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Pollution abatement and control expenditures, 1993.

Real spending for pollution abatement and control (PAC) increased 4.2 percent in 1993, compared with a 4.7-percent increase in 1992. Prices of PAC goods and services, as measured by the PAC fixed-weighted price index, increased 2.3 percent after a 1.6-percent increase. PAC expenditures consist of spending for goods and services that U.S. residents use to produce cleaner air and water and to manage solid waste.

In addition to the estimates for 1993, this article presents revised estimates of PAC expenditures for 1988-92. The revisions, which incorporate updated source data, are small and do not substantially alter the general picture of PAC spending throughout the economy.

The following are highlights of the PAC estimates for 1993:

* Real pollution abatement (PA) spending, which makes up over nine-tenths of PAC, continued to increase at a moderate rate: It increased 4.6 percent after increasing 5.0 percent in 1992.

* The other two PAC components continued to decrease as a share of total PAC. Real spending for regulation and monitoring increased 2.3 percent, in contrast to a 2.2-percent decrease in 1992. Real spending for research and development fell 12.7 percent after decreasing 2.6 percent.

* Real PA spending continued to increase across all sectors of the economy; substantial increases were in business capital spending (5.8 percent) and State and local government purchases (12.0 percent).

* Real spending for air PAC and for solid waste disposal increased 7.2 percent and 7.0 percent, respectively, while water PAC decreased 1.1 percent. Each of these types had increased in 1992.

* Real PAC spending as a percent of gross domestic product (GDP) inched up to 1.8 percent from 1.7 percent in 1987. Business PAC capital spending as a percent of the fixed investment component of GDP was 2.5 percent, compared with 2.0 percent in 1987.

The first section of this article examines real PAC spending and PAC prices in 1993. The second section discusses patterns in PAC spending during i987-93. The last section briefly describes the sources of the estimates.

Recent estimates

Real PAC spending in 1993.-Real PAC spending increased $3.7 billion, or 4.2 percent, to $91.8 billion in 1993 (table 1). It had increased 4.7 percent in 1992.

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Within PA, spending increased for all sectors in 1993 (chart 1). The business sector - which accounts for about two-thirds of PA spending - increased 2.3 billion, or 4.0 percent. Business spending on capital account increased $1.1 billion, or 5.8 percent, compared with an 11.3-percent increase for total fixed investment in GDP. The 1993 increase primarily reflected growth in purchases of motor vehicle emission abatement devices, all for air PA, and in purchases of new plant and equipment by electric utilities, primarily for air PA. Business spending on current account - that is, for the operation of PA capital - increased $1.2 billion, or 3.1 percent.(1) The increase was mainly in spending to operate water PA plant and equipment by nonmanufacturing establishments excluding electric utilities and in spending by residential customers for solid waste disposal. A decrease in costs recovered, which is a negative component of current-account spending, also contributed to the current-account spending increase; costs recovered is the value of reclaimed materials and energy from pollution abatement.

Government PA expenditures increased $1.3 billion, or 6.4 percent. The increase mainly reflects an increase in State and local government spending for solid waste disposal.

Personal consumption expenditures, which consists of the purchase and operation of motor vehicle emission abatement devices, increased $0.3 billion, or 4.5 percent, in 1993. The entire increase was for purchases of devices (for example, catalytic converters), which increased along with unit sales of vehicles.(2)

By type, real spending increased in 1993 for air PAC and solid waste disposal, but decreased for water PAC (chart 1 and table 2, with detail in tables 7 and 8). Air PAC increased 7.2 percent after increasing 6.4 percent in 1992; the 1993 increase was attributable to business and consumer spending for motor vehicle emission abatement devices and to business spending for PA plant and equipment. Real spending for solid waste disposal increased 7.0 percent after increasing 6.7 percent; the 1993 increase was mainly attributable to growth in State and local government spending.(3) Real spending for water PAC decreased 1.1 percent after increasing 2.4 percent; the decrease was due mainly to a decline in purchases of plant and equipment by business, both in manufacturing establishments and in nonmanufacturing establishments except for electric utilities.

