Reach will cost Euro18bn-32bn by 2020 - leaked EC paper

25 April 2003 12:56  [Source: ICIS news]

LONDON (CNI)--The European Union’s (EU) proposed Reach (registration, evaluation and authorisation of chemicals) system will cost between Euro18bn ($19.6bn) and Euro32bn until 2020, according to a leaked European Commission (EC) "orientation paper" obtained by CNI on Friday.

Enterprise and Information Commissioner Erkki Liikanen and Environment Commissioner Margot Wallstrom wrote the paper to inform the EC of essential features in the white paper draft legislation and the expected principal impacts of the Reach provisions.

The estimated financial impact estimate includes direct costs to chemicals producers as well as those expected to hit chemicals customers.

Direct costs to the chemicals industry from the implementation of the Reach strategy will total Euro3.6bn over the ten year period when the bulk of such costs will arise, according to the paper. This compares with initial estimates of between Euro1.4bn and Euro7bn thrown up by a business impact study conducted in May 2002.

Liikanen and Wallstrom concede that  this initial study has led the Commission to propose "simpler and more cost effective" ways to design the Reach system and includes the possibility of test waiving and limitations on the requirements for intermediates and polymers.

However, the commissioners warned that there is a risk that capacity restraints in the EU may result in testing costs which are higher than the Euro3.6bn figure to cover the cost of testing substances elsewhere in the world. Chemicals testing capacity in the EU can currently cope only with around 25-30% of the required testing and the EC has admitted that European testing facilities may be supplemented by capacity from elsewhere in the world.

Running costs for Reach are likely to be around Euro400m as a one off cost over 11 years, the paper added.

Immediate users of chemicals will experience a Euro14bn-26bn increase in costs over a period to 2020 thanks to Reach system implementation. Chemicals customers will face increased costs from the expected withdrawal from the EU market of some chemical substances under Reach and due to the absence of exact replacements of the products.

The EC also admits that these estimates have not taken account of capacity constraints, which may delay increases in the production of substitutes for withdrawn products.

On Thursday (24 April), Mercer Management Consulting reported that the impact of the Reach system on France’s economy would be between Euro29bn-54bn and involve the loss of 360 000-670 000 jobs, with repercussions affecting the entire production sector. The Mercer report, which was commissioned by French chemicals industry association the UIC, two government departments and various trade organisations, also claimed implementation costs of Euro50 000-1m per substance.

Despite the huge costs generated by Reach, the EC says occupational health benefits are estimated at between Euro18bn-Euro54bn over a 30-year period. The commissioners admitted that the extent of the range reflects the difficulties in estimating uncertainties but that it corresponds to an assumed yearly reduction of around 2200-4300 cancer cases over the three-decade period.

The Reach system is one of the main proposals in the EU white paper "A strategy for a future chemical policy".

By: Joanna Kesteven
+44 208 652 3214

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