Study of the Impact of the Future Chemicals Policy Additional REACH implementation scenario : Study of the Impact of the Future Chemicals Policy Additional REACH implementation scenario June 24, 2003 Prepared for:
UIC With the contribution of: National Economic Research Associates, and Regional Economic Models, Inc.
Contents : Contents Objectives
Additional scenario hypotheses and approach
Modelling results
Objectives of the additional scenario This scenario, which should be regarded as an addition to the main study, aims at integrating the latest proposals of the Environment D.G. and of the Enterprise D.G. regarding REACH released in May 2003 : Objectives of the additional scenario This scenario, which should be regarded as an addition to the main study, aims at integrating the latest proposals of the Environment D.G. and of the Enterprise D.G. regarding REACH released in May 2003 Objective: take into account in the study the latest evolutions of the proposed new European legislation, as presented in the "draft legislation – Volume I" document modified in May 2003 and featured on the European Commission website and recently modified
This scenario represents an addition to the main study and should not be read independently from the final report of this study, in which the key features of the methodology, the hypotheses and the analyses by segment are described
The hypotheses taken into account were communicated to the relevant authorities and validated both by the Environment D.G. and the Enterprise D.G.
Contents : Contents Objectives
Additional scenario hypotheses and approach
Modelling results
Scenario hypotheses – Reminder The additional scenario is based upon the same hypotheses as the reference scenario in terms of unit registration costs : Scenario hypotheses – Reminder The additional scenario is based upon the same hypotheses as the reference scenario in terms of unit registration costs Unit cost of registration Tests required: tests defined in EEC Directive 67/548, appendixes VIIa and VIIb1
Average unit testing cost of the tests derived from an industrial benchmark. Cumulate cost per level of test required:
Basic series 1-10 t: 34 k€
Basic series (VIIa): 209 k€
Level 1 (VIIb): 456 k€
Level 2: 898 k€
Hypothesis: all tests have to be carried out in GLP2 laboratories. The scenario does not take into account the possibility of using predictive models (QSAR type)
Hypothesis: the approach by chemical "family" is allowed regarding polymers
Implementation of consortia taken into account: the cost for a given producer / importer is calculated by multiplying by its market share or by dividing by the number of players in the consortium
Costs of the tests already carried out are subtracted. Especially the tests carried out in the ICCA HPV initiative (High Production Volume)
Administrative costs: we decided to keep the same hypothesis as in the reference scenario (15 % of testing cost remaining to be carried out after product suppression). Nevertheless, the requirements in terms of Duty of Care and of Chemical Safety Report are very likely to bring much higher administrative costs than the ones that were taken into account in the reference scenario Source: Interviews with the ministries and industrialists, Mercer analysis
1 The existing substances are dealt with like new substances
2 Good Laboratory Practice
Scenario hypotheses– New hypotheses The additional scenario is based on the proposals of the Environment D.G. and the Enterprise D.G. and takes into account new hypotheses on synthesis intermediates and on polymers (1/2) : Scenario hypotheses– New hypotheses The additional scenario is based on the proposals of the Environment D.G. and the Enterprise D.G. and takes into account new hypotheses on synthesis intermediates and on polymers (1/2) Synthesis intermediates Non isolated intermediates: exemption
Site-limited isolated intermediates: impact regarded as nil in the scenario
