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Pollution abatement and control expenditures, 1982-85.

Pollution Abatement and Control Expenditures, 1982-85

REAL expenditures for pollution abatement and control (PAC) increased 4.0 percent in 1985, about one-half the 1984 rate of increase and the same as the 1983 rate. PAC expenditures had declined in the preceding 3 years.

These expenditures are for goods and services that U.S. residents use to produce cleaner air and water and to dispose of solid waste; they consist of expenditures for pollution abatement, regulation and monitoring, and research and development.1 Pollution abatement (PA) directly reduces polutant emissions by preventing the generation of pollutants, recycling them, or treating them prior to discharge. Regulation and monitoring is a government activity that stimulates and guides action to reduce pollutant emissions. Research and development not only supports abatement, but also helps increase the efficiency of regulation and monitoring. PA expenditures --which account for over nine-tenths of PAC expenditures--increased 4.4 percent in 1985. Spending for regulation and monitoring declined 7.9 percent, and spending for research and development declined 1.1 percent.

1. PAC spending covers most, but not all, PAC activities, which are defined as those resulting from rules and 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 (e.g., 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, although resource-using, are nonmarket activities (e.g., volunteer litter removal).

Estimates of PAC spending are based directly or indirectly on surveys. About three-fifths of the total estimate is based directly on surveys of PAC spending. The remainder is based on more general survey information and assumptions necessary to utilize this information. For further information, see "Pollution Abatement and Control Expenditures, Revised Estimates for 1972-83 and Estimates for 1984,' SURVEY OF CURRENT BUSINESS 66 (July 1986).

The first section of this article discusses real PAC spending in 1985, price change for PAC goods and services in 1985, and likely 1986 real spending. The next section describes patterns of real PAC spending in 1983-85. The final section provides an overview of trends in real PAC spending in 1972-85.

Tables 1-5 summarize the major features of the PAC estimates. Table 1 provides an overview of 1985 real spending. Tables 2 and 3 highlight changes in spending and prices by type of PAC and changes in spending by sector, respectively. Table 4 provides more information by type of PAC; it organizes estimates according to definitions from PAC legislation. Table 5, organized in the same way, shows average annual growth rates in real PAC spending for 1972-85 and subperiods. The underlying detailed PAC estimates, prepared in a framework consistent with the national economic accounts, are in tables 6 and 7 for 1982-85. In table 6, the functions of purchases (PA, regulation and monitoring, and research and development), the purchasing sectors (persons, business, and government), and accounting distinctions (capital account, current account) are in the rows, and types of PAC (air, water, solid waste, and other) are the columns. In table 7, additional detail for business and government purchases is given for air and water pollution abatement. (Estimates for years prior to 1982 are in the July 1986 SURVEY article on PAC spending.)

Recent estimates

Real PAC spending in 1985.--Total PAC spending in 1985 increased $2.6 billion to $67.3 billion in 1982 dollars (table 1). PA spending increased $2.7 billion to $64.0 billion; the rest of PAC--regulation, monitoring, research, and development--declined $0.1 billion to $3.3 billion.

Business, government, and persons all contributed to the 1985 increase in PA spending. Business PA spending increased $1.3 billion (3.4 percent) to $40.8 billion. Capital spending increased $0.4 billion to $14.9 billion, mainly reflecting spending on motor vehicle emission abatement devices as unit sales of vehicles increased. Spending on current account, i.e., to operate and maintain capital (and reported net of the value of reclaimed materials from pollution abatement, referred to as costs recovered), increased $1.0 billion to $25.9 billion. About $0.3 billion of the increase was due to a reduction in the amount of costs recovered, mainly in manufacturing operations. Spending to operate public sewer systems, classified as a business activity in the national economic accounts, also increased substantially. Spending to operate plant and equipment increased $0.2 billion.

Government PA spending increased $0.6 billion (5.3 percent) to $11.9 billion. One-half of the increase was by State and local governments for the construction of public sewer systems, classified as a government activity in the national economic accounts. In addition, State and local government spending for solid waste collection and disposal increased $0.2 billion. Federal PA spending increased slightly.

Personal consumption spending for PA, all of which is for the purchase and operation of motor vehicle emission abatement devices, increased $0.8 billion (7.3 percent) to $11.4 billion in 1985. Purchases of these devices increased $0.6 billion; operating costs increased $0.2 billion, mainly for the additional cost of unleaded gasoline (gallons multiplied by the cost difference between unleaded and leaded gasoline).

Spending for PAC regulation and monitoring continued a decline from 1980. A decline in Federal spending overshadowed a small increase in State and local government spending.