PAC prices in 1993. - The fixed-weighted price index for total PAC spending increased 2.3 percent in 1993, following a 1.6-percent increase in 1992 (table 2). Price increases accelerated for air and water PAC goods and services, but decelerated for solid waste disposal.

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PAC spending in 1987-93

This section discusses selected patterns in PAC spending during 1987-93, with emphasis on real PAC spending and on changes in its composition. The estimates of real spending are presented by sector in tables 3 and 4 and by type in tables 5 and 6. The sectors are defined in accordance with national economic accounting conventions. The types are defined in accordance with Federal environmental legislation!

During 1987-93, PAC spending grew along with general economic activity, as reflected in GDP. Before adjustment for price change, PAC spending and GDP grew at comparable average annual rates, 5.8 percent and 5.7 percent, respectively; however, after adjustment for price change, PAC spending grew faster than GDP - 2.8 percent, compared with 2.1 percent. As a result of this faster PAC growth, real PAC spending as a percent of GDP inched up from 1.7 percent in 1987 to 1.8 percent in 1993.

Spending by sector. - Business spending as a share of total PAC spending increased from 60.0 percent in 1987 to 65.7 percent in 1993 (table 4). Within business spending, the share spent on capital account has generally increased, while that on current account has generally decreased, reflecting the higher average annual rate of growth of capital spending during 1987-93-5.9 percent, compared with 3.7 percent for spending to operate this capital (table 3). This 5.9-percent average annual increase in business capital spending for PAC is about three times the rate for the fixed-investment component of GDP; as a result, the PAC share of business fixed investment rose from 2.0 percent in i987 to 2.5 percent in 1993.

Government spending as a share of total PAC spending increased from 25.8 percent in 1987 to 26.3 percent in 1993. The government share was boosted by State and local government spending, which grew at an average annual rate of 11.0 percent during i987-93, mostly for solid waste disposal. The share of government spending accounted for by public sewer system fixed capital decreased (from 50.1 percent to 37.7 percent), reflecting a decline in public sewer construction spending. Government PAC spending increased at a 3.2-percent average annual rate during 1987-93, three times faster than the government-purchases component of GDP; as a result, the PAC share of government purchases rose from 2.3 percent in 1987 to 2.6 percent in 1993.

While the government and business shares of PAC spending have generally risen since 1987, the share accounted for by personal consumption has declined. The decline mainly reflects a dropoff in the cost of operating motor vehicle emission abatement devices, which started falling in 1987 and reached zero by 1991; this cost mainly reflects the price difference between unleaded and leaded gasoline. Since 1991, all spending by persons for PAC has been for the purchase of motor vehicle emission abatement devices. Such purchases have been relatively volatile, with increases in 1988 and 1992-93 and decreases in the intervening years, primarily reflecting changes in vehicle sales. However, the overall average annual change for emission abatement device purchases was negative (-2.9 percent) during i987-93. Spending by persons for PAC declined at a 6.6-percent average annual rate, in contrast to a 2.1-percent average annual increase in personal consumption spending within GDP; such PAC spending Continued to account for less than one-half percent of total personal consumption expenditures.

Spending by type. - The share of total PAC spending accounted for by air PAC declined from 37.2 percent in 1987 to 30.5 percent in 1993 (table 6). The share of total PAC spending accounted for by water PAC fluctuated from 1987 through 1993: From 39.0 percent in 1987, it Peaked at 39.6 percent in 1990 and settled at a relatively low 36.5 percent in 1993. The share accounted for by spending for solid waste disposal increased steadily from 24.6 percent in 1987 to 33.8 percent in 1993.

Within air PA, the share of spending accounted for by stationary sources generally rose in relation to that for mobile sources. Stationary source spending was boosted by industrial purchases of new plant and equipment, which increased at an average annual rate of 11.8 percent (table 5). Despite increases in 1992 and 1993, spending for mobile sources - both in the purchase and operation of emission abatement devices - was lower in 1993 than it had been in 1987.

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Within water PA, point sources continued to dominate spending, accounting for about 95 percent of the total. Spending by both point and nonpoint sources has tended to fluctuate during 1987-93; however, spending for point sources has risen, on average, outweighing the decline in nonpoint spending and resulting in a 1.7-percent average annual increase for total water PA spending.

