EU chems white paper promises a lot of pain but little gain

25 April 2003 16:31  [Source: ICIS news]

The European Commission (EC) will make some concessions to industry over Europe’s chemicals white paper proposals but there will be a great deal in the draft legislation – due for publication in early May – that will cause concern.

It is becoming clearer that the cost to Europe’s chemicals producers will be severe. That is likely to drive many smaller companies out of business. The shift of production and research out of Europe by the bigger firms can only accelerate.

As reported on CNI today, cost and benefit projections for the new chemicals registration and control system (called Reach) cover an almost exaggeratedly wide range. At least, as the leaked communication from the Enterprise and Environment commissioners to the EC reveals, some companies and businesses will be given time quietly to expire.

The suggestion is that the cost to users of chemicals (which means most of Europe’s manufacturing industry) will be between Euro14bn ($15.3m) and Euro26bn by 2020 as existing substances are withdrawn from the market. The cost of replacement products could be borne by consumers. But, as everyone knows, the chemical producers will bear the brunt of these and profits margins will fall.

Producers and markets will be given time to shift to alternatives – more than 10 years in some cases – but the total direct and indirect cost burden is put at between Euro18bn and Euro32bn. Industry will undoubtedly pick up on the fact that a comprehensive cost assessment of the impact on Europe as a whole has not been carried out. That would need to take into account consumer prices, international competition and employment and is a serious omission.

In many respects industry’s concerns about the white paper proposals are based on the workability of Reach. One thing is certain, chemical testing will be stretched to the limit by Reach and part of the internet consultation planned for the next few months is to investigate more fully whether the system will work. The workability and the technical requirements of Reach will be of deep concern particularly for Europe’s small and medium sized enterprises (SMEs) which expect to bear a disproportionate burden of costs.

The main thrust of the new chemicals policy is to protect employees and consumers from exposure to toxic chemicals. Independent research carried out for the EC suggests that the positive occupational health benefits could be between Euro18bn and Euro54bn over a 30-year period. The range depends on the successful discovery and control of currently unknown carcinogens and ultimately on a yearly reduction of between 2200 and 4300 cancers.

Reach is expected to have a beneficial impact on the environment through improved control of persistent bioaccumulative and toxic substances as well as other substances although that is difficult to quantify.

This is where the crux of Europe’s argument for more widespread chemicals controls lies. The commission talks of a substantial boost to EU chemical industry competitiveness as the Reach system becomes established as a new international standard (importers will have to fulfil the same obligations as EU producers to overcome any competition imbalances). If this were to be the case, the new regulatory regime would have to demonstrate internationally substantial benefits for human health and the environment and a boost to chemical industry innovation.

Chemical producers in Europe, unfortunately, will provide the test bed for this theory. As this latest white paper document to surface from Brussels suggests, in the short term there may be some negative effects on international competition. For Europe’s chemicals producers then is it going to be a case of ‘no pain, no gain’?

By: Nigel Davis
+44 20 8652 3214

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