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Pollution abatement and control expenditures, 1980-83.

U.S.RESIDENTS spent $62.7 billion on pollution abatement and control (PAC) in 1983, a 6.4-percent increase over the $58.9 billion spent in 1982 (tables 1 and 2). After adjustment for price dchange, the increase was 3.6 percent. The real increase was mainly in spending on motor vehicle emission abatement devices.

The spending discussed in this article is for goods and services that U.S. residents use to produce cleaner air and water and to dispose of solid waste. This spending is for regulation and monitoring, pollution abatement, and research and development. Regulation and monitoring is a government activity that stimulates and guides action to reduce pollutant emissions. Pollution abatement directly reduces pollutant emissions by preventing the generation of pollutants, recycling them, or treating them prior to discharge. Research and development not only supports abatement, but also helps increase the efficiency of regulation and monitoring. Highlights of the recently completed set of PAC estimates for 1983 are:

* In real terms, personal spending for pollution abatement increased 17.7 percent, business spending increased 3.4 percent, and government spending declined 3.2 percent from 1982.

* In real terms, spending for regulation and monitoring (all by government) declined 16.0 percent and spending for research and development (by business and government) changed little from 1982.

* Prices of PAC goods and services, as measured by the fixed-weighted price index for PAC, increased 3.1 percent in 1983, compared with 5.0 percent in 1982 (table 3). Prices for most PAC categories increased less in 1983 than in 1982.

* Real PAC spending was 1.6 percent of GNP, and business capital spending for pollution abatement was 2.6 percent of gross private domestic investment.

* In current dollars, business PAC costs--the costs of conforming to PAC rules and regulations--were $62.0 billion in 1983, up 16.6 percent from 1982.

Although information for 1984 is incomplete, what is available indicates another increase in real PAC spending. Spending for motor vehicles with emission abatement devices continued to be strong. According to the BEA plant and equipment survey taken in November-December 1983, business planned to increase their capital spending for pollution abatement in 1984, and according to preliminary Census Bureau estimates, governments increased their spending on sewer systems. Spending in other components declined, but at a slower rate than in 1983.

The section that follows discusses real PAC spending and the composition of that spending in 1983. The next section discusses business PAC costs, which reflect PAC spending in previous years as well as in the current year. Technical notes on definitions relating to PAC and sources used in preparing the estimates follow.

Real PAC spending

Changes in real spending.--Real total Pac spending increased $0.9 billion in 1983, following declines of $1.2 billion in 1982 and $0.8 billion in 1981. The increase was due to the recovery in general economic activity.

Personal spending for pollution abatement increased 17.7 percent in 1983 to $4.4 billion, following a 0.3-percent decline im 1983. The increase reflects the recovery in purchases of motor vehicles, which are required to have emission abatement devices.

Business spending for PAC, excluding research and development, increased 3.4 percent in 1983 to $14.9 billion, following a 4.8-percent decline in 1982. The recovery in general economic activity in 1983 led to higher utilization of production facilities and increased motor vehicle purchases by business. Spending for purchase and operation of motor vehicle emission abatement devices increased 13.4 percent, following a 1.7-percent decline in 1982. Spending to operate plant and equipment for pollution abatement increased 11.1 percent, following a 10.6-percent decline in 1982. Spending for new plant and equipment for pollution abatement declined 17.3 percent, compared with a 10.0-percent decline in 1982.

Government PAC spending, excluding research and development and regulation and monitoring, declined 3.2 percent in 1983 to $4.6 billion, compared with a 5.6-percent decline im 1982. A 9.5-percent decline in public sewer system construction outweighed an increased in other government pollution abatement spending.

Research and development spending for PAC by business and government remained at about $0.7 billion in 1983, following a 19.2-percent decline in 1982. Although government spending increased 6.1 percent, business spending declined 6.9 percent.

