Box: Stock of Plant and Equipment for Air and Water Pollution Abatement in the United States, 1980–91

This box presents estimates of the gross and net stocks of plant and equipment (P&E) for air and water pollution abatement (PA) in the United States during 1980–91. Gross and net stocks of PA P&E help to protect air and water from degradation by stationary and point industrial sources of pollutant emissions./1/

In 1991, the gross stock of air and water PA P&E was about $183.5 billion (table A)./2/ In constant (1987) dollars, the gross stock was $165.0 billion in 1991, about 2.0 percent of the real gross stock of all fixed nonresidential nonfarm business capital. Between 1980 and 1991, the real gross stock of air and water PA P&E grew at an annual rate of 2.6 percent. Growth in nonmanufacturing stocks outpaced that in manufacturing stocks, mainly reflecting PA P&E spending by electric utilities. The real net stock of air and water PA P&E—that is, after subtracting depreciation—was $91.3 billion in 1991, up from $85.8 billion in 1980.

The PA P&E stock estimates are useful when studying market production and economic well-being. They are helpful in determining how pollution abatement spending affects prices, total capital costs, and the profitability of capital. They are also helpful in constructing rough measures of the value of the degradation in air and water quality that has been avoided through pollution abatement./3/

The 1980–91 PA P&E estimates were prepared by the perpetual inventory method: Past PA P&E flows (capital spending) were cumulated and discards deducted, in accordance with lifespans of capital goods, to arrive at gross stocks of PA P&E. Net stocks were calculated by subtracting accumulated depreciation from gross stocks. Gross and net stock estimates for 1980–91 are valued at constant and at current cost—that is, using 1987 prices (for constant cost) and replacement or current-year prices (for current cost).

Data on an establishment basis for manufacturing PA P&E spending are mainly from the Pollution Abatement Costs and Expenditures (PACE) Survey by the Bureau of the Census. Data for electric utilities are mainly from the Pollution Abatement (PA) Supplement to the Census Bureau's P&E survey; the PA Supplement reports PA P&E spending for three industries—electric utilities, petroleum, and mining. The PA Supplement reports PA P&E on a company basis, but for electric utilities (unlike for petroleum and mining), such data approximate an establishment basis. The PA P&E spending estimates for mining and for nonmanufacturing except mining and electric utilities are prepared by indirect methods; a variety of data sources are used, including the PA Supplement, an environmental protection expenditures survey by the American Petroleum Institute, and the Census of Mineral Industries.

1. For air PA, the Clean Air Act classifies the sources of pollutants as mobile (for example, automobiles) or stationary (for example, factories). For water PA, the Federal Water Pollution Control Act classifies sources of pollutants as point (for example, factories) or nonpoint (for example, highway construction projects).

2. The stock estimates in table A are part of a new establishment-based series for 1960 forward. BEA is planning a SURVEY OF CURRENT BUSINESS article for later this year to present such PA P&E stock estimates for selected industries and to present their related capital flows through 1992. The new stock series replaces a series prepared on a company (or enterprise) basis.

3. Stocks other than for PA P&E also protect air and water. Examples include stocks of PA devices and systems on mobile (for example, motor vehicles) and nonindustrial pollutant sources (for example, public sewer systems and septic systems), as well as PA features of solid waste management systems. Estimates for these kinds of stocks are not available.