The True Costs of REACH

image of The True Costs of REACH

The proposed new chemicals policy of the European Community, REACH, is an important new development in environmental protection. Rather than waiting for government or independent researchers to determine that chemicals are hazardous, it will make manufacturers, importers, and professional users of chemicals responsible for the safe use. There is little doubt that REACH will give health and environmental benefits, but there has been little agreement about the resulting costs: -Will European manufacturers be crushed by the economic burden of chemicals regulation, as some industry sources have suggested? -Or, as projected in some public sector studies, will there be a minor cost impact, well within the ability of industry and worth the price? This report offers a new look at these costs. Frank Ackerman and Rachel Massey compare the current EC legislation on chemicals, the European Commission’s proposal and an alternative proposal addressing previous versions of REACH. The authors make a bottom-up calculation of the expected registration and testing costs under REACH and provide a new analysis of the indirect economic impacts. Ultimately they evaluate some prominent arguments about the costs of REACH and discuss the expected benefits. In the appendices there is the derivation of their economic impacts analysis and a critique of the best-known industry-oriented study.



Executive Summary

REACH, the European Union's proposed chemicals policy, is the subject of ongoing controversy -- focusing in particular on its potential costs. This study provides a bottom- up recalculation of the expected costs of the current (October 2003) version of REACH, estimating an 11-year total direct cost of €3.5 billion. A proposed variant, “REACH Plus,” would restore some features of a previous version of REACH, while increasing the total direct cost only to €4.0 billion. The annual cost is around 0.06% of the chemical industry's sales revenue. Two standard economic models imply that total (direct plus indirect) costs should be no more than 1.5 – 2.3 times the direct costs. Economic analysis confirms that costs of this magnitude are unlikely to harm European industry, while several studies have suggested that the health and environmental benefits of REACH will be substantial.


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