The main lobby organisation for Europe’s chemical industry, CEFIC, has been keen to publicise a new study from the European Commission, a “Cumulative Cost Assessment” of the cost of regulation on Europe’s chemical industry. However, as the European Commission has pointed out, the study doesn’t consider economic or broader societal benefits of the legislation (such as protection of workers, public and environment), nor does it provide any data on regulatory costs for chemical companies elsewhere in the world. The data also comes from the chemical industry, who have a long record of exaggerating costs, and assumes full compliance with the law, which is not the reality.
The Commission’s web page for this study states:
“The study shows that the 3 main drivers of regulatory costs are:
- legislation on emissions and industrial processes, representing 33% of the regulatory costs
- chemicals legislation including REACH and CLP with 30%
- workers’ safety legislation with 24%.
This provides useful insights into the nature of such costs and their development over time. As the study focused on the direct costs of legislation without assessing neither indirect costs nor economic or broader societal benefits of the legislation, no policy conclusions can be drawn at this stage.”
“…As a next step, the results of this study will be compared, to the extent possible, with the regulatory costs for chemical companies in other regions, such as the United States, China and India.”
Europe’s chemical industry lobby group CEFIC describes these costs as ‘high’, even though they give no data from other countries to compare them with. They do claim a doubling of cost since 2004, but fail to point out that it was widely accepted that the regulatory system in place in 2004 was ineffective, which is why a new system, based around REACH, was adopted.
This study also depends on the industry to report costs, even though the chemical industry has a long record of overestimating the financial cost of regulation. This exaggeration was particularly notable during the debate on creation of the REACH system, for example see pages 94-95 of the detailed study done for the Dutch Government in 2004, and ChemSec’s ‘Cry Wolf‘ report, from 2015. In spite of the fact that this study is based on industry data, it estimates that the direct cost of regulation is only around 2% of the industry’s turnover.
This study does not consider any of the costs that an effective regulation system aims to prevent, such as harm to workers, environment and the public, which means that it paints a very misleading impression of the situation. It also assumes full compliance with the regulations – which the study admits ‘is not always the case‘.
Dr Michael Warhurst, Executive Director of CHEM Trust, said:
“If your business is making and selling chemicals, it is essential that you know their hazards and how they should be used safely. Regulation is necessary to make sure the industry properly assesses hazards and safe use, as the evidence demonstrates that they weren’t doing it without it.
The costs of injury from chemicals is far higher than any regulatory cost. Any cost assessment based on industry data should be approached with caution, as the chemical industry has a history of exaggerating regulatory costs, as extensively demonstrated during the creation of REACH.
In addition, EU chemicals regulations are designed to cost more when hazardous chemicals are used, thus providing an economic incentive to innovate towards safer chemicals. This is in the long term interests of Europe’s chemical industry.
It is vital that these regulations are followed by all players in the market, so CHEM Trust would like to see a substantial increase in resources going to monitoring and enforcement”