Isolated intermediates transported between or supplied to up to two other sites under strictly controlled conditions, in quantities of under 1000 t: impact regarded as nil in the scenario
Isolated intermediates transported between or supplied to up to two other sites under strictly controlled conditions, in quantities of over 1000 t: impact equivalent to the registration cost for substances between 1 and 10 T
Isolated intermediates transported between or supplied to three other sites or more under strictly controlled conditions: general rules of REACH (Ann. VI, VII and VIII): registration costs are a function of volume Source: Proposals from the Environment DG and from the Enterprise D.G., presented in the "Draft legislation – Volume I", on the Commission website
Scenario hypotheses– New hypotheses The additional scenario is based on the proposals of the Environment D.G. and the Enterprise D.G. and takes into account new hypotheses on synthesis intermediates and on polymers (2/2) : Polymers not classified as "dangerous": exemption
Impact on polymers classified as "dangerous" in accordance with Directive 67/548/EEC, AND meeting at least one of the following criteria:
A number-average molecular weight < 10 000 Dalton, OR
A content of greater than or equal to 2% of low molecular weight (i.e. < 1000 Dalton) species of monomer units including residual monomer(s) but excluding other components such as additives or impurities
Requiring registration : impact corresponding to the registration cost for physicochemical properties
NB : "Classification of a polymer should be performed applying the rules laid down in Directive 1999/45/EC subject to the following provisions: a. The oligomeric residual fraction of the polymer composed of low molecular weight (i.e. < 1000 Dalton) species shall be deemed to be a preparation b. The low molecular weight species whose toxicologically and/or ecotoxicologically significant reactive functional groups are not consumed during polymerization shall be deemed to be substances" Polymers Scenario hypotheses– New hypotheses The additional scenario is based on the proposals of the Environment D.G. and the Enterprise D.G. and takes into account new hypotheses on synthesis intermediates and on polymers (2/2) Source: Proposals from the Environment DG and from the Enterprise D.G., presented in the "Draft legislation – Volume I", on the Commission website
Approach In order to elaborate this additional scenario, all product portfolios were re-analyzed and additional data were required from the most impacted pilot companies : Downstream Industries Intermediates Specialities Formulators Speciality chemistry:
Construction
Electronics
Water treatment .. Polyamides Synthetic rubbers Produits pharmaceutiques de base Agrochemistry Paint, varnish, glues Explosives Photography Oils/Lubricants Data support Basic plastics/large polymers Industrial gases Basic inorganic chemistry Fertilizers Basic organic chemistry
Pilot: Ethylene oxide
Butadiene Basic Chemistry Thiochemistry Fine chemistry Silicones Pigments Surfactants Plastic additives Polymers, etc. Metallurgy Other industries Automobile Electric and electronic construction Health Textiles Construction CHEMICALS INDUSTRY Approach In order to elaborate this additional scenario, all product portfolios were re-analyzed and additional data were required from the most impacted pilot companies Downstream or upstream segments impacted by the study Segments for which additional data were required from pilot companies Rhodia PCAS
BASF BASF Rhodia
Atofina Rhodia
Atofina "Pilot" segments ("industry segments" and "downstream sectors"): the additional scenario was analyzed without needs for additional data Key
Synthesis of hypotheses The input data of the additional scenario are very close to the ones of the D scenario, which did not take into account any non-commercialized intermediates : Synthesis of hypotheses The input data of the additional scenario are very close to the ones of the D scenario, which did not take into account any non-commercialized intermediates Source: Analyses Mercer.
