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Pollution abatement and control expenditures, 1987-91.

Real spending for pollution abatement and control (PAC) decreased 1.4 percent in 1991, in contrast to a 3.4-percent increase in 1990 (chart 1). Prices of PAC goods and services, as measured by the PAC fixed-weighted price index, increased 3.0 percent, following a 3.4-percent increase.

Over nine-tenths of all PAC spending is for pollution abatement (PA); the remainder consists of regulation and monitoring expenditures and of research and development expenditures. PA expenditures decreased 1.4 percent in 1991, following a 3.6-percent increase in 1990. Real spending for regulation and monitoring decreased 1.5 percent after a 1.3-percent decrease, and real spending for research and development decreased 0.5 percent after no change.(1)

This article first examines real PAC spending in 1991, prices of PAC goods and services in 1991, and likely real PAC spending in 1992, and then it examines changes in the composition of PAC spending in 1987-91. The sources of the estimates are described briefly at the end of the artide.

Recent estimates

Real PAC spending in 1991. - Real PAC spending decreased $1.1 billion, or 1.4 percent, to $80.6 billion in 1991 (table 1). It had increased 3.4 percent in 1990 (table 2, with detail in table 7).

[TABULAR DATA OMITTED]

By type, real spending for air PAC decreased 6.4 percent in 1991, following a decrease of 4.5 percent in 1990. The 1991 decrease was attributable to declines in personal consumption and business spending to purchase and operate emission abatement devices on motor vehicles. Real spending for water PAC decreased 1.4 percent, following an increase of 9.7 percent. The decrease was due mainly to declines in spending for the operation of industrial plant and equipment and for the purchase of residential and public sewer system fixed capital (largely construction). Real spending for solid waste disposal increased 3.9 percent after increasing 5.4 percent. The 1991 increase primarily reflected growth in operating costs.

By sector for PA, personal consumption expenditures decreased in 1991, and business and government spending increased. Personal consumption expenditures, which consists of the purchase and operation of motor vehicle emission abatement devices, decreased $1.9 billion, or 21.8 percent, in 1991. Purchases of these devices (for example, catalytic converters) decreased $1.7 billion, or 20.0 percent, reflecting a fall in unit sales of vehicles. Operating costs of these devices - which consist largely of the additional cost of using unleaded, rather than leaded, gasoline in vehicles with catalytic converters - decreased $0.2 billion to zero. By 1991, the market for leaded gasoline had diminished to such an extent that the price difference between unleaded and leaded gasoline was not discernible.(2)

Business PA expenditures increased $0.8 billion, or 1.6 percent, in 1991. Spending on capital account increased $0.6 billion, or 3.5 percent, reflecting an increase in purchases of new plant and equipment. Spending on current account increased $0.2 billion, or $0.6 percent, largely reflecting increases in the operation of plant and equipment for public sewer systems.

Government PA expenditures changed little in 1991. An increase in State and local government spending for solid waste disposal was offset by a decrease in construction of public sewer systems. Prices in 1991. - The fixed-weighted price index for total PAC spending increased 3.0 percent in 1991, following a 3.4-percent increase in 1990 (table 2). Price increases slowed for air PAC and for solid waste disposal and accelerated for water PAC.

Real PAC spending in 1992. - According to the information available by June 1993, real PAC spending probably increased slightly in 1992. The increase appears to be attributable to increases in State and local government spending for solid waste disposal and to increases in business spending to operate PA plant and equipment.

The composition of real PAC spending in 1987-91

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 are in accordance with national economic accounting conventions. The types are defined in accordance with Federal environmental legislation.(3)

[TABULAR DATA OMITTED]

Spending by sector. - The share of total PAC spending accounted for by personal consumption declined from 14.2 percent in 1987 to 8-3 percent in 1991. The share of personal consumption spending accounted for by the operation of motor vehicle emission abatement devices fell from 20.5 percent in 1987 to zero in 1991, while the share for purchases of these devices increased proportionately.

Business spending as a share of total PAC spending increased from 60.6 percent in 1987 to 65.5 percent in 1991. The shares of spending on capital account and on current account were relatively stable, with current-account spending representing about two-thirds of business spending.

Government spending accounted for about 25 percent of total PAC spending in 1987-91. The share of government spending accounted for by public sewer system fixed capital decreased, reflecting a decline in construction spending, while the share of "other" government spending increased, reflecting growth in spending for solid waste disposal.

