1. Measures of low carbon economy,
trade in environmental goods & services
Misato Sato, Arlan Brucal
Grantham Research Institute, LSE
Expert workshop on the creation and uses of combined environmental and economic performance datasets at the micro-level
July 11 2018, OECD Paris

2. Measures of the green economy
 Low Carbon and Renewable Energy (LCRE) data
 FTSE Russell Green Revenues data
 Trade in environmental goods
• Defining green goods
• HMRC trade data
 Trade in environmental services
• Defining green services
• International trade in services (ITIS)

3. UK Low Carbon and Renewable Energy (LCRE) database
• Annual survey of UK firms undertaking activities relating to low carbon and renewable energy
• Repeated cross-sectional study
• Sampling:
• All businesses with an employment of 250 or above, plus random sample of businesses
from each of the other strata
• Random sample – weights applied to make sample representative
• Target population identified based on evidence from the Annual Business Survey,
guidance from Eurostat and the target population of similar surveys administered by
other NSIs
• Several industries excluded e.g. financial and insurance activities
• 2014 (41,400 businesses), 2015 (14,000), 2016 (similar to 2016)
• Response to demand from policy departments and devolved administrations

4. LCRE key variables
• SIC2007 code
• Country of registration (England, Scotland, Wales, Northern Ireland)
• LCRE
• Sectors
• Turnover
• Employment
• imports and exports
• Subsidies
• acquisition and disposal of capital assets
• Dummy variable indicating if respondent is active in any LCRE sector
• Sampling weight (to be applied to unweighted data in order to make sample representative)
• Inter-Departmental Business Register (IDBR) number

5. LCRE definition
Low Carbon and Renewable Energy defined as “economic activities that deliver goods and
services that generate significantly lower emissions of greenhouse gases; predominantly carbon
dioxide”
G1 – Low Carbon Electricity (sectors 01, 02, 03, 04, 05, 16, 15)
G2 – Low Carbon Heat (sectors 08, 09)
G3 ‐ Energy from Waste and Biomass (sectors 06, 07)
G4 – Energy Efficient Products (sectors 11, 10, 12)
G5 – Low Carbon Services (sector 13)
G6 – Low Emission Vehicles and Infrastructure (sector 14)
G7 – Fuel Cells and Energy Storage (sector 17)

6. LCRE sector classifications
 01 – offshore wind
 02 – onshore wind
 03 – solar photovoltaic
 04 – hydropower
 05 – Other renewable electricity
 06 – Bioenergy
 07 – Alternative fuels
 08 – Renewable heat
 09 – Renewable combined heat and power
 10 – Energy efficient lighting
 11 – Energy efficient products
 12 – Energy monitoring, saving or control
systems
 13 – Low carbon consultancy and advisory
services
 14 – Low emission vehicles and infrastructure
 15 – Carbon capture and storage
 16 – Nuclear power
 17 – Fuel cells and energy storage systems

7. UK low-carbon activities accounted for around 1% of total UK
turnover and employment in both 2015 and 2016
How the low-carbon transition can drive strong and sustainable growth (forthcoming,) Samuela Bassi, Sandra Bernick, Arlan Brucal,
James Hamilton, Tobias Kruse, Karlygash Kuralbayeva, Ralf Martin, Myra Mohnen, James Rydge, Misato Sato and Anna Valero.
Special paper for the LSE Growth Commission
Metric LCRE (2016) Percentage change
(2015-16)
Share of total 2015 (2016) non-
financial business economy activity
Total low-carbon activity/turnover
(non-financial sector)
£42.6bn 5.0% 1.3% (1.3%)
Imports £6.0bn 38.6% 1.0% (0.8%)
Exports £3.7bn 1.4% 0.8% (0.8%)
Total low-carbon jobs (FTE) 208,000 3.3% 0.9% (0.9%)
 Energy efficiency made largest contribution to turnover (50% turnover, 70%employment,
32% imports)
 Electric vehicles (25% imports, 60% exports)

