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Pollution abatement and control expenditures, 1987-89.

REAL spending for pollution abatement and control (PAC) increased 1.0 percent to $74.4 billion in 1989, following a 3.0-percent increase in 1988 (chart 6). Prices of PAC goods and services, as measured by the PAC fixed-weighted price index, increased 4.1 percent, following a 2.7-percent increase.

Real pollution abatement (PA) expenditures also increased 1.0 percent in 1989, following a 3.0-percent increase in 1988. PA expenditures account for over nine-tenths of all PAC spending. The two components accounting for the remainder of total PAC spending are regulation and monitoring expenditures and research and development expenditures. Real spending for regulation and monitoring increased 0.7 percent, following an 8.3-percent increase. Real spending for research and development increased 2.6 percent, following a 0.4-percent increase. (1)

Real spending for air PAC decreased 8.9 percent in 1989. The decrease was attributable to declines in personal and business spending to purchase and operate emission abatement devices on motor vehicles. Operating expenditures dropped 48.4 percent, and purchases declined 7.0 percent. Real spending for both water PAC and solid waste disposal rose in 1989. Water PAC spending increased 5.7 percent, following a decrease of 2.6 percent in 1988. Real spending for solid waste disposal increased 10.6 percent, reflecting a large increase in business operation of plant and equipment expenditures and a moderate increase in government spending.

The first section of this article examines real PAC spending in 1989, prices of PAC goods and services in 1989, and likely real PAC spending in 1990. The second section examines changes in the composition of PAC spending in 1989.

Recent estimates

Real PAC spending in 1989.--Real PAC spending increased $0.8 billion in 1989 to $74.4 billion (table 1, with detail in tables 7 and 8). The largest increase in PAC spending, $1.5 billion, was in business spending to operate plant and equipment for air PA, water PA, and solid waste disposal. Business spending to purchase such new plant and equipment also increased substantially, $1.1 billion. Government PA spending arose $0.7 billion.

[TABULAR DATA OMITTED]

Personal consumption PA expenditures, all of which is for the purchase and operation of motor vehicle emission abatement devices, decreased $1.9 billion in 1989. Purchases of these devices (for example, catalytic converters) decreased $0.5 billion; the decrease was mainly due to a fall in unit sales of vehicles. The cost of operating emission abatement devices decreased $1.3 billion. This cost consists largely of the additional cost of using unleaded, rather than leaded, gasoline in vehicles with catalytic converters. In 1989, the price gap between unleaded and leaded gasoline narrowed for the fourth consecutive year, sharply cutting the cost of operating the devices.

Business PA expenditures increased $1.9 billion, to $47.1 billion. Most of

[TABULAR DATA OMITTED]

the increase was in spending on current account, which increased $1.3 billion, to $31.5 billion. Among current-account items, the largest increase was in PA spending on the operation of plant and equipment (particularly for water PA and solid waste disposal). PA spending on capital account increased $0.6 billion, to $15.5 billion.

Government PA expenditures increased $0.7 billion, to $14.4 billion. The increase was primarily for State and local spending for solid waste disposal, although spending for the construction of public sewer systems also increased.

Prices in 1989.--The fixed-weighted price index for total PAC spending increased 4.1 percent in 1989, following a 2.7-percent increase in 1988 (table 2). Price increases was higher in 1989 than in 1988 for each type of expenditure. Air PAC prices increased 4.2 percent, following a 2.2-percent increase. Water PAC prices increased 3.5 percent, following a 2.4-percent increase. Prices for solid waste disposal, which continued to increase faster than prices of air and water PAC, increased 5.3 percent, following a 4.0-percent increase.

Real PAC spending in 1990.--According to the information available in November 1991, real PAC spending in 1990 remained close to the 1989 level. Large increases in spending to operate PA plant and equipment and in spending for public sewer system construction are expected to have offset large decreases in spending to operate

[TABULAR DATA OMITTED]

motor vehicle emission abatement devices.

The changing composition of real PAC

spending in 1989

To highlight the changes in real spending that resulted in significant compositional shifts of PAC purchases, real spending is organized by sector (for example, business) in tables 3 and 4 and by type (for example, air PA mobile sources) in tables 5 and 6. The sectors identified in tables 3 and 4 are in accordance with national economic accounting conventions. The types identified in tables 5 and 6 are in accordance with definitions in Federal environmental legislation. (2)

Spending by sector.--In 1989, the share of total PAC spending accounted for by persons declined, and the shares accounted for by business and by government increased. Personal consumption spending accounted for 12.3 percent of total PAC spending in 1989, down from 15.0 percent in 1988. The drop in share reflected the declines in purchases of motor vehicle emission abatement devices and in expenditures for the operation of these devices. Within the personal sector, the share of spending accounted for by purchases of motor vehicle emission abatement devices increased, and the share accounted for by spending to operate these devices decreased. Business spending as a share of total PAC spending increased from 63.7 percent

Table 4.--Composition of Pollution Abatement and Control Spending, by Sector
 1987 1988 1989
 Percent of total PAC
 spending
Personal consumption 14.4 15.0 12.3
Business 63.7 63.7 65.6
Government 21.9 21.3 22.1
 Percent of sector spending
Personal consumption:
 Motor vehicle emission abatement
 devices 71.3 75.8 85.4
 Operation of devices 28.7 24.2 14.6
Business:
 Current account 67.8 68.1 68.2
 Capital account 32.2 31.9 31.8
Government:
 Public sewer system construction 52.6 49.1 48.3
 Other 47.4 50.9 51.7


in 1988 to 65.6 percent in 1989; compositional shifts within the sector were negligible. Government spending as a share of total PAC spending edged up from 21.3 percent in 1988 to 22.1 percent in 1989. Within the government sector, the share of spending accounted for by public sewer system construction decreased, and the share of the "other" government category increased, reflecting growth in solid waste disposal.