1: cost increase in % of operating costs Inorganic chemistry Organic chemistry Para chemistry Pharmaceuticals Cosmetics, soaps, detergents Total chemistry Risk of decline in production (% turnover) +1.3% 4.6% +2.1% 1.3% +1.8% 8.4% +1% 0% +3% 11.4% Increase in costs (%)1 Electric and electronic components Automotive Textile Rubber & plastics Metallurgy +0.2% 0.8% +1.6% 2.6% +1.1% 5.8% +0.2% 1.3% +4.3% 5% +1.9% +3.9% The increase in costs and the risks of decline in production are slightly higher than scenario D. This is due to the "pigments" sub-segment, for which there exist intermediates transported on more than 3 sites or commercialized
Thiochemistry (no intermediates) and "Terres rares" (no transported intermediates) : the scenario is equivalent to scenario D Polyamides : scenario equivalent to scenario D because all intermediates are commercialized and polymers are not classified as "dangerous"
Fine chemistry: see next page
Silicones: input data slightly lower than scenario D (see page # 12)
Resins: input data slightly higher compared to scenario D, because some intermediates are transported on more than 4 sites or commercialized + some polymers might be classified as "dangerous" The increase in costs and the risk of decline in production are very close to the input data of scenario D. Paints especially experience an impact equivalent to scenario D (cf. same hypotheses in terms of suppression of additives) See page on fine chemistry. As the pharmaceutical fine chemistry is only slightly impacted, pharmaceutical products are not impacted much either. This scenario is equivalent to Scenario D in terms of increase in costs and risk of decline in production The increase in costs and the risk of decline in production are very close to the input data of scenario D. The slight gap is due to a small number of intermediates that are transported on more than 3 sites Same hypotheses in terms of increase in costs and risk of decline in production as in scenario D (see this scenario) Examples:
Textile: no additional impact compared to scenario D on colorants, hence no change compared to scenario D
Metallurgy: the costs and risks of decline in production are neither linked to polymers, nor linked to intermediates, but are due to reformulation needs
Same rational for other downstream sectors Comments
Portfolio analysis – Intermediates – Focus on Fine Chemistry On the portfolios analyzed1, 64% of isolated not commercialized intermediates are transported from one site to another, 16 % are transported from one site to two other sites. None of them is transported to three sites or more : Portfolio analysis – Intermediates – Focus on Fine Chemistry On the portfolios analyzed1, 64% of isolated not commercialized intermediates are transported from one site to another, 16 % are transported from one site to two other sites. None of them is transported to three sites or more Note : we have not made any assumption on the probability of moves of intermediates, which would potentially be CMR or PBT and for which Appendix V-type analyses would be launched - 1 : 5 companies for the calculation of REACH implementation costs; 3 companies for the calculation of the economic impact (risk of decline in production, added costs) - Source: Mercer interviews Breakdown of isolated not commercialized intermediates according to their moves among the sites of a given group (fine chemistry) (as a % of the number of isolated intermediates in the analyzed portfolios) On the portfolios analyzed, no isolated not commercialized intermediate is transported from one site to three sites or more
The transported volumes are low and always lower than 1000 T/year
That is why we estimated that the new hypotheses regarding the implementation of REACH for the fine chemistry would have the same impact as the one that was assessed for the D scenario, in which no not commercialized intermediate required registration Impact of REACH – Additional scenario Isolated not commercialized intermediates consumed on the production site Isolated not commercialized intermediates transported from one site to another Isolated not commercialized intermediates transported from one site to two other sites Isolated not commercialized synthesis intermediates
Portfolio analysis – Polymers The new hypotheses regarding polymers lead to a slight decrease regarding cost and risk of decline in production on the portfolios which contain polymers compared to scenario D : In the first analyses, the polymers taken into account were:
Water-soluble polymers
Polymers with an active graft
The approach by family of polymers had been regarded as possible
Regarding silicones, the new hypotheses lead to the following results:
No change in the number of molecules requiring testing
Reduction in the testing cost for each molecule, as only physicochemical properties must be tested
Yet this cost is not nil as, even though the physicochemical properties are well known, they have in most cases been tested internally, not according to the Good Laboratory Practices, as required by the proposed REACH legislation. With this requirement, the tests would be performed again according to the GLP and the costs would be paid again
The number of reformulations linked to potentially suppressed additives remains the major problem
The implementation of the "Preparation Directive" for the classification of polymers might lead to re-classifications for a number of polymers. This issue was taken into account when enough information was available (example: resins for paints). Nevertheless, in most cases, this impact could not be taken into account because it was not possible to quantify the number of additional polymers classified as "dangerous" Portfolio analysis – Polymers The new hypotheses regarding polymers lead to a slight decrease regarding cost and risk of decline in production on the portfolios which contain polymers compared to scenario D
Contents : Contents Objectives
Additional scenario hypotheses and approach
Modelling results
Slide13 : What is the effect of new legislation on the chemicals industry in France? Outside input
Cost increase Outside input
Evaluation of all of the legislation variables REMI Model Impact of the legislation
“Control” evolution Foreseen evolution
Introduction in the model of the direct impact for the analysis of segments Modelling of the global impact on the GDP, employment, investments, … Based on the direct impact on chemistry and the downstream sectors, the model simulates:
The indirect impact on other sectors (reduction in sales, reduction in purchases and investments and labour).