Regulation and monitoring spending for PAC by government declined 16.0 percent in 1983 to $0.6 billion, compared with a 5.7-percent decline in 1982. Federal spending declined 21.6 percent, and State and local spending declined 7.1 percent.

Composition of real spending.--Table 4 is a reorganization of items in table 2 designed to highlight subjects emphasized by PAC legislation. Most of PAC spending in 1983 was for pollution abatement (95 percent). Regulation and monitoring by government accounted for 2 percent of PAC spending, while research and development by business and government accunted for 3 percent. Almost one-half of the PAC program in 1983 was for purchase and operation of motor vehicle (mobile sources) emission abatement devices and public sewer systems.

Chart 1 compares PAC spending in 1983 and 1972, the first year for which estimates are available. In 1983, about 30 percent of PAC spending was by persons and business for motor vehicle emission abatement, about twice the percentage in 1972. spending to abate pollution from industrial facilities was 32 percent of PAC spending in 1983, down from 38 percent in 1972, and spending for public sewer systems was about 20 percent, down from 24 percent in 1972.

Business PAC costs

Business PAC costs are the costs of conforming to PAC rules and regulations. They result from both current-and previous-year business spending for PAC. Most current-year spending, except for capital, is in business PAC costs. Current-year capital spending is not directly charged to business PAC costs; instead, the capital consumption allowance and net imputed return on use of capital for PAC over time are included. The former reflects the depreciation of existing pollution abatement facilities. The latter, which is measured as the return that is foregone by business when capital is used for PAC, reflects the actual cost of capital ownership irrespective of the extent of its use.

Business PAC costs amounted to $62.0 billion in current dollars in 1983, up substantially--16.6 percent--from 1982 (table 5). Since 1972, these costs have increased at an average annual rate of 15.1 percent, and declined in only 1 year, 1982.

Costs of PAC-induced modifications in final products amounted to $13.3 billion. These costs are likely to be passed on from producers to purchasers in final product prices, although the extent and the timing of the passons depend on the markets for the final products. Costs of business PAC for its own wastes amounted to $48.7 billion, of which $38.0 billion were incurred by nonfarm nonresidential business.


Pollutants are substances and other emissions that are potentially harmful and degrade the quality of air or water shared by all. Activities resultting from rules and regulations restricting the release of pollutants into common-property media (the air and water used by all) are defined as PAC activites. This definition of PAC activities excludes other environmental activities, such as natural resource conservation and protection of endangered species.

The PAC expenditure series in this article covers most, but not all, PAC activities; excluded are (1) PAC activities that do not use productive resources (for example, plant closings due to PAC, delays in plant construction, or curtailments in the use of chemicals in manufacture and agriculture) and (2) PAC activities that, although resource-using, are non-market activities (for example, volunteer litter removal). The series coveres pollution abatement, regulation and monitoring, and research and development--as described at the beginning of the article.

The PAC expenditure series includes all spending for the collection and disposal of solid waste by means acceptable to Federal, State, and local authorities. Some of this spending, such as that for the avoidance of the slowing of production or consumption actvity due to the accumulation of solid waste, is not for PAC. The separation of the PAC part was last shown in the February 1984 SURVEY of current business; for further discussion of solid waste collection and disposal, see the March 1981 SURVEY.


Estimates of PAC expenditures are based directly or indirectly on surveys. Approximately three-fifths of the 1982 estimate of PAC expenditures is based directly on surveys of PAC spending. The remainder is based on more general survey information and assumptions necessary to utilize this information. BEA collects data on capital spending for pollution abatement by companies and on Federal agency funding for PAC. All other data are from surveys by other government agencies--including the Bureau of the Census and Department of Energy--and private organizations. Table 6 shows the percentage of PAC spending by type of estimate.
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Publication:Survey of Current Business
Date:Mar 1, 1985
Previous Article:The business situation.
Next Article:Capital expenditures by majority-owned foreign affiliates of U.S. companies, 1985.

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