Industry report says cost of REACH exaggerated

By Anna McLauchlin

Date: 07/04/05

Proposals to regulate the use of chemicals in Europe will not have the dire economic consequences forecast by the manufacturing industry, a keenly awaited impact assessment is to conclude.

The study was commissioned by the European chemical federation Cefic and the European business association UNICE, which have both been lobbying hard against aspects of the REACH proposal.

But the consultancy KPMG quashes one of industry's claims: that the cost of registering some low-volume chemicals could lead to them being withdrawn from the market.

The assessment examines the four main supply chains affected by REACH: cars, flexible packaging (such as drinks labels), large-scale inorganic manufacture (steel, cement, paper) and the electronics industry.

The results of the electronics case study have not yet been submitted.

The case study involves 152 substances from an unspecified number of companies, of which six were small- and medium-sized businesses (SMEs).

KPMG has concluded that, for the automobile and packaging industries, the cost burden of REACH is "low" and the risk that companies will have to remove critical substances from the market "limited".

Most firms value the products that they use, it concludes, and the burden of reformulating is likely to outweigh the registration costs.

The prospect of companies moving outside the EU in order to avoid complying with REACH is "unlikely".

The companies in the automobile sector interviewed for the study estimated that REACH would imply an average one-off cost increase of 10%, which they would most likely pass on to their customers rather than absorb.

Commission sources say that overall, the fear of an unacceptable burden on industry does not appear to be borne out by the study.

The assessment highlights important benefits as a result of REACH, including an improved data package for downstream users, easier design of safer products and better risk management.

The Commission has already said that any changes to REACH will take account of the study, which will be presented to a working group next week (13 April) and then to a high-level group including Competitiveness Commissioner Günter Verheugen and Environment Commissioner Stavros Dimas on 27 April.

Two of the MEPs responsible for drawing up reports for the Parliament - German centre-right deputy Hartmut Nassauer for the internal market committee and Italian Socialist Guido Sacconi for the lead environment committee - have delayed their report and a committee vote respectively to incorporate the results of the study.

Nassauer's report particularly depends on the study because the approach he has taken is based on the assumption that REACH is too costly.

There are some risks identified by the assessment, notably the impact on small- and medium-sized enterprises (SMEs).

Two of the six firms noted problems with REACH, and the study found that for SMEs the one-off cost for registration rises to 20%, taking into account the data-sharing expected from the formation of industry consortia.

Other findings include an increased administrative burden and more staffing, estimated at two extra people for a company of 300-600 employees in the automobile sector.

There could be an overall shift in some sectors towards the use of polymers as these are not covered by REACH and a small initial drop in innovation.

A study to be presented on 13 April 2005, carried out by consultancy KPMG and commissioned by the European chemical federation Cefic and the European business association UNICE, concluded that the proposed EU regulatory framework for chemicals (REACH) would not have the dire economic consequences forecast by the manufacturing industry. It contradicts the chemical industry's claim that the cost of registering some low-volume chemicals could lead to them being withdrawn from the market.

CEFIC: EU Chemicals Policy Review (REACH) http://www.cefic.be/en/main-steps-of-REACH.html

European Commission: DG Environment: Policies: Chemicals: REACH http://ec.europa.eu/comm/environment/chemicals/reach.htm

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