecting the respiratory functions of the human body and the latter affecting cardiovascular health.

Table 1 shows that the largest potential for emission reductions is situated on the production side of the economy. An important question in this respect is, of course: what part of production? This is important because, de-pending on which environmental problem one wants to remedy, different industries will have to be targeted in order to achieve the greatest impact. The same is true when it comes to consumption categories. The greenhouse effect was mainly caused by the electricity, gas and water sector, together with household heating. Acidification was caused primarily by agriculture and the electricity, gas and water sector. Photochemical pollution was caused mainly by transport activities. Carbon monoxide pollution was chiefly accounted for by the basic metals sector and transport by households. For each of the environmental themes a large proportion of the emissions are thus produced by a limited set of industries and consumption categories.

Table 2 shows the growth figures for air polluting emissions. Between 1994 and 1998 there has been a significant decrease in total acidifying, photochemical and carbon monoxide emissions, while for the greenhouse effect the opposite was true. The increase in greenhouse gas emissions was primarily due to increased emissions by private consumers. On the production side the increase in greenhouse gas emissions was limited to just over one percent, while emissions from private consumption have increased by almost nine percent. The decrease in acidifying emissions, photochemical pollution and carbon monoxide pollution was primarily due to production, though for the first two of these environmental themes emissions by private consumers also decreased. The evolution of emissions by the production side of the economy thus compares favourably to the evolution of emissions by private consumers in each case. Nevertheless table 1 showed that production was still responsible for the bulk of air pollution.

STU 2-02 was finalised on May 14th 2002.