{"id":13925,"date":"2021-08-18T01:01:00","date_gmt":"2021-08-18T00:01:00","guid":{"rendered":"https:\/\/www.economicsobservatory.com\/?post_type=question&p=13925"},"modified":"2021-12-07T09:51:35","modified_gmt":"2021-12-07T09:51:35","slug":"how-much-do-uk-businesses-spend-on-protecting-the-environment","status":"publish","type":"question","link":"https:\/\/www.economicsobservatory.com\/test\/how-much-do-uk-businesses-spend-on-protecting-the-environment","title":{"rendered":"How much do UK businesses spend on protecting the environment?"},"content":{"rendered":"\n

The goal of the 2016 Paris Agreement is to keep average global temperatures from rising more than 2\u00b0C above pre-industrial levels by reducing the emissions that cause climate change. Business investment to make production less harmful to the environment is an important factor in meeting this goal.<\/p>\n\n\n\n

Environmental protection expenditure includes all activities and actions that contribute to the prevention, reduction and elimination of pollution or any other degradation of the environment. Some examples are sewage treatment, the removal of solid waste, the management of exhaust gas emissions and protection of natural landscapes. Each of these activities plays a role in the effort to limit the rise in temperature and mitigate climate change.<\/p>\n\n\n\n

Recent ONS data<\/a> provide an update on environmental protection expenditure by UK businesses. The ONS surveyed around 3,000 firms from four industries: mining and quarrying, manufacturing, energy production, and water supply. The data show that UK businesses spent an estimated \u00a32.1 billion on environmental protection in 2019 (See Table 1).<\/p>\n\n\n\n

Table 1: Environmental protection expenditure by businesses, UK, 2016 to 2019<\/h4>\n\n\n\n

\u00a3 billions<\/strong><\/p>\n\n\n\n

<\/td><\/td>2016<\/strong><\/td>2017<\/strong><\/td>2018<\/strong><\/td>2019<\/strong><\/td><\/tr>
External expenditure<\/td>operating<\/td>1.2<\/td>1.2<\/td>1.2<\/td>1.2<\/td><\/tr>
In-house expenditure<\/td>operating<\/td>0.5<\/td>0.5<\/td>0.5<\/td>0.4<\/td><\/tr>
Total operating expenses<\/strong><\/td><\/td>1.7<\/td>1.7<\/td>1.7<\/td>1.7<\/td><\/tr>
End-of-pipe expenditure<\/td>capital<\/td>0.2<\/td>0.5<\/td>0.3<\/td>0.4<\/td><\/tr>
Integrated expenditure<\/td>capital<\/td>0.1<\/td>0.1<\/td>0.0<\/td>0.0<\/td><\/tr>
Total capital expenditure<\/strong><\/td><\/td>0.3<\/td>0.5<\/td>0.4<\/td>0.4<\/td><\/tr>
Disposals<\/td><\/td>0.0<\/td>0.0<\/td>0.0<\/td>0.0<\/td><\/tr>
Total environmental protection expenditure<\/strong><\/td><\/td>2.0<\/td>2.2<\/td>2.1<\/td>2.1<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
Source: Office for National Statistics \u2013 Environmental Protection Expenditure Survey<\/h5>\n\n\n\n

Environmental protection spending can be divided into operating and capital expenditure. Operating expenditure relates to running costs incurred by businesses for environmental protection services that enable them to operate. In 2019, operating expenditure accounted for 79% of environmental protection expenditure. Around three-quarters (\u00a31.2 billion) of this related to payments made to external organisation for their environmental services, such as waste disposal or sewage treatment. This suggests that businesses mainly paid other organisations for treatment, disposal, and investigation of waste, instead of managing these processes internally.<\/p>\n\n\n\n

Capital expenditure relates to investment by businesses in assets such as land, equipment or buildings that are used during business operations to manage or reduce pollutants generated. These are often one-off items such as investment in equipment that treat generated industrial pollutants \u2013 low levels of investment in the current year may reflect high investment in previous years.<\/p>\n\n\n\n

UK businesses in the four surveyed industries spent \u00a30.4 billion on capital environmental protection expenditure in 2019, compared with \u00a30.3 billion in 2018. In both years, most of this capital expenditure related to \u2018end-of-pipe\u2019 spending. End-of-pipe spending is an investment in new methods, technologies or equipment designed to manage pollutants after<\/em> their creation. This might include investment in equipment that treated generated pollutants, such as an effluent treatment plant or exhaust air scrubbing system, or investment in ensuring their safe disposal, such as a solid waste compactor.<\/p>\n\n\n\n

In contrast, integrated capital expenditure refers to methods, technologies and equipment integrated within a business\u2019 overall activity, where the primary aim of the expenditure is to reduce any pollutants generated. An example here would be the difference in the cost to a business of purchasing more precise cutting machinery, that led to the production of smaller amounts of waste, compared to the business purchasing cheaper but less precise cutting machinery that might lead to the production of larger amounts of waste.<\/p>\n\n\n\n

Spending on solid waste management activities (\u00a30.9 billion) accounted for the largest proportion (42%) of all environmental protection expenditure in 2019 (Figure 1). Solid waste management includes the treatment and investigation of waste, including general waste such as paper and cardboard, as well as hazardous and non-hazardous waste. Most spending on solid waste management (87%) related to external operating expenditure.<\/p>\n\n\n\n

Figure 1: Environmental expenditure by type and activity, UK, 2019<\/h4>\n\n\n
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