What lessons can we learn from Europe's innovative chemicals policy?
Thousands of chemicals are used in industry every day. Very few of them have ever been adequately tested for health and environmental safety; in most cases, no one knows which, if any, of these chemicals pose dangers to workers, consumers, and the natural environment. REACH -- an acronym for Registration, Evaluation and Authorization of Chemicals -- is the European Union's response to this problem. When REACH is adopted, likely in late 2006 or early 2007, industry will have 11 years to register and test all chemicals in use in the EU in quantities greater than one ton per year.
In Europe, chemicals introduced to the market in recent years have been subject to relatively careful testing, while older ones were "grandfathered" and exempted from contemporary testing standards. In 1981, when Europe adopted its regulation for new chemicals, some 100,000 chemicals were listed as already in use and therefore grandfathered. A quarter of a century later, the chemicals that were on the market in 1981 still account for virtually all of the volume of industrial chemical use. Thus, grandfathering the pre-1981 chemicals meant that the new chemical testing standards were largely ineffective. A patchwork of other European regulations called for testing and regulation of selected chemicals that were identified as potential hazards. But at the glacial pace of progress under these regulations, it would have taken literally thousands of years to complete the testing of the chemicals already on the market in Europe.
REACH, first proposed in 2001, will eliminate the grandfathering of the pre-1981 chemicals and continue to require testing of new chemicals. The program will mandate that both new and old chemicals be tested under a schedule that starts with the substances known to be dangerous, and the largest volume chemicals. The initial proposal would have subjected all chemicals to roughly the new chemical standards; after several years of amendments, the current form of REACH represents a weakening of standards for low-volume new chemicals -- but a dramatic strengthening of standards for the pre-1981 chemicals that still dominate the market.
Roughly 30,000 grandfathered chemicals are thought to remain in use in quantities of 1 ton per year or more, making them subject to REACH. Although precise prediction is impossible, the great majority of chemicals are expected to pass the tests and be approved for use. When potential hazards are identified, chemicals may be subject to authorization, i.e., approved only for narrowly defined and carefully regulated uses where hazards can be minimized. In extreme cases, chemicals can be restricted (banned) altogether. If there is disagreement about these judgments, an appeals procedure explicitly allows weighing the economic and other effects of authorization or restriction against the health and environmental impacts.
Several major categories of chemicals are exempt from REACH, most of them because they are covered by other European regulations. (In some cases, industry has succeeded in amending the REACH proposal to exclude particular categories.) Pharmaceuticals, pesticides, fuels, and nuclear materials are all handled under other regulations. REACH covers basic industrial chemicals, and the numerous specialty chemicals that are not in the exempted categories. The chemical inputs used to make pharmaceuticals and pesticides are subject to REACH, even though the final products are not. Likewise, REACH does not cover plastic polymers such as PVC, but does cover the monomers, such as vinyl chloride, which are used to make plastics. As in the case of vinyl chloride and PVC, the monomers are often more directly hazardous than the polymers.
What People are Fighting About
REACH was originally proposed by Greens and other environmental advocates, and quickly met with vigorous opposition from industry. Today, industry worries that REACH will raise costs and interfere with business, making it harder to sell substances that are even suspected of being hazardous, while some environmental advocates fear that the compromises already incorporated into REACH have undermined its initial promise.
The most influential critical study, commissioned by a German industry federation, performed elaborate calculations in support of the thesis that REACH would devastate German manufacturing and cripple the national economy. A similar study for a French industry group, to date released only in the form of PowerPoint slides, asserts that France, too, would be flattened by REACH. Industry public relations efforts have highlighted small businesses that fear they will be unable to bear the new regulatory burden of REACH. Yet despite their criticisms, European business groups soon realized that REACH in some form was unstoppable, and focused on the details of the amendment process. U.S. business was more hostile to REACH, continuing to oppose it altogether for much longer than its European counterparts. The Bush administration has echoed business criticisms, publishing vastly exaggerated estimates of the impact of REACH on the U.S, economy.
Studies performed without industry funding have uniformly found the costs to be much lower, and entirely manageable. In 2004, the European Commission estimated the 11 year total cost of registration and testing of chemicals now on the market at €2.3 billion. A study sponsored by the Nordic countries, which I directed, estimated the same 11 year cost at €3.5 billion. The latter figure, if entirely passed on to customers, would raise the average price of chemicals sold in Europe over the next 11 years by .0006, or 1/16 of 1% -- an entirely affordable amount by any reasonable standard. The Nordic study also presented a detailed critique of the huge cost estimates in the German industry study. Amendments to REACH, adopted after the completion of these studies, have lowered the costs still further. A more recent study, which I directed for the European Parliament in early 2006, found that REACH will have only minimal impact on developing countries. Most of the developing country exports subject to REACH are exported by multinational or very large national companies - enterprises that certainly have the resources to comply with EU regulations on the same terms as European firms. (Indeed, in some cases they are European firms.)