Within solid waste PA, both the industrial and "other" categories increased strongly - at average annual rates of 6.5 percent and 10.7 percent, respectively. The share of industrial spending fell in relation to the "other" share (mainly State and local government spending for solid waste disposal) - from 53.6 percent in 1987 to 47.9 percent in 1993.

Sources of the estimates

The estimates of PAC components that are derived from direct sources account for about two-thirds of total PAC spending. The most important of these direct data sources are the following surveys conducted by the Bureau of the Census: The Pollution Abatement Costs and Expenditures Survey (for capital and operating spending by manufacturing establishments), the Pollution Abatement Plant and Equipment Expenditures Survey (for electric utilities capital spending and, to a lesser extent, mining and petroleum enterprises), surveys of government finances (for government spending to operate public sewer systems and for solid waste disposal), and a survey of new construction put in place (for government spending to construct sewer systems). Other relevant surveys are conducted by the Bureau of Economic Analysis (for PAC by Federal agencies) and by the Energy Information Administration of the U.S. Department of Energy (for a key component of electric utility operating costs for PA).

The estimates of the remaining one-third of PAC spending are based on sources that provide more general information used in indirect methods of estimation. The most significant of these estimates are for nonmanufacturing and residential customers' spending for solid waste disposal, spending for motor vehicle emission abatement devices and their operation, and nonmanufacturing operation and maintenance spending for PA (excluding electric utilities). For more information about these indirect methods, see the discussion of "other sources" at the end of the PAC expenditures article in the May 1994 Survey of Current Business.

To convert current-dollar estimates to constant (1987) dollars, selected Bureau of Labor Statistics (BLS) price data, together with cost and price indexes mainly derived from BLS price data, are used. The basic approach is deflation with fixed-weighted indexes, which are constructed to correspond as closely as possible to a particular element of PAC. After each element is converted to constant dollars, estimates are summed to obtain the PAC published totals.

Tables 7 and 8 follow.

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Key Terms

In this article, PAC expenditures are presented by sector (personal consumption, business, and government), by type (air, water, solid waste, and other), and by function (pollution abatement, regulation and monitoring, and research and development). Over nine-tenths of all PAC spending is for pollution abatement (PA); the rest is for regulation and monitoring and for research and development. PA, which is the principal function, directly reduces pollutant emissions by preventing the generation of pollutants, by recycling the pollutants, by treating the pollutants prior to discharge, or by restoration (for example, site clean-up). 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 to increase the efficiency of regulation and monitoring.

Preparation of the estimates was a divisionwide effort, supervised by Gary L. Rutledge, Chief of the Environmental Economics Division. Christine R. Vogan coordinated preparation of the article and analysis of the estimates. Christian Thieme provided computer programming support and,, along with Mary L. Roy coordinated the compilation of the estimates. Shirley D. Tisdale provided statistical services.

(1.) Operation of PA capital refers to operation, maintenance, and minor repairs of PA capital. (2.) Operating costs of these devices - which consist mainly of the additional cost of using unleaded, rather than leaded, gasoline in vehicles with catalytic converters - have not been discernable since 1990, reflecting a market for leaded gasoline that has so diminished that any price difference between unleaded and leaded gasoline is not measurable. For more information, see the box discussing the operating costs of emission abatement devices on motor vehicles in "Pollution Abatement and Control Expenditures, 1972-90," Survey of Current Business (June 1992): 33. (3.) Throughout this article, solid waste management - which includes the collection and disposal of solid waste and the alteration of production processes to generate less solid waste - is referred to in the tables as solid waste PAC and in the text as solid waste disposal. (4.) For air PA, the Clean Air Act classifies the sources of pollutants as mobile (for example, automobiles) or stationary (for example, factories). For water PA, the Federal Water Pollution Control Act classifies the sources of pollutants as point (for example, factories) or nonpoint (for example, highway construction projects).
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Title Annotation:economic statistics
Author:Rutledge, Gary L.; Vogan, Christine R.
Publication:Survey of Current Business
Date:May 1, 1995
Words:2380
Previous Article:National income and product accounts.
Next Article:Gross state product, 1991-92.
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