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Plant and equipment expenditures by business for pollution abatement, 1986 and 1987.

Plant and Equipment Expenditures by Business for Pollution Abatement, 1986 and 1987

U.S. NONFARM business spent $8.5 billion in 1986 for new plant and equipment to abate air and water pollution and to dispose of solid waste, a decrease of 1.9 percent from the 1985 level (table 1).1 Business plans to spend $7.7 billion in 1987, an 8.5-percent decrease from 1986. These estimates are based on a BEA survey conducted early in 1987. Spending for pollution abatement (PA) plant and equipment had increased in 1984 and 1985, after decreasing in the preceding 2 years (chart 6).

1. Pollution abatement is the purposeful reduction or elimination of emissions of pollutants. Pollutants are substances and other emissions that are potentially harmful and degrade the quality of air or water shared by all. Solid waste disposal refers to means acceptable to Federal, State, and local authorities.

The survey results are universe estimates for U.S. nonfarm business for PA plant and equipment. The estimates are based on sample data from companies, each of which is assigned to a single industry corresponding to the industry classification of the company's principal product. For further information about the survey methodology and for industry detail for spending prior to 1985, see "Plant and Equipment Expenditures by Business for Pollution Abatement: Revised Estimates for 1973-83 and Estimates for 1984,' SURVEY OF CURRENT BUSINESS 66 (February 1986) and "Plant and Equipment Expenditures by Business for Pollution Abatement, 1985 and 1986,' SURVEY 66 (December 1986).

The survey provided information about air PA, water PA, and solid waste disposal for 24 industries. Highlights are:

Spending for each media--air, water, and solid waste--decreased slightly in 1986 (chart 7). The decrease for solid waste disposal occurred despite the recent emphasis on hazardous waste control.

Planned spending for solid waste disposal for 1987 indicated a sharp increase. Thus, the total spending decrease planned for 1987 reflected decreases for air and water PA.

Industries that made sizable cuts, $0.1 billion or more, in PA plant and equipment spending in 1986 were electric utilities and primary steel (shown as blast furnaces-steel works in tables and charts). The chemicals industry showed a sizable increase in spending.

The same industries making sizable cuts in spending in 1986 also planned cuts for 1987. Electric utilities doubled its cut relative to 1986. The paper industry planned a sizable increase for 1987.

In recent years, PA plant and equipment spending accounted for about one-half of total business PA capital spending and about one-eighth of total spending for pollution abatement and control. Total PA business capital includes, in addition to spending for plant and equipment, spending for emission abatement devices on cars and trucks as well as spending for agricultural and residential systems (e.g., septic systems). Total spending for pollution abatement and control also includes spending to operate business PA capital and all pollution abatement and control spending by consumers and government.2

2. For further details, see "Pollution Abatement and Control Expenditures, 1982-85,' SURVEY 67 (May 1987).

Real spending for PA plant and equipment--spending adjusted for price change--decreased 2.4 percent in 1986 and, if plans are realized, will decrease 10.4 percent in 1987 (table 2). Real spending had increased in 1984 and had been essentially unchanged in 1985. Prices for PA plant and equipment increased only 0.6 percent in 1986, compared with 2.2 percent in 1985. Price increases have generally decelerated since 1981, when prices increased 11.0 percent. Preliminary estimates indicate that prices will increase 2.1 percent in 1987.

The share of total new plant and equipment expenditures accounted for by PA was 2.0 percent in 1986, the same as in 1985. If plans are realized, the share will decrease to 1.7 percent in 1987. The ratio has generally decreased throughout the 1980's. However, recent reauthorizations of several Federal environmental laws--the Resource Conservation and Recovery Act (in 1984), the Safe Drinking Water Act (in 1986), the Superfund Act (in 1986), and the Clean Water Act (in 1987)--have tended to make PA requirements stricter. If this tendency continues, the decline in the share of total new plant and equipment expenditures accounted for by PA may soon be arrested.

Media detail

Of the $8.5 billion spent for PA plant and equipment in 1986, about $4.1 billion was allocated for air PA, $3.2 billion for water PA, and $1.2 billion for solid waste disposal. Small decreases from 1985 occurred for each media: Air PA, down 1.2 percent; water PA, down 2.4 percent; and solid waste disposal, down 2.5 percent.

The air PA decrease in 1986 was slightly smaller than the 1.7-percent decrease that had been planned, as reported in the PA survey a year earlier. Increases that had been planned for water PA (1.5 percent) and solid waste disposal (9.2 percent) did not materialize. The actual decrease in solid waste disposal in 1986, although small, is surprising in light of the emphasis on control of hazardous wastes in recent years and follows increases of 36.8 percent and 14.4 percent in 1984 and 1985, respectively.

Estimates of planned spending for 1987 show substantial decreases for air and water PA plant and equipment, but a large increase for solid waste disposal--25.9 percent. The large increase for solid waste disposal is consistent with moving ahead on programs after postponing investment first planned for 1986.

In 1986, real spending for air PA plant and equipment decreased slightly, 1.3 percent. Real spending for water PA plant and equipment and for solid waste disposal decreased moderately, 4.7 percent and 5.6 percent, respectively. In 1987, plans indicate larger decreases in real spending for air and water PA, partly offset by increased spending for solid waste disposal. Given that real spending for total PA plant and equipment has tended to decrease, recent Federal environmental legislative activity so far appears to have affected primarily the composition of real PA plant and equipment spending, shifting spending from air and water PA to solid waste disposal. If 1987 plans are realized, real spending for solid waste disposal will reach its highest level since 1973 and its share of total PA plant equipment spending will increase to 18.3 percent, up from 13.1 percent the previous year.