The debates about REACH have extended far beyond the issue of registration and testing costs. Industry representatives base their fears of ruinous costs on the indirect consequences of REACH: Will essential chemicals be withdrawn from the market? Will confidential business information be disclosed? Will innovation be delayed and discouraged? Will the competitiveness of European industry be diminished? Supporters of REACH have offered answers to each of these questions: for example, the Toxics Use Reduction Act in Massachusetts requires reporting of more information about chemical use than REACH, but has never led to problems of disclosure of confidential business information.
Environmental advocates, for their part, worry about the weakening of REACH by amendments introduced by conservatives and business interests. The reduced testing requirements for low-volume chemicals, the growing list of exemptions, and the appeals procedure that could allow economic arguments to outweigh findings of health and environmental hazards, have all reduced the strength of what was initially a very powerful proposal. In response to concerns about costs, supporters of REACH have pointed out that the health and environmental damages caused by toxic chemicals dwarf any estimate of regulatory costs. The health costs associated with asbestos, or the environmental costs to clean up PCB contamination, are many times the total costs of REACH. If just one future toxic hazard comparable to asbestos or to PCBs is avoided by REACH, the benefits (avoided future health and environmental costs) will be many times the total costs of registering and testing all of Europe's chemicals.
CPR welcomes REACH as an important example of precautionary regulation in practice. The ongoing problem of toxic chemical use illustrates the need for a precautionary approach; huge health and environmental damages have resulted from ignoring the early warnings about asbestos, lead, mercury, and many other dangerous substances. Traditionally, chemicals and their producers have been presumed innocent until proven otherwise, and guilty verdicts have rarely been issued until great harm has been done. Prior to REACH, Europe, like the U.S., privileged the freedom of business to produce and sell untested chemicals, at the expense of the freedom of workers and consumers to avoid chemical harm. REACH reverses the burden of proof, requiring producers to demonstrate the safety of their products, and privileging freedom from chemical harm above commercial interests.
REACH is not perfect, and last-minute amendments may change it even farther from its original intent and scope. The growing list of exemptions and the shrinking list of tests required for low-volume chemicals have been motivated by groundless fears of the alleged costs of regulation. The appeals procedures for chemicals subject to authorization and restriction, described only in vague, general terms, could provide a backdoor entry for the abuses of American-style cost-benefit analysis. At best, REACH might be seen as a work in progress, a first draft toward the development of appropriate chemical regulation for the 21st century. Nonetheless, it is unquestionably a big step in the right direction.
It is important to be clear about what REACH will not do. Above all, it will not undermine the competitiveness of European industry. The costs imposed by REACH are too small to have a decisive influence on prices; and safer substitutes are generally available for the chemicals that are found to be hazardous. Rather, Europe stands to gain a competitive advantage from being the first to develop and market the safer substitutes that REACH will encourage. As the emerging economies of Asia regulate their chemical industries, it is likely that they will look to Brussels rather than Washington for models, so that REACH may in time become a de facto global standard. U.S. manufacturers that want to retain access to the huge European market will have to learn to comply with REACH, like it or not. They will be happy to learn that the actual costs of compliance are much lower than their lobbyists have been claiming.
The evidence that regulations do not destroy competitiveness can already be seen within the European economy. If strict regulations and high wages made a country unable to compete, Germany would be a complete failure in world trade. German environmental and other regulations, and German minimum wages for industrial work, are far above American standards. Despite these supposed handicaps, Germany is the world's leading exporter, with a greater dollar value of exports than the much larger US economy (and also greater than exports from China or Japan). The chemical industry, an area where Germany and Europe in general are particularly successful in world markets, will not be destroyed by strengthening health and environmental regulation, and accelerating the development of safer substitutes where necessary. Indeed, Europe has the opportunity to lead from a position of strength in developing new, higher standards.
REACH provides an inspiring example for Americans. Rather than a regulatory regime devoted only to retreat, rollback, and repeal of past levels of protection, the EU has demonstrated the power of democratic deliberation and the ongoing possibility of careful, competent regulation of the private sector. The modest costs will likely be repaid many times over in the avoided damages from eliminating tomorrow's toxic hazards today. Theoretical debates about precaution will be brought down to earth by the example of an important precautionary policy in practice.