Spending for PAC research and development declined for the second consecutive year. Government spending for research and development declined in 1985; business spending increased slightly.

Of the major types of PAC spending, air PAC spending increased $1.0 billion (3.3 percent) to $31.3 billion, water PAC spending increased $1.2 billion (4.8 percent) to $25.1 billion, and solid waste collection and disposal spending increased $0.3 billion (3.1 percent) to $11.3 billion (table 2).

Prices in 1985.--Prices of PAC goods and services increased 3.1 percent in 1985 (table 2). PAC prices had increased 3.4 percent in 1984. Air PAC prices increased 2.1 percent in 1985, water PAC prices increased 3.5 percent, and solid waste collection and disposal prices increased 4.1 percent. The lower rate of price increase for air PAC than for the other PAC categories is mainly the result of declining energy prices (e.g., for unleaded gasoline) in 1985. Energy purchases, about one-third of total air PAC purchases, are a very small portion of purchases for the other categories.

Real PAC spending in 1986.--The limited data available as of mid-May indicate an increase in real PAC spending in 1986 somewhat less than that in 1985. The increase was mainly for construction of public sewer systems and for business and government solid waste collection and disposal. Total spending for motor vehicle emission abatement devices and their operation remained about the same as in 1985. Business PA capital spending probably fell slightly, as indicated by plans reported by business in the 1986 BEA survey of business PA capital spending.

Patterns in real PAC spending, 1983-85

As noted earlier, total PAC spending increased in each of the last 3 years--the 4.0-percent increase in 1985 followed a 7.8-percent increase in 1984 and a 4.0-percent increase in 1983. In 1983, when economic activity was reviving, the increase in total PAC spending was largely traceable to the complementary relationship between pollution abatement and conventional production. In 1984, the increase was not only due to the continued upswing in economic activity but also a surge in environmental regulatory activity. Increased concern about environmental issues, which stimulates environmental regulatory activity and PAC spending, had emerged in 1983 but intensified during the 1984 election year, as evidenced by the passage of the first major environmental legislation in 4 years--the 1984 Resource Conservation and Recovery Act Amendments. In 1984, increases in PAC spending were spread widely across all major sectors and all types of PAC. In 1985, increases in PAC spending continued to be widespread, but they moderated along with economic activity and environmental regulatory activity.

Real spending by sector.--Spending by business for PAC, which accounts for almost two-thirds of total PAC spending, showed a pattern similar to that of total spending, although in 1985, as in 1984 and 1983, the rate of increase was slightly lower than that in the total (table 3). The 3.3-percent increase in business spending in 1985 followed increases of 7.6 percent in 1984 and 3.7 percent in 1983. Spending to operate industrial plant and equipment and public sewer systems, about one-half of total business spending, accounted for much of the increase in business spending in recent years. Such spending increased 2.1 percent in 1985, 6.6 percent in 1984, and 6.4 percent in 1983. Spending to purchase industrial plant and equipment, about one-third of total business spending, was more volatile; it increased only slightly in 1985, following a moderate increase in 1984 and a sharp decline in 1983.

The 3.3-percent increase in government spending for PAC in 1985 followed a 7.5-percent increase in 1984 and a 3.6-percent decline in 1983. Spending for construction of public sewer systems, the largest single component of government PAC spending, accounted for about one-half of the increase in 1985, about three-fourths of the increase in 1984, and almost all of the decline in 1983.

The rates of increase in personal consumption spending were higher than those in the total each year. The 7.3-percent increase in spending in 1985 followed increases of 9.0 percent in 1984 and 17.0 percent in 1983. Spending for purchases of motor vehicle emission abatement devices, about two-thirds of total personal spending, accounted for most of the increase in personal spending in recent years.

Real spending by type.--Table 4 organizes estimates of PAC spending according to definitions emphasized in PAC legislation. For air PA, the Clean Air Act classifies sources of pollutants as mobile (e.g., cars) or stationary (e.g., factories). For water PA, the Federal Water Pollution Control Act classifies sources as point (e.g., factories) or nonpoint (e.g., highway construction projects).

Spending for air PA, which accounts for over two-fifths of total PAC spending, showed a pattern generally similar to that of total spending, although the rate of increase was lower in 1985 and higher in earlier years than for the total. The 3.3-percent increase in air PA spending in 1985 followed increases of 8.4 percent in 1984 and 5.6 percent in 1983. Spending for mobile sources, which in recent years increased to about three-fifths of total air PA spending, accounted for all of the increase in 1985 and 1983 and most of the increase in 1984. Such spending increased 6.5 percent in 1985, 12.6 percent in 1984, and 15.7 percent in 1983. Spending for stationary sources declined 1.9 percent in 1985, increased 2.3 percent in 1984, and declined 6.2 percent in 1983. This pattern is traceable to changes in spending for purchases of industrial facilities; spending for operation of industrial facilities increased each year.