Spending for air and water PA plant and equipment has accounted for over four-fifths of PA plant and equipment spending in recent years. Such air and water PA is accomplished either by end-of-line methods or changes-in-production-process methods. 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. Business reported spending $6.4 billion for end-of-line methods in 1986 and planned $5.6 billion for 1987-- 87.7 percent and 88.5 percent, respectively, of total air and water PA plant and equipment spending (table 3). Prior to 1986, the largest share of air and water PA plant and equipment spending allocated to end-of-line methods was 83.4 percent in 1984.

Industry detail

Manufacturing industries spent $5.3 billion for PA plant and equipment in 1986, a 3.9-percent increase and the third consecutive yearly increase. Nondurable goods industries raised spending, and durable goods industries lowered spending. Plans for 1987 by manufacturing indicate a smaller increase, 2.1 percent, again reflecting an increase by nondurables.

Durable goods industries lowered spending for PA plant and equipment 2.8 percent in 1986. Decreases by primary steel, machinery (except electrical), and stone-clay-glass more than offset increases in other industries-- notably electrical machinery and motor vehicles. The largest decrease was by steel, over $0.1 billion (down 23.0 percent); this industry had increased spending for PA plant and equipment strongly in 1985. For 1987, steel reported plans for another sizable cut and motor vehicles planned a cut almost as large. Partly offsetting these cuts were planned increases by "other durables' and stone-clay-glass.

Nondurable goods industries raised spending for PA plant and equipment 8.6 percent in 1986. Increases by chemicals and petroleum more than offset a decrease by paper. The largest increase was by chemicals, over $0.2 billion (up 32.4 percent). The increase by petroleum was small and followed four consecutive decreases; plans for 1987 indicate another decrease in petroleum spending. For 1987, paper reported the largest planned increase; chemicals also reported plans for a notable increase. Both the 1986 and 1987 increases by the chemicals industry are consistent with favorable economic conditions in that industry (e.g., strong sales and rising profits) and may also indicate stimulus from recent reauthorizations of environmental legislation.

Nonmanufacturing industries spent $3.1 billion for PA plant and equipment in 1986, a 10.3-percent decrease --about the same rate as in 1985. A much larger decrease is planned for 1987, 26.6 percent. Both the actual and planned decreases by nonmanufacturing reflect large cuts by electric utilities, $0.4 billion in 1986 (down 12.5 percent) and $0.7 billion in 1987 (down 29.5 percent). Electric utilities have added little capacity in recent years due to slow growth in demand. Notable cuts were made by mining in 1986 and planned for 1987. A notable increase was made by trade and services in 1986, but a cut was planned for 1987.

1980's in perspective.--Six industries have largely shaped the path of PA plant and equipment spending in the 1980's: Electric utiliies, petroleum, chemicals, paper, motor vehicles, and primary steel (chart 8). The total has been trending down in the 1980's, at a 1.4-percent annual rate. Electric utilities and petroleum, the largest spenders, peaked early and contributed substantially to the downtrend. Spending by chemicals fell between 1981 and 1984 before its recent resurgence, which will put it at a record high in 1987 if plans are realized. Spending by the other three industries --primary steel, motor vehicles, and paper--declined sharply early in the 1980's. These three industries had relatively low PA plant and equipment spending in 1983 and contributed to the dip in total PA plant and equipment spending in that year. Recent increases by paper and, to a lesser extent, motor vehicles have tended to moderate the downtrend in total PA plant and equipment spending.

Spending for PA plant and equipment in 1986 and that planned for 1987 may be largely for replacing and rebuilding existing equipment. Most industries appear to have made substantial progress toward fulfilling existing regulatory requirements, except those from changes accompanying recent reauthorizations of Federal environmental laws noted earlier. Spending for PA plant and equipment by electric utilities (except hydroelectric), chemicals, and primary steel in the next few years may be influenced by the outcome of pending legislation to reduce emissions of 50 hazardous air pollutants and to control acid rain.

Table: 1.--New Plant and Equipment Expenditures by U.S. Nonfarm Business: Total and for Pollution Abatement

Table: CHART 6 Current-Dollar and Constant-Dollar Expenditures by Business for Pollution Abatement New Plant and Equipment

Table: CHART 7 Current-Dollar and Constant-Dollar Expenditures by Business for New Plant and Equipment to Abate Air and Water Pollution and to Dispose of Solid Waste

Table: 2.--New Plant and Equipment Expenditures for Pollution Abatement in Current and Constant Dollars with Implicit Price Deflators

Table: 3.--New Plant and Equipment Expenditures by U.S. Nonfarm Business for Air and Water Pollution Abatement by End-of-Line Methods

Table: CHART 8 Current-Dollar Expenditures for Pollution Abatement New Plant and Equipment, Selected Industries
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Author:Rutledge, Gary L.; Stergioulas, Nikolaos A.
Publication:Survey of Current Business
Date:Oct 1, 1987
Words:1940
Previous Article:Current business statistics.
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