Greenwire, October 13, 2006
INDUSTRY GIRDS FOR SPRAWLING E.U. REGULATORY SCHEME
[Rachel's introduction: The chemical industry continues to oppose REACH, Europe's proposed new precautionary chemicals policy -- but the handwriting is on the wall. REACH is coming, in one form or another.]
By Russell J. Dinnage
A landmark European Commission plan for overhauling chemical regulations is on its way to becoming law.
Five years in the making, REACH -- the Registration, Evaluation, Authorization and Restriction of Chemicals Act -- is a 600-page tome that has been making the rounds in government offices and corporate headquarters throughout Europe, generating thousands of public comments for European Union officials to review. The proposal is on track to become law sometime next year.
Some experts are questioning U.S. readiness for a such a sweeping proposal that figures to reshape the global regulatory landscape for chemical manufacturers and all businesses that use chemicals.
"Businesses in the United States are completely not focused on this topic," said Angela Logomasini, who tracks risk and environmental policy for the Washington-based Competitive Enterprise Institute. "The reality of REACH is that it will affect everything in the business. From downstream manufacturers, importers, domestic users -- people are not aware that it could become a globally focused phenomenon."
But it is not easy to assess REACH's effect on U.S. interests. There is, first of all, a lack of consensus about how deeply the law would dig into industry's bottom line.
The Bush administration, for example, considers REACH "a very important issue," but it has yet to produce an official evaluation of its potential economic impact on the U.S. chemical industry, said Matt Braud, spokesman for the Department of Commerce's International Trade Administration.
Nonetheless, the administration has a strong opinion on REACH. "In our view, and as expressed by many other governments, the E.U.'s proposal remains overly expansive, burdensome and would be difficult to implement effectively," Braud said. "We believe the E.U.'s stated objectives of protecting human health and the environment are worthy policy goals; however, achieving those goals must be applied in ways that are consistent with the E.U.'s obligations to its trading partners under the World Trade Organization."
Small and mid-sized U.S. chemical companies are keenly aware of REACH "and are actively preparing for its impacts," said Jim Cooper, a spokesman for the Synthetic Organic Chemical Manufacturers Association.
The American Chemistry Council, which represents large companies, did not return calls for comment on REACH's potential financial effect, and DuPont Chemical Corp. spokesman Dan Turner said the company is examining REACH but it does not have any comprehensive financial impact estimates yet. A price tag in the billions
REACH would require the registration of more than 30,000 chemical substances used in manufacturing within 11 years for the stated purpose of protecting human and environmental health. The proposal resembles the Federal Insecticide, Fungicide and Rodenticide Act, which regulates pesticides in the United States.
A November 2005 Government Accountability Office report said REACH would "eliminate the distinction between new and existing chemicals and require chemical companies to submit certain basic information on chemical products produced over certain volumes."
Specifically, REACH affects all chemicals manufactured in or imported into the European Union in quantities of 1,000 kilograms (2,204.6 pounds) or more.
REACH's Article 23 requires all chemical companies doing business in Europe to submit testing data to the new European Chemicals Agency. If a substance has qualities deemed "carcinogenic, mutagenic or toxic," further testing must be conducted at a company's expensive on animals and results submitted to the agency for a safety review.
Of 30,000 substances expected to come under regulation in 2010, 1,500 are estimated to have carcinogenic qualities, the European Union says.
No one can say with certainty how much it will cost to register a substance. But the E.U.'s 2003 "Extended Impact Assessment" estimates it would cost about $250,000 per chemical -- or $15 billion for the industry as a whole over the 11 to 15 years it is expected to take to fully implement the regulation.
Another study -- "E.U. 2004 REACH: the Impact of REACH" -- puts the total industry testing cost at $3 billion and estimates that it will cost between $10,000 to $37,000 to register a single substance, depending on the size of the registration and whether animal testing is needed.
And then there is a study by the German chemical industry association, BDI, predicting REACH will cause a 1.4 percent loss of production for German manufacturers and the loss of 150,000 to 2.3 million jobs.
Cooper, of the chemical manufacturers group, predicts testing will quickly become an expensive burden. "Most of the official estimates from the European Commission... do not seem to take into account administrative costs, analytical method development, consulting fees, interpretation of test results and other potential burdens," he said. Cooper's group puts the cost of screening level tests for a single chemical at about $250,000."For some chemicals, it will be in the millions of dollars," Cooper said. "As with certain pesticides, companies will probably choose to leave those markets rather than pay for the testing."
Most U.S. companies preparing for REACH implementation are pointing to the 2008 deadline for pre-registering chemicals. A chemical that is not pre-registered cannot be sold in the European Union.
Rob Donkers, the environment counselor to the European Commission's U.S. delegation, said a manufacturer can pre-register by sending an e- mail or even a postcard to the European Chemicals Agency that includes the name of the company and the substances they want to register.
"It's just to signal an intention to be involved in the program and does not stop production or importation," Donkers said. He dismissed the 2004 E.U. study that says industry pre-registration costs would range from $62 million to $125 million.
But Cooper and Logomasini see the pre-registration being a lot more complicated than Donkers maintains.
"It is unlikely that the E.U. will have the resources or infrastructure in place to handle all of the pre-registrations, let alone sorting through them all and determining which companies should be playing in which sandboxes," Cooper said.
Said Logomasini: "The fact that the E.U. officials are saying all pre- registration will require is for a company to send in a postcard shows that they have no idea what they are doing."
'A driver for innovation'
REACH is currently being read, debated and amended in the European Parliament's Environment Committee. From there, it will likely go to a plenary session of the full parliament the week of Nov. 13, Donkers said (Greenwire, Oct. 10).
After a full parliament vote, he said, the measure will go to the Council of Minister for a second reading in early December, when the ministers will decide on new amendments. If there is contention over the amendments, the proposal will go to a conference committee next March for a vote on proposed changes.
"So by the summer of 2007... we will see full passage," Donkers said. It would still take "another few years" until various administrative agencies and the act "can be implemented effectively on a day-to-day basis."
Donkers predicted that REACH would "serve as a driver for manufacturing and process innovation" and assure consumers that products are safe.
"REACH will benefit companies that are more responsive and have a no- questions-needed attitude about the safety of their products," Donkers said. "Industries that are responsible will have a competitive edge under REACH."
But Logomasini said REACH will present a global regulatory morass for industry.
"Quite frankly they have no idea what they are doing in Europe," Logomasini said. "There's no enforcement plan for this act. The E.U. is simply saying 'trust us,' but even they don't know what it's going to cost. It just doesn't seem rational, and I don't think we should trust the bureaucracy when they say the impact will be minimal."