The 5.0-percent increase in water PA spending in 1985 followed increases of 8.0 percent in 1984 and 1.6 percent in 1983, reflecting increases for point sources, almost all of total water PA spending. Increases in spending for operation of facilities accounted for part of the increase in 1985 and 1984 and all of the increase in 1983. Such spending increased 6.0 percent in 1985, 4.7 percent in 1984, and 10.5 percent in 1983. Spending for facilities, dominated by construction of public sewer systems, increased 4.3 percent in 1985 and 11.9 percent in 1984 after having declined 5.4 percent in 1983.

The 2.8-percent increase in spending for solid waste disposal followed increases of 10.5 percent in 1984 and 1.5 percent in 1983. Industrial spending increased slightly in 1985 and 1983, but sharply in 1984, accounting for the fluctuation in the total. Other spending, almost all for the collection and disposal of solid waste by local governments, increased moderately each year.

Trends in real PAC spending, 1972-85

PAC spending trended upward over the 1972-85 period for which data are available, at an average annual rate of 3.5 percent (table 5). After a downturn in 1979-82, PAC spending continued up at nearly the same rate as before. The increases in 1972-79 and, to a lesser extent, in 1982-85 were broadly based. The downturn in total spending in 1979-82 was mainly due to reduced funding for public sewer system construction, although several other categories contributed.

The 5.5-percent increase in air PA spending in 1972-85--the largest increase by type--was primarily due to large increases in each subperiod in spending for purchases of devices to abate air pollution from mobile sources. Operation of industrial facilities to abate air pollution from stationary sources increased overall, but declined in 1979-82. Purchases of such facilities declined overall, having increased only moderately in 1972-79.

The 1.7-percent increase in water PA spending in 1972-85 was attributable to the overall increase in operation of facilities to abate water pollution from point sources. Purchases of facilities declined overall; the moderate recovery in 1982-85 did not offset the large decline in 1979-82, when government spending for the construction of public sewer systems declined sharply (14.3 percent).

The 3.5-percent increase in spending for solid waste disposal in 1972-85 was primarily due to increases in industrial spending, which is mostly for operation of facilities. A decline in industrial spending in 1979-82 contributed to the decline in total PAC spending in that subperiod.

Less than one-tenth of total PAC has typically been spent on regulation, monitoring, research, and development. Regulation and monitoring increased 2.9 percent in 1972-85; it declined only in 1982-85. Research and development increased slightly in 1972-85; it contributed to the decline in total PAC spending in 1979-82.

Abstracting from the fluctuations in the subperiods, the distribution of PAC spending in 1985 summarizes the effect of trends in PAC spending (chart 1). The distribution in 1985 was very different from that in 1972. As a share of total PAC spending, spending for motor vehicle emission abatement devices rose from 2.9 percent in 1972 to 18.0 percent in 1985, reflecting the far higher than average rate of growth for the period. Industrial capital spending as a share fell from 20.8 percent in 1972 to 11.8 percent in 1985, reflecting an overall negative growth rate. Public sewer construction spending also fell as a share, also reflecting a negative growth rate. Due to augmented stocks of facilities of all types--motor vehicles, industrial capital, and public sewer systems--spending for operation of facilities rose as a share from 37.6 percent in 1972 to 42.9 percent in 1985.

Table: 1.--Constant-Dollar PAC Spending in 1985

Table: 2.--PAC Spending in Current and Constant Dollars and Fixed-Weighted Price Indexes: Percent Change

Table: 3.--Constant-Dollar PAC Spending, by Sector

Table: 4.--Constant-Dollar PAC Spending, by Type

Table: 5.--Major Components of Constant-Dollar PAC Spending: Average Annual Rate of Change, 1972-85 and Subperiods

Table: 6.--Expenditures for Pollution Abatement and Control in Current and Constant Dollars and Selected Fixed-Weighted Price Indexes

Table: 7.--Business and Government Expenditures for Air and Water Pollution Abatement in Current and Constant Dollars

Photo: CHART 1 Distribution of Constant-Dollar Pollution Abatement and Control Spending by Major Component, 1972 and 1985
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Author:Farber, Kit D.; Rutledge, Gary L.
Publication:Survey of Current Business
Date:May 1, 1987
Words:2572
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