Newsletter No 1 March 2014

Roy Brouwer re-appointed as expert observer by the European Chemicals Agency

Professor Roy Brouwer supports implementation of new EU regulation to restrict hazardous chemicals on European markets (REACH). He has summarized first experiences with the economic underpinning of REACH decision-making in a recently published article.

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Since 2007 a new the regulation concerning the Registration, Evaluation, Authorization and Restriction of Chemicals (REACH) is in force in Europe to reduce the adverse effects of hazardous chemical substances on human health and the environment. Implementation of the regulation by the European Chemicals Agency (ECHA) is supported by a Socio-Economic Analysis Committee. Socio-economic analysis (SEA) forms an important part of this regulatory process, and aims to provide support to decision-making as to whether it is a good idea for society as a whole to either impose a restriction (compared to continued use or using other risk management options) or grant an authorisation (compared to refusing the authorisation) for a hazardous substance. Authorization will only be granted if the applicant can prove adequate control of the substance, or if it can show that the socio-economic benefits outweigh the associated risks to human health or the environment and if there are no suitable alternative substances or technologies. In the case of a restriction, the costs of complying with the restriction, including any shift to alternatives, are compared to the benefits from the reduced level of risk to either the environment or human health.

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The individual Member States proposing a restriction on a substance have to show through the SEA that the restriction is capable of reducing the risks to an acceptable level within a reasonable period of time and at a cost proportionate to the avoided risk. In the case of authorisation, the burden of proof that the benefits outweigh the risks from the authorisation application being granted lie with the industry wishing to use the substance within Europe. What is considered proportionate is not clearly defined in REACH and was the main focus of Brouwer’s research. 

The opinion making process is characterized by many uncertainties related to the limited information about the expected costs and benefits of the proposed restrictions. Compared to the benefits of the proposed restrictions, implementation costs were in most cases easier to find and calculate, but based on a partial economic impact analysis. The expected wider economic impacts on European markets were mostly assessed in a qualitative manner. Given the estimated restriction costs, a key question was whether these costs were considered worth paying for in view of the expected heath risk reductions across the different proposals. Answering this difficult question could in some cases be avoided by focusing on the technical and economic feasibility of using substitutes. If substitutes were already available on markets and used in industry, as is the case for example for some of the mercury containing measuring devices, this was used as an indication that the proposed restriction must be proportionate if markets reveal that the replacement is economically feasible and downstream users are willing to pay the substitute’s extra cost.

Given the lack of a common approach to reach a conclusion in each restriction proposal, it was difficult to assess which cost level was considered proportionate to the risk reduction involved or which benefit-cost ratio was applied as a benchmark to decide on a proposal’s proportionality. The experts found themselves in a position of having to answer in each restriction proposal the question of whether the available evidence suggested that the estimated costs were deemed acceptable and worth paying for. This varied in the first REACH proposals from €11 per kg of lead in jewellery to €19 thousand per kg of mercury in thermometers for industrial use. International benchmarks are needed to support decision-making regarding the proportionality of future restriction and authorization proposals. 
More information:
Brouwer, R., Cauchi, J. and Verhoeven, J. (2014). Regulatory decision-making under uncertainty: Are costs proportionate to benefits when restricting dangerous chemicals on European markets?Regulatory Toxicology and Pharmacology, 68(3): 438-466
For more information on the author: see the website of Roy Brouwer