REACH, a regulation farce

Believing EU officials we have entered, on 1st December 2008, a new era. From now on it will be illegal to manufacture, import, sell, buy or use chemicals that have not been registered or pre-registered following EU’s complicated REACH procedure. Yet experiences during the pre-registration process are rather confirming old fears that REACH does not fundamentally improve chemicals security, but will only increase bureaucratic control over every day’s life.

REACH, a Costly Piece of Theatre?

By Edgar L. Gärtner

Believing EU officials we entered, on December 1st 2008, a new era. After this, it will be illegal to manufacture, import, sell, buy or use chemicals that have not been registered or pre-registered following EU’s REACH procedure. Yet the ongoing pre-registration process is rather confirming the old fears that REACH does not fundamentally improve chemicals security and that the good intentions behind this new regulation initiative would lead to a Babylonian confusion or a costly piece of theatre.

REACH is the paradigm for a new type of regulation that will have a worldwide impact – even if it is not really workable due to its fundamental flaws. For the EU’s new chemicals legislation is thought to fully translate into action for the first time the Precautionary Principle (PP) adopted in 1992 at the “Earth Summit” in Rio de Janeiro. Principle 15 of the Rio Declaration stipulates: “Where there are threats of serious and irreversible damage, lack of full scientific certainty shall not be used as a reason for postponing cost-effective measures to prevent environmental degradation.” Following the EU’s interpretation of the Rio declaration this wording implies a reversal of the burden of proof between government and industry. Till then government officials had to demonstrate that a product is unsafe before removing it from the market. But following the EU’s interpretation of the PP manufacturers would have to prove that their products are safe before putting them on the market. How, under this condition, is it possible to innovate and introduce new types of products, given the fact that nothing on earth can be considered absolutely safe?

In see behind the dogmatic precautionary approach the mentality of nihilism. What is nihilism? “Nihilists don’t believe in nothing, but do not believe in what is”, declared French literature Nobel Prize winner Albert Camus in 1951. In other words: Nihilists are capable to believe nearly in all but truth: This is that life by itself is very risky and that by tenting to reduce chemicals and other risks we are taking the much greater risk of reducing chances for human life in freedom and dignity (please see my book “Öko-Nihilismus. Eine Kritik der politischen Ökologie”, Jena 2007).

Even the original Rio wording of the PP is leaving lot of questions: How does it relate to Principle 12 of the Rio Declaration on Non-Discrimination? Does “cost effective” also mean “cost efficient” and thus respect the Principle of Proportionality fundamental in the EU’s Maastricht Treaty? This treaty refers in Art. 130r (later 174.2) to the Rio Declaration and doesn’t give a proper definition of the PP. In order to clarify these questions, the EU Commission issued, in February 2000, a special “Communication” précising that the PP applies only to risk management and not to risk assessment. The latter must be based on state-of-the-art scientific methodology. Last but not least the EU Commission’s paper underlined that the PP incorporates the Principle of Proportionality.

Thus, the EU Commission in 2000 clearly rejected definitions of the PP that open the way to different forms of irrationalism, like for instance the NGO’s Wingspread Consensus Statement on the PP which claimed: “When an activity raises threats of harm to human health or the environment, precautionary measures should be taken even if some cause and effect relationships are not fully established scientifically.” Following this, chocolate would need to be banned as even amateur chemists could easily convert it, with the help of ordinary kitchen equipment, into dangerous explosives!

Unfortunately, the EU Commission did not pursue this line in its White Paper “Strategy for a Future Chemicals Policy” published on 27 February 2001: “Whenever reliable scientific evidence is available that a substance may have an adverse impact on human health and the environment but there is still scientific uncertainty about the precise nature or magnitude of the potential damage, decision-making must be based on precaution in order to prevent damage to human health and the environment. Another important objective is to encourage the substitution of dangerous by less dangerous substances where suitable alternatives are available.” This is everything but a clear rejection of nihilism for very few things that have been selected by market competition are easily substituted. The “substitution principle” claimed by NGOs and many members of the European Parliament is based on the belief that political regulators can find a better way to select substance or product alternatives than the traditional trial and error interaction between scientific research, engineers’ creativity and consumer demands.

