Plant and equipment expenditures by business for pollution abatement, 1987 and planned 1988

Survey of Current Business, Nov, 1988 by Gary L. Rutledge, Nikolaos A. Stergioulas

Plant and Equipment Expenditures by Business for Pollution Abatement, 1987 and Planned 1988

BUSINESS plans to spend $9.0 billion in 1988 for new plant and equipment to abate air and water pollution and to dispose of solid waste, 1.1 percent less than in 1987 (table 1).(1) Spending in 1987 is estimated at $9.1 billion, a 7.9-percent increase from 1986. These results are based on a survey conducted in early 1988.

The sizable increase in 1987 was a surprising turnaround from a planned decrease and appears to reflect an increased priority accorded to pollution abatement as business allocated funds among alternative capital spending projects. Only seven industries had planned increases for 1987, but sixteen registered increases--the largest by petroleum. Electric utilities had planned a large decrease, but scaled this decrease back sharply.

Business plans to allocate 1.9 percent of total plant and equipment spending to pollution abatement (PA) in 1988. In 1987, the share was 2.1 percent; in the two previous years, it had been 2.0 percent. The share had peaked in 1975 at 4.2 percent and then declined each year, but the declines moderated recently (chart 4). The moderation after 1984 and the increase in 1987 are consistent with the emergence of increased environmental concern and new environmental legislation: The 1984 Resource Conservation and Recovery Act, the 1986 Superfund Act, the 1986 Safe Drinking Water Act, and the 1987 Clean Water Act.

Plans for 1988 indicate a 1.6-percent decrease in real spending--spending adjusted for price change--for PA plant and equipment (table 2). In 1987, real PA plant equipment spending increased 6.9 percent, the largest percentage increase since 1975. Prices--as measured by the implicit price deflator for PA plant and equipment--increased 0.5 percent in 1988, compared with 0.9 percent in 1987.

Media detail

For air PA plant and equipment, business plans indicate $4.0 billion in spending in 1988, 44.1 percent of the PA total. In 1987, business spent $4.2 billion. The air PA share has tended to fall in the 1980's (chart 5).

For water PA plant and equipment, plans indicate $3.3 billion in spending in 1988, 37.0 percent of the PA total. In 1987, business spent $3.6 billion. The water PA share has tended to be relatively stable in the 1980's.

For solid waste disposal plant and equipment, plans indicate $1.7 billion in spending in 1988, 18.8 percent of the PA total. In 1987, business spent $1.4 billion. Increases in spending for solid waste disposal plant and equipment were large in 1984, 1985, 1987, and planned 1988, increasing the solid waste share significantly.

The tendencies noted in shares of spending for air PA, water PA, and solid waste disposal are consistent with priorities in environmental regulation in the 1980's. The focus has been on increased control of the more hazardous substances, with attention directed to implementing regulations for solid waste disposal and, to a lesser extent, for water PA. The implementation for air PA has tended to lag, possibly reflecting uncertainty over the outcome of congressional deliberation over amendments to the Clean Air Act.

Air and water PA plant and equipment spending--which accounts for most of total PA plant and equipment spending, about 90 percent in the early 1980's and about 85 percent more recently--is for one of two general methods. End-of-line methods involve the separation and treatment of pollutants after they are generated but before they are emitted into the environment. An example is the use of baglike filters mounted in a large housing for collecting particles from gaseous exhausts. Changes-in-production-process methods are preventive; they reduce the generation of pollutants during the production activity. An example is the use of a water recirculation system, instead of a once-through system, for cooling machinery used in production. (Changes-in-production-process methods generally have production and PA features, but respondents to the survey on which the estimates are based are asked to report only the part of spending that is for PA.)

Business reported spending $6.9 billion in 1987 for end-of-line methods and planned $6.4 billion in 1988 (table 3). Spending for end-of-line methods accounted for 89.0 percent of air and water PA plant and equipment spending in 1987, up from 1986 and several percentage points higher than in 1985. The share is expected to be 87.6 percent in 1988.

Industry detail

In 1988, manufacturing industries plan to spend $6.5 billion for PA plant and equipment, an increase of $0.3 billion (4.7 percent); nonmanufacturing industries plan to spend $2.5 billion, a decrease of $0.4 billion (13.4 percent). Within manufacturing, durable goods industries indicated an increase of $0.1 billion, and nondurable goods industries indicated an increase of $0.2 billion. Across industry groups, the largest decreases planned were by electric utilities ($0.5 billion, or 23.3 percent), petroleum ($0.5 billion, or 21.8 percent), and electrical machinery ($0.1 billion, or 37.5 percent). Although the sum of decreases slightly exceeded increases, the number of industries planning increases and decreases was equal. The largest increases planned were by chemicals ($0.4 billion, or 46.5 percent), paper ($0.3 billion, or 60.0 percent), and other nondurables ($0.1 billion, or 60.0 percent).