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Plant and equipment expenditures by business for pollution abatement, 1985 and 1986.

Plant and Equipment Expenditures by Business for Pollution Abatement, 1985 and 1986

U.S. nonfarm business spent $8.6 billion in 1985 for new plant and equipment to abate air and water pollution and to dispose of solid waste, an increase of 2.0 percent from the 1984 level (table 1). According to business plans, spending will increase 1.2 percent in 1986--bringing total pollution abatement (PA) capital expenditures to $8.7 billion. These results are based on a BEA survey conducted early in 1986.

Spending for PA capital had peaked at $9.3 billion in 1981 and declined to $7.8 billion by 1983 before beginning to increase in 1984. The 2.0-percent increase in PA capital spending in 1985 was one-fourth of the 1984 increase. The deceleration reflects the slowing of total capital spending, from an increase of 16.2 percent in 1984 to an increase of 8.3 percent in 1985. The pattern of spending was probably not affected by changes in legislative and administrative requirements for PA in 1984 and 1985.

Real spending for PA capital--spending adjusted for price change--was unchanged in 1985, compared with a 4.2-percent increase in 1984 (table 2). If current-dollar spending reaches the planned 1986 level, a real decrease of 2.5 percent is indicated for 1986. Real spending had peaked in 1975 and decreased in all but one year until the 1984 increase. Prices for PA capital increased 2.2 percent in 1985, compared with 3.6 percent in 1984. Preliminary estimates indicate that prices will increase in 1986 by 3.8 percent.

The share of total new plant and equipment expenditures accounted for by PA decreased from 2.1 percent in 1984 to 2.0 percent in 1985, the lowest level since the first survey was conducted in 1973 (chart 2). This decline continues the trend that started a decade earlier after the share peaked at 4.2 percent. According to planned spending estimates, the ratio of PA spending to total capital spending will decrease slightly in 1986.

Media detail.--Of the $8.6 billion spent for PA capital in 1985, about $4.1 billion was allocated for air PA, $3.3 billion for water PA, and $1.2 billion for solid waste disposal. Spending for air PA capital decreased 3.3 percent in 1985, and spending for water PA capital increased 5.1 percent. Solid waste disposal capital increased at a substantial rate, 14.4 percent.

Estimates of planned spending for 1986 show another strong increase in solid waste disposal, 9.2 percent. Planned spending for air PA capital decreased 1.7 percent, and that for water PA capital increased 1.5 percent.

Concern about control of hazardous wastes appears to be stimulating capital spending for solid waste disposal. The share of PA capital spending accounted for by solid waste disposal fluctuated during 1973-76 and then increased each year, except 1982. At 5.7 percent, the share was smallest in 1975, and it reached 13.8 percent in 1985. Estimates of planned PA capital spending for 1986 indicate a 14.9-percent share for solid waste disposal.

Real spending for air PA capital decreased 4.4 percent in 1985, but that for water PA and for solid waste disposal increased 1.4 percent and 13.7 percent, respectively. For air PA, real spending has declined every year since 1979, except in 1984 when it increased slightly. Preliminary estimates for 1986 indicate decreases of 4.8 percent and 2.7 percent in real spending for air PA and water PA, respectively, and an increase of 6.5 percent in real spending for disposal of solid waste.

For air and water PA, reduction in emissions of pollutants is either by end-of-line methods or changes-in-production-process methods (table 3). End-of-line methods treat pollutants after they are generated, e.g., use of a settling pond for waste particles suspended in water. Changes-in-production-process methods are preventive in that they reduce the generation of pollutants during production, e.g., use of a water recirculation system for process cooling, instead of a once-through system, for excess heat. The share of air and water PA capital spending for end-of-line methods has fluctuated since 1973. It was smallest in 1982 (77.5 percent) and largest in 1984 (83.4 percent). The share has remained high.

Industry detail. --Manufacturing industries spent $5.1 billion for PA capital in 1985, $0.6 billion (13.2 percent) more than in 1984. Durable goods industries increased spending $0.4 billion (23.4 percent), reflecting large increases by the blast furnaces and motor vehicles industries (chart 3). Nondurable goods industries increased spending $0.2 billion (6.7 percent), reflecting an increase in spending by the chemicals industry after 3 consecutive years of declines.

Nonmanufacturing industries spent $3.5 billion for PA capital in 1985; a $0.4 billion (11.0 percent) decrease largely offset the increase in manufacturing. Almost all this decrease was accounted for by electric utilities, for which PA capital spending dropped to the lowest level since 1978. Reduced PA capital spending by electric utilities is consistent with slowing increases in demand for electricity--which affects the building of new plants that must meet new source performance standards for PA.

Six industries accounted for three-quarters of PA capital spending in 1985: Electric utilities, petroleum, chemicals, blast furnaces, paper, and motor vehicles (chart 4). The first two of these industries accounted for almost one-half of the spending.

For 1986, a planned increase of $0.2 billion for manufacturing was partly offset by a decrease by nonmanufacturing for a net increase of $0.1 billion. Within manufacturing, a planned increase by nondurable goods industries ($0.4 billion) was partly offset by a planned decrease ($0.1 billion) by durable goods industries. The planned decrease by durable goods industries is accounted for by blast furnaces. The planned increase by nondurable goods industries is largely accounted for by chemicals ($0.2 billion) and petroleum ($0.1 billion). It is likely that actual increases will be smaller, particularly for petroleum. Weakness in sales and profits for petroleum related to recent price declines will make realization of 1986 plans difficult.

Within nonmanufacturing, electric utilities planned a $0.2 billion decrease. With this decrease, the electric utility share of total PA capital spending is 30.2 percent, down from 38.2 percent in 1982. The downtrend in Pa capital spending in electric utilities may continue, in line with industry projections indicating a substantial drop in new plant additions during the next decade. On the other hand, congressional interest in acid rain reduction, as evidenced by current acid rain bills, may result in additional PA requirements for electric utilities. For example, a recent proposal calls for expanded application of 1978 regulations on sulfur dioxide emissions to include electric plants built prior to 1977, which would add to PA capital spending.
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Author:Rutledge, Gary L.; Stergioulas, Nikolaos A.
Publication:Survey of Current Business
Date:Dec 1, 1986
Words:1139
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