This belief was already subjacent in chapter 19 of Agenda 21 on waste management adopted 1992 in Rio. For the first time a new hazard based Globally Harmonized System (GHS) of substance classification and characterization, which will be introduced in the EU together with REACH, was proposed there. The nihilistic quest of risk minimizing down to zero became predominant in § 23 of the Action Plan adopted ten years later by the Johannesburg Summit on Sustainable Development (WSSD). The precautionary approach was also chosen by the UNEP-Initiative SAICM (Strategic Approach to International Chemicals Management) which, after some preparatory meetings in 2003, 2004 and 2005, was officially launched at the Dubai Conference in February 2006 with an Action Plan aiming the ban of all potentially dangerous substance uses till 2020. This plan is expressly referring to the Stockholm agreement on phasing out Persistant Organic Pollutants (POPs) whose DDT ban was leading to the rebound of mosquito born malaria causing the death of millions of people, mostly children, in Africa and other tropical regions of the world.

Thus, we were hearing at the Dubai Conference Austria’s environment minister Josef Pröll (at that time in charge of the presidency of the EU’s Environment Council) comment the Dubai Declaration on SAICM as follows: “Dubai is a milestone of global environmental policy. There is a clear commitment to the Precautionary Principle. We don’t need to see a tragedy happen to put safety systems in place. In other words, the Dubai Declaration says that if you’re not sure, don’t do it.” If man had always followed this interpretation of the PP, he would never have tamed fire nor invented the wheel!

Given this background it is not surprising to see the EU courts apply the PP in a very contradictorily and confusing way. US analysts Gary E. Marchant and Kenneth L. Mossmann concluded from a survey published in 2005 that the PP “provides an open invitation for arbitrary and unreasonable decisions by both regulators and judges.” A speaking example of an ill interpreted PP is the EU’s ban of six phthalates in toddlers’ toys and child-care articles which was decided in 2005. Following this decision the EU imposed a total ban on the use in children’s toys of three plasticizers employed in the manufacture of PVC (DEHP, DBP and BBP). It also has prohibited the use of three additional plasticizers (DIDP, DNOP and DINP) in babies’ toys intended to be put in the mouth. Only one of the banned substances (DINP) was currently used in toys. Yet on 11 April 2006 the EU Commission clearly confirmed the EU’s scientific risk assessment from 2003 and stated that “DINP is safe in all applications (toys included) and that there is no need for any further measures to regulate the use of this phthalate.”

Industry has spent over 130 million Euros in total to assess the health and environmental risks of plasticizers such as DEHP and DINP. A core reason for these tests was these plasticizers’ widespread use in medical equipment. All have now been in such longstanding use that if there had been any harmful side effects from their application these would have long since come to the fore. The EU now forces manufacturers of pacifiers, plastic ducks and baby equipment to switch to alternative plasticizers, which have not been investigated as thoroughly, have often not been tested sufficiently for these applications and are often considerably more expensive.

Adipates are one possible substitute. Their possible impact on human health and the environment appear to be slight, but so far they have not been subjected to such exhaustive examinations as have the six banned substances. Other alternatives, although extant for some time, have a high migration tendency, and are clearly much less suitable for these applications.

Citrate esters, touted by environmental groups as more environmentally and health-friendly, migrate from treated materials so quickly that these objects easily become brittle. Toys manufactured using citrate esters as plasticizers will therefore put children at risk of swallowing broken-off fragments. Are we therefore justified in substituting a (theoretical) health risk with the much more concrete risk of a child choking?

