Pollution abatement and control expenditures, 1980-83 Essay

U.S.RESIDENTS spent $62.7 billion on pollution abatement and
control (PAC) in 1983, a 6.4-percent increase over the $58.9 billion
spent in 1982 (tables 1 and 2). After adjustment for price dchange, the
increase was 3.6 percent. The real increase was mainly in spending on
motor 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 dispose
of solid waste. This spending is for regulation and monitoring,
pollution abatement, and research and development. Regulation and
monitoring is a government activity that stimulates and guides action to
reduce pollutant emissions. Pollution abatement directly reduces
pollutant emissions by preventing the generation of pollutants,
recycling them, or treating them prior to discharge. Research and
development not only supports abatement, but also helps increase the
efficiency of regulation and monitoring. Highlights of the recently
completed set of PAC estimates for 1983 are:

* In real terms, personal spending for pollution abatement
increased 17.7 percent, business spending increased 3.4 percent, and
government spending declined 3.2 percent from 1982.

* In real terms, spending for regulation and monitoring (all by
government) declined 16.0 percent and spending for research and
development (by business and government) changed little from 1982.

* Prices of PAC goods and services, as measured by the
fixed-weighted price index for PAC, increased 3.1 percent in 1983,
compared with 5.0 percent in 1982 (table 3). Prices for most PAC
categories increased less in 1983 than in 1982.

* Real PAC spending was 1.6 percent of GNP, and business capital
spending for pollution abatement was 2.6 percent of gross private
domestic investment.

* In current dollars, business PAC costs–the costs of conforming
to PAC rules and regulations–were $62.0 billion in 1983, up 16.6
percent from 1982.

Although information for 1984 is incomplete, what is available
indicates another increase in real PAC spending. Spending for motor
vehicles with emission abatement devices continued to be strong.
According to the BEA plant and equipment survey taken in
November-December 1983, business planned to increase their capital
spending for pollution abatement in 1984, and according to preliminary
Census Bureau estimates, governments increased their spending on sewer
systems. Spending in other components declined, but at a slower rate
than in 1983.

The section that follows discusses real PAC spending and the
composition of that spending in 1983. The next section discusses
business PAC costs, which reflect PAC spending in previous years as well
as in the current year. Technical notes on definitions relating to PAC
and sources used in preparing the estimates follow.

Real PAC spending

Changes in real spending.–Real total Pac spending increased $0.9
billion in 1983, following declines of $1.2 billion in 1982 and $0.8
billion in 1981. The increase was due to the recovery in general
economic activity.

Personal spending for pollution abatement increased 17.7 percent in
1983 to $4.4 billion, following a 0.3-percent decline im 1983. The
increase reflects the recovery in purchases of motor vehicles, which are
required 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-percent
decline in 1982. The recovery in general economic activity in 1983 led
to higher utilization of production facilities and increased motor
vehicle purchases by business. Spending for purchase and operation of
motor vehicle emission abatement devices increased 13.4 percent,
following a 1.7-percent decline in 1982. Spending to operate plant and
equipment for pollution abatement increased 11.1 percent, following a
10.6-percent decline in 1982. Spending for new plant and equipment for
pollution abatement declined 17.3 percent, compared with a 10.0-percent
decline in 1982.

Government PAC spending, excluding research and development and
regulation 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 in
public sewer system construction outweighed an increased in other
government pollution abatement spending.

Research and development spending for PAC by business and
government remained at about $0.7 billion in 1983, following a
19.2-percent decline in 1982. Although government spending increased
6.1 percent, business spending declined 6.9 percent.

Regulation and monitoring spending for PAC by government declined
16.0 percent in 1983 to $0.6 billion, compared with a 5.7-percent
decline in 1982. Federal spending declined 21.6 percent, and State and
local spending declined 7.1 percent.

Composition of real spending.–Table 4 is a reorganization of items
in 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 PAC
spending, while research and development by business and government
accunted for 3 percent. Almost one-half of the PAC program in 1983 was
for purchase and operation of motor vehicle (mobile sources) emission
abatement devices and public sewer systems.

Chart 1 compares PAC spending in 1983 and 1972, the first year for
which estimates are available. In 1983, about 30 percent of PAC
spending was by persons and business for motor vehicle emission
abatement, about twice the percentage in 1972. spending to abate
pollution from industrial facilities was 32 percent of PAC spending in
1983, down from 38 percent in 1972, and spending for public sewer
systems was about 20 percent, down from 24 percent in 1972.

Business PAC costs

Business PAC costs are the costs of conforming to PAC rules and
regulations. They result from both current-and previous-year business
spending for PAC. Most current-year spending, except for capital, is in
business PAC costs. Current-year capital spending is not directly
charged to business PAC costs; instead, the capital consumption
allowance and net imputed return on use of capital for PAC over time are
included. The former reflects the depreciation of existing pollution
abatement facilities. The latter, which is measured as the return that
is foregone by business when capital is used for PAC, reflects the
actual cost of capital ownership irrespective of the extent of its use.

Business PAC costs amounted to $62.0 billion in current dollars in
1983, 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 to
purchasers in final product prices, although the extent and the timing
of the passons depend on the markets for the final products. Costs of
business PAC for its own wastes amounted to $48.7 billion, of which
$38.0 billion were incurred by nonfarm nonresidential business.


Pollutants are substances and other emissions that are potentially
harmful and degrade the quality of air or water shared by all.
Activities resultting from rules and regulations restricting the release
of pollutants into common-property media (the air and water used by all)
are defined as PAC activites. This definition of PAC activities
excludes other environmental activities, such as natural resource
conservation and protection of endangered species.

The PAC expenditure series in this article covers most, but not
all, PAC activities; excluded are (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
manufacture and agriculture) and (2) PAC activities that, although
resource-using, are non-market activities (for example, volunteer litter
removal). The series coveres pollution abatement, regulation and
monitoring, and research and development–as described at the beginning
of the article.

The PAC expenditure series includes all spending for the collection
and disposal of solid waste by means acceptable to Federal, State, and
local authorities. Some of this spending, such as that for the
avoidance of the slowing of production or consumption actvity due to the
accumulation of solid waste, is not for PAC. The separation of the PAC
part was last shown in the February 1984 SURVEY of current business; for
further discussion of solid waste collection and disposal, see the March
1981 SURVEY.


Estimates of PAC expenditures are based directly or indirectly on
surveys. Approximately three-fifths of the 1982 estimate of PAC
expenditures is based directly on surveys of PAC spending. The
remainder is based on more general survey information and assumptions
necessary to utilize this information. BEA collects data on capital
spending for pollution abatement by companies and on Federal agency
funding for PAC. All other data are from surveys by other government
agencies–including the Bureau of the Census and Department of
Energy–and private organizations. Table 6 shows the percentage of PAC
spending by type of estimate.