Spending by type.--In 1989, the share of total PAC spending accounted for by air PA declined, and the shares accounted for by water PA and by solid waste disposal increased. Air PA spending as a share of total PAC spending fell from 39.5 percent in 1988 to 35.4 percent in 1989. Mobile sources as a share of total air PA decreased, and the share accounted for by stationary sources incrreased. Water PA spending as a share of total PAC spending increased

[TABULAR DATA OMITTED]

about 2 percentage points to 38.7 percent; compositional shifts were negligible. Solid waste disposal spending as a share of total PAC spending increased about 2 percentage points to 22.5 percent; compositional shifts were negligible.

Technical notes

The estimates of PAC components are based directly on surveys or censuses or are estimated by indirect methods. Typically, PAC estimates derived from direct sources account for about three-fifths of total PAC spending. The most important direct sources are the Pollution Abatement Costs and Expenditures (PACE) Survey (for capital and operating spending by manufacturing industries), the Pollution Abatement Plant and Equipment Expenditures Survey (for capital spending totals by nonfarm business), and surveys of government finances (for government spending for sewer systems and for solid waste collection and disposal). All of these surveys are conducted by the Bureau of the Census. (3)

Because of a cutback in the number of industries covered by the Pollution Abatement Plant and Equipment Expenditures (P&E) Survey, BEA is experimenting with new methods for estimating nonfarm business PA capital spending. For the present article, 1987 estimates from the PA P&E survey have been brought forward using growth rates for 1988 and 1989 from a new estimation method. This method builds on manufacturing estimates of PA capital spending reported by the PACE survey. Added to the PACE survey estimates are estimates for electric utilities from the PA P&E survey and estimates for mining and other non-manufacturing. The latter estimates are based on indirect estimation procedures utilizing a variety of source data, including the PA P&E survey, an environmental protection expenditures survey by the American Petroleum Institute, and data from the Census of Mineral Industries.

Table 6.--Composition of Pollution Abatement and Control Spending, by Type
 1987 1988 1989
 Percent of total PAC
 spending
Air 39.3 39.5 35.4
Water 39.1 36.9 38.7
Solid waste 18.8 20.5 22.5
 Percent of PA-type
 spending
Air:
 Mobile sources 59.8 62.2 56.7
 Stationary sources 40.3 37.8 43.3
Water:
 Point sources 96.2 96.7 96.9
 Nonpoint sources 3.8 3.3 3.1
Solid waste:
 Industrial 56.5 57.0 57.8
 Other 43.5 43.0 42.2
 Percent of air PA spending
Mobile sources:
 Devices 41.6 46.3 47.6
 Operation of devices 18.1 15.9 9.1
Stationary sources:
 Facilities 15.0 14.1 16.6
 Operation of facilities 25.2 23.7 26.7


[TABULAR DATA OMITTED] [TABULAR DATA OMITTED]

(1) The expenditures discussed in this article are for goods and services that U.S. residents use to produce cleaner air and water and to dispose of solid waste. PA directly reduces pollutant emissions by preventing the generation of pollutants, by recycling the pollutants, or by treating the pollutants prior to discharge. Regulation and monitoring is a government activity that stimulates and guides action to reduce pollutant emissions. Research and development by business and government not only supports abatement but also helps increase the efficiency of regulation and monitoring.

PAC spending covers most, but not all, PAC activities, which are defined as those resulting from rules, policies and conventions, and formal regulations restricting the release of pollutants into common-property media such as the air and water. PAC spending excludes (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 manufacturing and agriculture) and (2) PAC activities that do use productive resources but that are nonmarket activities (for example, volunteer litter removal).

(2) For air PA, the Clean Air Act classifies sources of pollutants as mobile (for example, automobiles) or stationary (for example, factories). For water PA, the Federal Water Pollutant Control Act classifies sources of pollutants as point (for example, factories) or nonpoint (for example, highway construction projects).

(3) For a more detailed discussion of the sources of PAC component estimates, see Kit D. Farber and Gary L. Rutledge, "Pollution Abatement and Control Expenditures, 1984-87," SURVEY OF CURRENT BUSINESS 69 (June 1989): 22-23.

Gary L. Rutledge, Chief of the Environmental Economics Division, supervised the preparation of the estimates. Mary L. Leonard planned and coordinated the compilation and analysis of the estimates, with the assistance of Mohamad F. Moabi and Christine R. Vogan. The preparation of estimates involved the following staff: Personal consumption--Frederick G. Kappler; business--David M. Bratton, Frederick G. Kappler, Mary L. Leonard, Nikalaos A. Stergioulas, and Howard J. White; and government--David M. Bratton, Mary L. Leonard, and Howard J. White, Shirley D. Tisdale and Sonia R. Bundy provided statistical and secretarial services, respectively.
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Author:Rutledge, Gary L.; Leonard, Mary L.
Publication:Survey of Current Business
Date:Nov 1, 1991
Words:1951
Previous Article:Motor vehicles, model year 1991.
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