Greenpeace activists, on whose arguments the EU’s actions were based, don’t appear to be losing any sleep over such questions. In fact, they are demanding that toy manufacturers abandon the use of PVC altogether. According to them, soft PVCs in toys should be replaced with rubber. However, the effect of heat during the vulcanization process of rubber results in carcinogenic nitrosamines, and the substitution of organic for petroleum-based rubber will simply substitute a new, ‘natural’, set of carcinogens.

The plastics industry currently has great hopes for DINCH, a new substance developed through computer modelling by BASF in co-operation with customers from toys and medical device industry. This substance is only slightly more expensive than DEHP, and it can also be almost seamlessly substituted for DEHP without the need to rebuild production plants. DINCH also does not include any of the aromatic hydrocarbons defined as suspect by toxicologists so we can expect it to have a much more benign toxicological profile. BASF has confirmed this in a far reaching programme of tests. These tests indicate that DINCH does not affect the development of sexual organs or fertility, nor does it harm the environment. DINCH has a rate of migration which is at least 8 times lower than that of DEHP, although it has disadvantages such as higher volatility.

The quest for innovation or substitution in the case of these alternative plasticizers cannot be pursued without consideration of the costs, as we would end up substituting the proven with the unproven through ideologically driven wishful thinking. Society needs to pursue fulfilment of consumer demands in a way that balances benefits against the costs to the economy, the environment, and to health.

This raises the question of who decides which materials may be used: Greenpeace? The EU Commission? Science? Nature? And just who is ‘Nature’? Aren’t humans also part of nature, including the average consumer who weighs up product choices and then consciously chooses for instance PVC plastics? Wouldn’t it be better to choose the winner out of several competing market-based solutions?

Thus the European Parliament’s decision to restrict the use of DINP in spite of a thorough and costly risk assessment opens the way to unfounded black listing. Consumer product and packaging material manufacturers could be tented to ban all substances demonized by NGOs or restricted for use prior to their testing and assessment in line with REACH. This could cause major business disruptions as possible alternatives take years to come to market.

Will the REACH procedures dispel this sort of confusion? When the REACH initiative was started in 1999 its principal aim was to halt unequal treatment of ‘old’ and ‘new’ substances. New chemicals were submitted since 1981 to the registration procedure introduced by the EU directive 548/68/EEC while over 100.000 substances in use prior to 18 September 1981 (listed in the EINECS register at the EU Commission’s Joint Institute in Ispra/Italy) were exempt from registration. Only old substances on a ‘priority list’ established by EU Directive 793/93/EEC, Art. 15 had to undergo an assessment. This was done with 141 substances in 20 years. But only 28 of these have been definitely evaluated. With REACH the EU is trying to evaluate the different uses of approximately 30,000 substances over only 10 years. Doing this the original REACH proposal would have required data generation for the drafting of no less than 100 million safety reports, each containing 20 up to 200 pages (plus translations in some 20 languages). Everybody could see that this approach would create a new tower of Babel.

That is why after an internet consultation with industry and major wrangling between different stakeholders the scope of REACH has partially changed. Now extensive safety reports (and the sometimes costly data generation they suppose) are only required for substances with an annual production volume of more than 10 tonnes. Following the amendments to the EP’s First Reading on 17 November and the Council’s agreement on Common Position on 13 December 2005 (finally adopted by EP and EC in December 2006) the registration procedure has been facilitated while the authorisation process has been in tendency complicated. This could lead to more bureaucracy and create a new potential for arbitrary decisions and thus endanger industry’s innovation capacity. The main problem lies in REACH Art.57 which defines substances of Very High Concern (VHC) targeted by authorisation procedures. The definition of VCH substances has been partially altered. Instead of potentially dangerous substances susceptible to be released from products all potentially endocrine disrupting, persistent, bio-accumulative and carcinogenic chemicals as well as substances “giving rise to a similar level of concern” contained in products are focussed now.