8. Contributions by industrial sectors to the UK low-carbon economy
 Turnover (2015)  Employment (2015)
How the low-carbon transition can drive strong and sustainable growth (forthcoming,) Samuela Bassi, Sandra Bernick, Arlan Brucal,
James Hamilton, Tobias Kruse, Karlygash Kuralbayeva, Ralf Martin, Myra Mohnen, James Rydge, Misato Sato and Anna Valero.
Special paper for the LSE Growth Commission

9. FTSE Russell
Green Revenues
database

10. FTSE Russell Green Revenues database
 Sold as a sustainable investment product
 Sample – 14,000+ publicly listed companies in 48 countries.
 Represents nearly 98.5% of total global market capitalization
 3000+ companies identified as engaging in green activities
 Yearly data, 2008-17
 Data collection - mostly by looking at company reports.
 Firm IDs: SEDOL, ISIN

11. LCE 8 Sectors and 60 Subsectors
–
FTSE Russell 11
Detailed below is the core LCE Sector & Subsector classification model derived from the application of the Low Carbon Economy Industrial Engagement Matrix™
to the current outputs of listed companies.
In accordance with the decisions of the ICB Committee, these groupings have been established to represent the most effective structural framework for capturing
the industrial transition to the Low Carbon Economy. This will not be a static model due to the dynamic changes occurring within global commerce.
LCEG – Energy Generation LCEQ – Energy Equipment LCEM – Energy Management LCEE – Energy Efficiency
01 LCE Bio Fuels LCE Bio Fuels LCE Combined Heat/Power LCE Advanced Materials
02 LCE Clean Fossil Fuels LCE Clean Fossil Fuels LCE Controls LCE Building and Property
03 LCE Geothermal LCE Geothermal LCE Fuel Cells LCE Industrial Processes
04 LCE Hydro LCE Hydro LCE Integrated LCEM LCE Integrated LCEE
05 LCE Integrated LCEG LCE Integrated LCEG LCE Logistics and Support LCE IT Processes
06 LCE Nuclear LCE Nuclear LCE Power Storage LCE Lighting
07 LCE Ocean and Tidal LCE Ocean and Tidal LCE Smart Grids LCE Video Conferencing
08 LCE Solar LCE Solar
09 LCE Waste to Energy LCE Waste to Energy
10 LCE Wind LCE Wind
LCEI – Environmental Infrastructure LCER – Environmental Resources LCMS – Modal Shift LCOS – Operating Shift
01 LCE Carbon Capture & Storage LCE Agriculture LCE Aviation LCE Finance/Investment
02 LCE Desalination LCE Aquaculture LCE Integrated LCMS LCE Integrated LCOS
03 LCE Flood Control & Land Erosion LCE Integrated LCER LCE Railways LCE Retail/Wholesale
04 LCE Integrated LCEI LCE Mining LCE Road Vehicles LCE Property
05 LCE Logistics and Support LCE Minerals and Metals LCE Shipping
06 LCE Pollution Management LCE Source Water
07 LCE Recyclable Products LCE Sustainable Forestry
08 LCE Recycling Services
09 LCE Waste Management
10 LCE Water Management

12. LCE (low carbon economy) industrial classification system
A simple but consistent test of the utility of industrial output
Inclusion in the Low Carbon Economy Industrial Classification System™ is determined by compliance with the 9 point LCE Low Carbon Economy
Industrial Engagement Matrix™.
The Industrial Engagement Matrix requires industrial Sectors & Subsectors as well as individual stocks to demonstrate that they meet minimum criteria
for inclusion through alignment of their activities with at least one factor in each EAE (Engagement, Action, Externality) divisions of the matrix as shown
in the example above.