The induced impact on the decrease in prices, the reduction in salaries, the evolution of unemployment, … Modelling results - Reminder The extrapolation of the results is based, as for the main study, on a macro-economic model that evaluates the entire economic impact using the analyses of the product portfolios
Modelling results – GDP impact The impact of the White Paper reaches a peak after 10 years when it represents a 1.8% drop in the French GDP or 30 billion euros : Modelling results – GDP impact The impact of the White Paper reaches a peak after 10 years when it represents a 1.8% drop in the French GDP or 30 billion euros Additional scenario: scenario F: Comparative evolution of the reference French GDP and the French GDP with the White Paper Source: REMI modelling France reference series Scenario F In the current modelling, the impact on costs and reduction in turnover/stoppage of European production are linearised between the year 2 and the year 12 from REACH implementation Impact of the White Paper: 1.8% drop in the GDP in ten years or 30 billion euros Hypothesis of the reference series: source The Economist Intelligence Unit (Oct. 2002)
1.8 to 2% growth per year (refer to appendixes) GDP (base 100) in year 0 Number of years since REACH implementation
Modelling results – Impact on Employment The impact of the White Paper represents a loss of 370 000 jobs in 10 years in France, all sectors included : Modelling results – Impact on Employment The impact of the White Paper represents a loss of 370 000 jobs in 10 years in France, all sectors included Scenario F: Comparative evolution of the number of jobs in France with and without impact of the White Paper France reference series Scenario F Impact of the White Paper: 1.5% loss in 10 years (370 000 jobs) Hypotheses of the reference series: Source The Economist Intelligence Unit (Oct. 2002)
Active population in 2001: 24.5 million In the current modelling, the impact on costs and reduction in turnover/stoppage of European production are linearised between the year 2 and the year 12 from REACH implementation Number of jobs
(base 100) in year 0 Number of years since REACH implementation Source: REMI modelling, Employment
Modelling results – Impact on Investments The White Paper provokes a cumulate decline in investments of 53 billion euros in 10 years in France, all sectors included : Modelling results – Impact on Investments The White Paper provokes a cumulate decline in investments of 53 billion euros in 10 years in France, all sectors included Source: REMI modelling, Gross Capital Formation Decline in investments (billions of euros) Scenario F: Decline in investments per year in France due to the White Paper
Modelling results – Details by Sector The chemicals and plastics sectors absorb the greatest impact in terms of added value with a respective decrease of 7% and 8% in 10 years : Modelling results – Details by Sector The chemicals and plastics sectors absorb the greatest impact in terms of added value with a respective decrease of 7% and 8% in 10 years % added value of
the added value of the sector Scenario F: Distribution of the decrease in added value in 10 years by sector in % of the added value of the sector
Source: REMI Modelling, Added value by sector Nomenclature of the activity sectors: NACE – CLIO Sectors examined in the study, direct impact calculated on these sectors
Modelling results – Details by Sector The sectors in which the direct impact was evaluated are subject to a loss of 100 000 jobs for a total of 370 000 lost in France in 10 years, or a direct impact/indirect impact of 1 to 3 : Modelling results – Details by Sector The sectors in which the direct impact was evaluated are subject to a loss of 100 000 jobs for a total of 370 000 lost in France in 10 years, or a direct impact/indirect impact of 1 to 3 Loss of jobs (thousands of jobs) Scenario F: Distribution of the loss of jobs in 10 years by sector in thousands of jobs per sector
Source: REMI Modelling, Employment by sector
1: direct and induced impact by incremental increase of the model Nomenclature of the activity sectors: NACE – CLIO Sectors examined in the study, direct impact calculated on these sectors Loss of 100 000 jobs Loss of 270 000 jobs Directs1 (and induced) impact Indirect and induced impact