Substances meeting the VHC criteria defined in Art. 57 shall be listed in REACH Annex XIV (pending authorisation procedure). Substances supposed to meet the VHC criteria are listed in Annex XV (‘candidate list’) in order to be examined as soon as possible. This creates a new risk of Black Listing. For manufacturers could be tented to seek out politically correct substances in order to replace VHC and ‘candidate’ substances bad mouthed by NGOs long before their examination has come to final conclusions. This is leading to difficult reporting issues.

For instance REACH, Art.7 stipulates that all VHC substances contained in domestic or imported articles surmounting 1 tonne per annum in total and surpassing concentrations of 0,1 % have to be notified. This is leading to problems like this one: Can an importer of cardboard manufactured and finished in China by using printing ink containing the famous postal yellow pigment lead chromate (PbCrO4), which was voluntarily banned in the EU by the printing ink manufacturers association CEPE, know how much of this substance is produced or imported in total? Another example: According to REACH Art.33 all suppliers of products containing VHC substances above a concentration of 0,1 % are obliged to respond free of charge before 45 days to VHC related requests of their customers. Greenpeace has already prepared post cards for mass requests.

Retailers are responding to this challenge by forming a sort of information cartel. Initiated by the German Retailers’ Federations HDE and BHB as well as by the big retailers Metro and REWE, a common data bank named “REACH Solution” was created. It is provided and operated by the specialised company Chemical Service Compliance AG in Cologne. The internet platform offers two portals: one for suppliers and one for their customers. The access to this data bank is also offered via the federation Eurocommerce to non German suppliers and retailers so that a unified European solution seems to be on the way. This illustrates well the general tendency that strong technical and economic regulation is leading to cartelisation of the private sector of the economy.

In spite of all good intentions REACH will probably not reduce but even enlarge grey or black markets for illegal applications of potentially hazardous substances. For on one hand due to the lack of viable substitutes many of those chemicals will remain for some time officially authorised for specific purposes, “if the risks are adequately controlled”. On the other hand it would be very difficult to avoid illegal applications of the same chemicals. There are still markets for ‘dirty’ products. Even completely forbidden chemicals that are applied only in very small amounts in textiles, printing inks or other consumer products can easily be imported from China via the ports of Naples or Piraeus. We cannot suppress those grey or black markets through more and more bureaucracy for excessive bureaucracy is often the real reason behind their emergence, but only by establishing sound open markets.

Well aware of those problems the EU member states have till now proposed only 15 substances as calling for special attention. Geert Dancet, the Executive Director of the EU’s new Chemicals Agency (ECHA) in Helsinki, is convinced that REACH Annex XIV will show in the first time an even smaller number of suspect chemicals while NGOs are calling for no less than 2,000. The official list of substances subject to authorisation will be updated every two years. It is intriguing to see on ECHA’s first “Candidate List” well proven, yet still controversial plasticizers and flame retardants like DEHP or HBCDD closely associated with clearly dangerous arsenic compounds. We can only hope that EU member states and ECHA will come to rational priorization.

Given these meagre prospects it is our duty to ask if REACH has any chance to become conform to the Principle of Proportionality. When starting the REACH process the EU Commission tried to demonstrate that the benefits of the new chemicals regulation overweigh largely its costs. One of the most quoted cost-benefit-analysis is an impact study done by the London based consultancy RPA Risk and Policy Analysts Ltd. In this study registration costs according to REACH were estimated to reach from 1,7 to 7 bn € till 2018. The expected benefits were estimated at 54 bn € in the next 30 years – due principally to a regression of occupational cancer. Yet Angela Logomasini from CEI (Washington) and German statistician Walter Krämer als well as Michael Nasterlack and Andreas Zober, two industry toxicologists from BASF, have shown in Chemistry World, January 2005 that some 80 percent of all occupational cancer cases in the EU are related to the asbestos legacy and that at most 360 out of 32.331 occupational cancer cases per annum can be imputed to the contact with chemicals. It appears now that chemicals industry represented in the EU by CEFIC had many reasons for its strong opposition against REACH.

