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Plant and equipment expenditures by business for pollution abatement, 1983 and planned 1984.

U.S NONFARM business spent $7.2 billion in 1983 for new plant and equipment to abate air and water polution and to dispose of solid waste, 14.7 percent less than in 1982 (table 1). These estimates are based on a survey conducted in November and December 1983 by BEA. Plans indicate that spending will increase 5.5 percent, to $7.6 billion, in 1984.

The share of total new plant and equipment expenditures accounted for by pollution abatement decreased from 2.7 percent in 1982 to 2.4 percent in 1983. Business plans indicate a decrease to 2.2 percent in 1984. The trend in the share has been downward since 1975, when the share reached 4.4 percent (chart 4).

Prices, as measured by the implicit price deflator for PA plant and equipment, increased 2.2 percent in 1983, compared with a revised increase of 5.7 percent in 1982 (table 3). The 1983 price increase was the smallest since 1965. It appears, based on information available in May, that prices are likely to increase between 2 and 5 percent in 1984.

After adjustment for price change, PA plant and equipment spending decreased 16.6 percent in 1983 to $3.1 billion. Decreases for air, water, and solid waste were 23.0 percent, 6.0 percent, and 20.6 percent, respectively. If plans are realized in 1984, real spending will range between $3.1 and $3.2 billion. This will result in the first increase in real spending since 1979. Spending patterns

Spending for air and water PA plant and equipment has accounted for approximately 90 percent of total PA plant and equipment spending since 1973, the first year covered by the survey. Such spending is for one of two general methods. End-of-line methods involve the separation, treatment, or reuse of pollutants after they are generated but before they are emitted. Spending for end-of-line methods has accounted for a fairly constant share--about 80 percent--of air and water spending. Companies reported spending $5.2 billion in 1983 for end-of-line methods and plan to spend the same amount in 1984 (table 2). Changes-in-production-process methods are preventive in that they reduce the generation of pollutants during the production activity. Such methods generally have production and PA features, but survey respondents are asked to report only the part of spending that is for pollution abatement. Technologies for both methods change over time depending upon resources devoted to research and development.

In 1983, business spending decreased 22.0 percent (to $3.7 billion), 2.7 percent (to $2.9 billion), and 17.1 percent (to $0.7 billion) for air, water, and solid waste, respectively. Plans indicate business spending in 1984 for air and solid waste will increase 3.6 percent (to $3.8 billion) and 47.1 percent (to $1.0 billion), respectively, while spending for water will remain about the same.

Industry detail.--The 1983 decrease in PA plant and equipment spending was widespread, affecting all major industry categories (table 4). The decrease was 15.0 percent in manufacturing and 14.3 percent in nonmanufacturing. The 1983 decrease was mainly due to environmental regulatory conditions facing business. These conditions are highlighted in the accompanying box, which discusses the decline in the share of new plant and equipment that is for pollution abatement.

The 1984 planned increase in PA plant and equipment spending is also widespread, except for a planned decrease by electric utilities. The planned increase is 7.5 percent in manufacturing and 3.1 percent in nonmanufacturing. Environmental regulatory conditions in 1984 show little change from 1983 and thus can not contribute significantly to the planned increase. The 1984 planned increase appears to be mainly due to improvement in general business conditions affecting investment (see the article reporting the results of BEA's plant and equipment expenditures survey elsewhere in this SURVEY). This improvement increases firms' ability to finance facility purchases, including those for pollution abatement, and if production capacity is expanded, pollution abatement capacity often must also be expanded.

In 1983, the largest absolute decreases in spending for PA plant and equipment were by blast furnaces and steel works ($0.22 billion), electric utilities ($0.20 billion), and nonferrous metals ($0.17 billion). In percentage terms, the decreases in blast furnaces and nonferrous metals were each over 50 percent; the decrease in electric utilities was 7 percent.

The largest absolute increases in spending for PA plant and equipment planned for 1984 are by paper ($0.14 billion), "gas and other" public utilities ($0.14 billion), and blast furnaces and steel works ($0.10 billion). In percentage terms, each of these planned increases is large.

Six industries have, over the years, accounted for most--70 percent or more--of PA plant and equipment spending: electric utilities, petroleum, chemicals, blast furances, paper, and nonferrous metals (chart 5). Through 1983, the share of spending by electric utilites tended to rise. Trends for other industries shares are less clear; the shares of others, except for petroleum, tended to decrease slightly through 1983.
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Author:Russo, William J., Jr.; Rutledge, Gary L.
Publication:Survey of Current Business
Date:Jun 1, 1984
Words:837
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