Spending by type. - The share of total PAC spending accounted for by air PAC steadily declined from 40-0 percent in 1987 to 31.3 percent in 1991, reflecting the decline in operating costs of emission abatement devices. The share accounted for by water PAC was relatively stable at about 40 percent. The share accounted for by spending for solid waste disposal increased from 20.7 percent in 1987 to 27.7 percent in 1991, primarily reflecting growth in operating costs.

Within air PA, the share of spending for mobile sources decreased, while the share for stationary sources increased. Within water PA, abatement activities of point sources continued to account for most of the spending. Within solid waste PA, industrial spending continued to account for a little more than one-half of the spending.

Sources of the estimates

The estimates of PAC components that are derived from direct sources typically account for about three-fifths of total PAC spending. The most important 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 capital spending totals by nonfarm business), and surveys of government finances (for government spending to operate public sewer systems and to collect and dispose of solid waste). The estimates of the remaining PAC components are based on other sources that provide more general survey information and on assumptions made to utilize this information.(4)

Effects of the 1990 Clean Air Act

This box describes key provisions of the 1990 Clean Air Act and discusses their possible effects on expenditures for pollution abatement and control in 1991.

One provision of the act requires lower emissions of air pollutants from motor vehicles, beginning with the 1994 model year. Consequently, any effects of this provision on 1991 spending would be limited to research and development spending, which rose slightly.

Another provision expanded the range of businesses required to lower their air emissions to include medium and selected small businesses, and it expanded the list of hazardous substances fo be controlled. Probably reflecting a pickup in spending due to this provision, the pollution abatement part of nonresidential fixed investment increased significantly. This increase was mainly in manufacturing, according to data from the Census Bureau's Pollution Abatement Costs and Expenditures Survey.

In addition, a provision of the act requires lower emissions, particularly sulfur oxides emissions, by electric utilities, and it calls for the design of a system or market for the trading of rights to emit sulfur oxides. The first phase of the implementation of this provision is to be in full operation by 1995. Capital spending for pollution abatement by electric utilities declined in 1991, as utilities weighed various compliance strategies; many electric utilities may be planning a mix of strategies - such as switching to cleaner fuels, emissions trading, and pollution abatement investment.

The effect of the act on operating costs for air pollution abatement will probably occur gradually. Operating costs fell in 1991; the decrease was mainly accounted for by manufacturing and electric utilities and is consistent with a relatively low capacity utilization rate in a relatively weak economic recovery. It is likely that any increases in spending in response to the act occurred near the end of 1991, and in that case, any rise in capital stock would tend not to affect operating spending until 1992. 1. The expenditures discussed in this article are for the goods and services that U.S. residents use to produce cleaner air and water and to manage solid waste and are classified by function (for example, research and development), sector (for example, business), and type (for example, air). which is the principal function, reduces pollutant emissions by presenting the generation of pollutants, by recycling the pollutants, and 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.

The estimates of PAC spending cover most, but not all, which are defined as activities resulting from rules, policies and contentions, and formal regulations restricting the release of pollutants into common property media, primarily air and water. The estimates exclude (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 (3) PAC activities that do use productive resources but that are nonmarket activities (for example, volunteer litter removal).

For the purpose of concise presentation, solid waste management - which includes the collection and disposal of solid waste and the alteration of production processes to generate less solid waste - is categorized as solid waste PAC in the tables in this article. These estimates mainly cover spending for collection and disposal by means acceptable to Federal, State, and local governments; in the text, they are referred to as "solid waste disposal" spending.

For more information about trends in these operating costs, see Gary L. Rutledge and Mary L. Leonard, "Pollution Abatement and Control Expenditures, 1972-90," Survey of Current Business 72 (June 1992): 33. 3. For air PA, the Clean Air Act classifies the sources of pollutants as mobile (for exampler, automobiles) or stationary (for examples, 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 constrution projects). 4. For a discussion of these other sources, see Rutledge and Leonard, "Expenditures," pages 31-34. Since the publication of that article, several

minor adjustments have been made to the sources and methods used to prepare the nonmanufacturing estimates.
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Author:Rutledge, Gary L.; Leonard, Mary L.
Publication:Survey of Current Business
Date:May 1, 1993
Words:1829
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