Unfortunately pressed by big players on the market for end consumer products like for instance Unilever or Procter & Gamble CEFIC finally gave up its resistance against the new legislation. In 2006 CEFIC declared: “REACH is an opportunity for the chemicals industry to regain public confidence.” Behind this assertion I see the will of established big players to defend their monopoly against newcomers on the market, especially from poorer regions of the world by controlling the whole innovation process along a politically correct corridor. With REACH it is very difficult for players from outside the EU to comply with EU regulations for they are not allowed to pre-register or register substances directly but only with the help of what is called an Only Representative (OR) in the EU. Unfortunately ECHA’s guidance documents on REACH say very little about the legal status and the liability of the OR towards its clients, towards other players in the supply chain, towards possible victims of decision errors, and towards the ECHA (cf. Nicolas Gardères: “The Legal Risks of REACH”, in: Kemia-Kemi Vol.35, 2008, 5). It will be nearly impossible to import preparations or formulations of mixed and partly unknown substances ready to use from outside the EU without risking law suits. These are depending on the national tort and contract laws of each EU member state. Till now there is no tendency to harmonise the national legal conditions that depend on different juridical traditions.

This is worth also for data sharing between competitors in Substance Information Exchange Fora (SIEF) and consortia that are even mandatory in the case of data generation involving tests on vertebrate animals. In order to cooperate companies will have to disclose sensitive data that may let their competitors discover critical trade secrets. Which form of agreement between companies is prohibited depends on national legislation. In short: REACH is primarily an job creation program for lawyers. The new chemicals regulation is probably no more than a costly piece of theatre destined to produce the impression that politics is doing something to calm fearful consumers.

Conclusions

REACH contradicts nearly all we know about intelligent collective decision making and successful innovation (Cf. James Surowiecki: “The Wisdom of Crowds. Why the Many are Smarter than the Few”, Random House, 2004). There is no real alternative to trial and error. Market remains the main information source for decision makers. Bureaucracy needs to support it. The market’s role in experimentation and bureaucracy’s role in maintaining stability should be viewed as complementary. Bureaucracy needs to serve the market economy by assessing and crystallising the results of trial and error learning in order to avoid repeating such mistakes in the future.

In contrast to the position of the Green lobby appears to be that political application of the Precautionary Principle and the aims of sustainable development are core drivers for innovations. But how do they know which materials are inherently safe and which have a lasting impact on the environment … when even water can be deadly under certain circumstances? Do the Greens and their political friends consider themselves better able to judge what will prove itself on the open market than market participants themselves? The Greens seem perfectly happy with the authoritarian undercurrents inherent in their position.

Unfortunately, some people cling to the erroneous belief that the expansion of knowledge implies that there is an end – a point where society has attained ‘ultimate knowledge’. This is not the case. The accumulation of knowledge can even lead to total confusion. However important science may be as a reconnaissance and early warning system for society, the most important source of information in a market economy is not science but the market itself. This information is not transferred without cost, but rather set against the cost of the risks undertaken or refused. I think that Angela Logomasini is right when concluding her analysis quoted earlier: “Rather than following a stagnating precautionary principle, regulators should follow a risk-risk principle, assessing even the risk of regulation. They should also recognize that regulation is the last resort because well-being is best promoted by maximizing freedom, which results in human progress.”

In spite of all this, the REACH approach is spreading around the world like a virus. South Korea has already adopted a chemicals law which is a true copy of REACH. Japan is going to do the same. It is expected that under newly elected president Barack Obama even the US will follow the EU. Thus we are risking extending bureaucratic control of energy and substance use (via climate and chemicals policy) all over the world.

(Extended version of a speech presented, on 25 November 2008, at the LVMI’s conference on „Better Regulation“ in Brussels.)