Pollution abatement and control expenditures, 1980-83 Essay

U.S.RESIDENTS spent $62.

7 billion on pollution abatement andcontrol (PAC) in 1983, a 6.4-percent increase over the $58.9 billionspent in 1982 (tables 1 and 2). After adjustment for price dchange, theincrease was 3.6 percent.

The real increase was mainly in spending onmotor 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 disposeof solid waste. This spending is for regulation and monitoring,pollution abatement, and research and development.

Regulation andmonitoring is a government activity that stimulates and guides action toreduce pollutant emissions. Pollution abatement directly reducespollutant emissions by preventing the generation of pollutants,recycling them, or treating them prior to discharge. Research anddevelopment not only supports abatement, but also helps increase theefficiency of regulation and monitoring. Highlights of the recentlycompleted set of PAC estimates for 1983 are: * In real terms, personal spending for pollution abatementincreased 17.7 percent, business spending increased 3.4 percent, andgovernment spending declined 3.2 percent from 1982. * In real terms, spending for regulation and monitoring (all bygovernment) declined 16.

0 percent and spending for research anddevelopment (by business and government) changed little from 1982. * Prices of PAC goods and services, as measured by thefixed-weighted price index for PAC, increased 3.1 percent in 1983,compared with 5.

0 percent in 1982 (table 3). Prices for most PACcategories increased less in 1983 than in 1982. * Real PAC spending was 1.6 percent of GNP, and business capitalspending for pollution abatement was 2.6 percent of gross privatedomestic investment.

* In current dollars, business PAC costs–the costs of conformingto PAC rules and regulations–were $62.0 billion in 1983, up 16.6percent from 1982. Although information for 1984 is incomplete, what is availableindicates another increase in real PAC spending. Spending for motorvehicles with emission abatement devices continued to be strong.According to the BEA plant and equipment survey taken inNovember-December 1983, business planned to increase their capitalspending for pollution abatement in 1984, and according to preliminaryCensus Bureau estimates, governments increased their spending on sewersystems. Spending in other components declined, but at a slower ratethan in 1983. The section that follows discusses real PAC spending and thecomposition of that spending in 1983.

The next section discussesbusiness PAC costs, which reflect PAC spending in previous years as wellas in the current year. Technical notes on definitions relating to PACand sources used in preparing the estimates follow. Real PAC spending Changes in real spending.–Real total Pac spending increased $0.

9billion in 1983, following declines of $1.2 billion in 1982 and $0.8billion in 1981. The increase was due to the recovery in generaleconomic activity. Personal spending for pollution abatement increased 17.7 percent in1983 to $4.

4 billion, following a 0.3-percent decline im 1983. Theincrease reflects the recovery in purchases of motor vehicles, which arerequired 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-percentdecline in 1982. The recovery in general economic activity in 1983 ledto higher utilization of production facilities and increased motorvehicle purchases by business. Spending for purchase and operation ofmotor vehicle emission abatement devices increased 13.4 percent,following a 1.

7-percent decline in 1982. Spending to operate plant andequipment for pollution abatement increased 11.1 percent, following a10.6-percent decline in 1982. Spending for new plant and equipment forpollution abatement declined 17.3 percent, compared with a 10.

0-percentdecline in 1982. Government PAC spending, excluding research and development andregulation 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 inpublic sewer system construction outweighed an increased in othergovernment pollution abatement spending. Research and development spending for PAC by business andgovernment remained at about $0.

7 billion in 1983, following a19.2-percent decline in 1982. Although government spending increased6.

1 percent, business spending declined 6.9 percent. Regulation and monitoring spending for PAC by government declined16.

0 percent in 1983 to $0.6 billion, compared with a 5.7-percentdecline in 1982. Federal spending declined 21.6 percent, and State andlocal spending declined 7.1 percent. Composition of real spending.

–Table 4 is a reorganization of itemsin 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 PACspending, while research and development by business and governmentaccunted for 3 percent. Almost one-half of the PAC program in 1983 wasfor purchase and operation of motor vehicle (mobile sources) emissionabatement devices and public sewer systems. Chart 1 compares PAC spending in 1983 and 1972, the first year forwhich estimates are available.

In 1983, about 30 percent of PACspending was by persons and business for motor vehicle emissionabatement, about twice the percentage in 1972. spending to abatepollution from industrial facilities was 32 percent of PAC spending in1983, down from 38 percent in 1972, and spending for public sewersystems was about 20 percent, down from 24 percent in 1972. Business PAC costs Business PAC costs are the costs of conforming to PAC rules andregulations. They result from both current-and previous-year businessspending for PAC. Most current-year spending, except for capital, is inbusiness PAC costs. Current-year capital spending is not directlycharged to business PAC costs; instead, the capital consumptionallowance and net imputed return on use of capital for PAC over time areincluded. The former reflects the depreciation of existing pollutionabatement facilities.

The latter, which is measured as the return thatis foregone by business when capital is used for PAC, reflects theactual cost of capital ownership irrespective of the extent of its use. Business PAC costs amounted to $62.0 billion in current dollars in1983, 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 topurchasers in final product prices, although the extent and the timingof the passons depend on the markets for the final products. Costs ofbusiness PAC for its own wastes amounted to $48.

7 billion, of which$38.0 billion were incurred by nonfarm nonresidential business. Definitions Pollutants are substances and other emissions that are potentiallyharmful and degrade the quality of air or water shared by all.

Activities resultting from rules and regulations restricting the releaseof pollutants into common-property media (the air and water used by all)are defined as PAC activites. This definition of PAC activitiesexcludes other environmental activities, such as natural resourceconservation and protection of endangered species. The PAC expenditure series in this article covers most, but notall, PAC activities; excluded are (1) PAC activities that do not useproductive resources (for example, plant closings due to PAC, delays inplant construction, or curtailments in the use of chemicals inmanufacture and agriculture) and (2) PAC activities that, althoughresource-using, are non-market activities (for example, volunteer litterremoval). The series coveres pollution abatement, regulation andmonitoring, and research and development–as described at the beginningof the article. The PAC expenditure series includes all spending for the collectionand disposal of solid waste by means acceptable to Federal, State, andlocal authorities. Some of this spending, such as that for theavoidance of the slowing of production or consumption actvity due to theaccumulation of solid waste, is not for PAC.

The separation of the PACpart was last shown in the February 1984 SURVEY of current business; forfurther discussion of solid waste collection and disposal, see the March1981 SURVEY. Sources Estimates of PAC expenditures are based directly or indirectly onsurveys. Approximately three-fifths of the 1982 estimate of PACexpenditures is based directly on surveys of PAC spending. Theremainder is based on more general survey information and assumptionsnecessary to utilize this information. BEA collects data on capitalspending for pollution abatement by companies and on Federal agencyfunding for PAC.

All other data are from surveys by other governmentagencies–including the Bureau of the Census and Department ofEnergy–and private organizations. Table 6 shows the percentage of PACspending by type of estimate.

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