13. Main issues
 Large green revenues range
 Matching low carbon sectors to standard sector classifications.
 Country level analysis
• companies included in the database often operate across several countries

14. example
 Estimate based on Industry-shares [Manufacture of motor vehicles] : 4.9% [0.9427*0.052]

15. Aggregated estimated global green revenues 1.5-4 trillion USD, up to
6% of global listed equity market derived from green economy

16. Trade in green goods

17. There are 545 unique goods in the universe of green products
 Overall sample of environment goods:
― a total set of 545 unique environmental products collated from existing WTO,
APEC and OECD classifications
― Narrow list (60, based on high consensus, and broad list)
― classified at the HS-6 digit level
― merged with UK firm level trade data (HMRC) to enable the analysis of
environmental trade flows 2005-2016
List Description
WTO Reference Universe
408 products that represent a universe of potentially green products
proposed by different WTO Member States
WTO Sample Core list 26 products with wide endorsement from WTO Member States
APEC List of Environmental Goods
54 green products for which APEC Member states agreed to reduce
applied tariff rates to 5% or less by the end of 2015
OECD (1999) Illustrative Product List of
Environmental Goods
list of 121 illustrative environmental products developed by the
OECD/Eurostat Informal Working Group
OECD (2014) Combined List of
Environmental Goods
list of 257 customised products developed by the OECD

18. HMRC Overseas trade statistics
 Non-EU Trade in goods data collected from UK Customs import and export entries made by
importing/exporting businesses
 EU trade : VAT-registered businesses must declare the value of their supplies to and acquisitions
from other EU Member States
 Commodity codes from the UN Tariff (HS Nomenclature) and its EU derivative, the Intrastat
Classification Nomenclature
 Businesses trading below the Intrastat Exemption Threshold complete two boxes on the UK VAT
return
 Should include all trading businesses
 Estimates made where businesses fail to submit data by the required due date
 Variables: Transaction value; Country of origin/destination; Country of dispatch; SIC code; HS6
code; CN8 (Combined Nomenclature) number

19. Issues
 Quality
• Ex-post amendments are made by creating two additional entries, the new
and accurate figure and the negative of the original figure – this introduces
duplicate values
• While all figures should be in GBP, some are – allegedly – not
 The raw data does not exactly match the published (adjusted) figures
 CN8 numbers change from year to year, complicating the harmonisation process
 Access:
• Onsite access only.
• Cannot be matched with other UK microdata.

20. UK trade for low-carbon equipment with the European Union
(2011-2014 average)
Source: Dussaux and Carvalho (2017) UK needs free trade with the EU in low-carbon technologies

21. UK ITIS
International Trade in Services, 1996-2015

22. Summary
 Launched in 1996
 Collects data on the international transactions in services by
private sector companies resident in the UK and is the main
input into UK balance of payments
 Annual and quarterly (no company should receive both in
any given year)
 Covers imports and exports of 51 types of service by service
and country of origin/destination
 All surveys are statutory and data is collected under the
Statistics of Trade Act

23. Sampling procedure
Annual survey
 Stratified random sample based on Interdepartmental Business Register
as the sample frame
 Additional firms selected using filter questions on other business surveys,
direct sampling in “High Propensity Industries”, and due to “Known
Trader status” from previous period
Quarterly survey
 Addressed to companies with largest service trade transactions
(identified in last annual survey, updated yearly)
 Panel of about 700 contributors (60% of total ITIS)

24. Sample size
Before 2002
 Annual survey: 10,000 firms
 Quarterly survey: 550 firms
Since 2002
 Annual survey: 20,000 firms (approx. 9,000 for production
industries and 11,000 for non-production industries)
 Quarterly survey: 700 (mainly larger) firms

25. Data issues
 Harmonisation: changes in both SIC and ITIS Product Code
classifications
 Mapping not 1:1
 SIC correlations: weighted tables only available for 2003/07
transition – solution: calculated ratios ourselves for 1992/2003
transition
 Product code change sometimes 1:m, sometimes m:1 – solution:
generated new classification using broader category in each case
 Additional complication: timing of product code changes not
known (2005 annual survey, 2005 Q1, 2004 Q4)