MEMO/03/202
Brussels, 16 October 2003
Impact Assessment of the Chemicals proposal
The overall costs of the proposal on chemicals, currently in preparation, will
be substantially reduced compared to earlier estimates. The draft proposal
which was posted for Internet consultation earlier this year has been
thoroughly revised to cut costs and minimize bureaucracy whilst
safeguarding human health and the environment. In the new Impact
Assessment the direct costs of REACH (Registration, Evaluation and
Authorisation of Chemicals) to the chemicals industry are estimated at a total
of some € 2.3 billion over an 11 year period. This is a reduction of over € 10
billion compared to the Internet text. This reduction is due to changes such
as reduced testing requirements and simplified registration procedures for
low volume chemicals, exclusion of polymers from registration, and a major
reduction in downstream user requirements.
The costs to downstream users of chemicals are estimated at € 2.8 – 3.6 billion if the
market behaves as expected with 1 - 2 per cent of substances being withdrawn
because continued production would not be profitable. Costs could rise to € 4.0 - 5.2
billion if industry faces higher supply chain adaptation costs. These estimates include
the direct costs passed on from the chemicals sector to downstream users.
The overall costs to the chemicals industry and its downstream users would then be
€ 2.8 – 5.2 billion.
The anticipated benefits to environment and human health are expected to be
significant. An illustrative scenario put the health benefits in the order of magnitude of
€ 50 billion over a 30 year period.
Key Findings
 Expected direct costs to the chemicals sector: € 2.3 billion over 11 years.
The estimate is based on the assumed availability of validated computer-based
methods (Quantitative Structure-Activity Relationships or QSARs) that should allow
for a significant reduction in testing costs to the chemicals sector. These methods
permit the prediction of physiochemical, environmental, or health effects based upon
the molecular structure of a chemical, without the need for costly animal testing.
Table 1: Testing and registration costs of REACH
Net present value (3% discount factor)
Registration costs
Testing costs
Safety data sheet cost
Authorisation procedures
Reduced costs for new substances
Total testing and registration costs
plus Agency fees (paid by chemicals sector)
Total costs (including Agency fees)
Total
€ 500 million
€ 1250 million*
€ 250 million
€ 100 million
( benefit of € 100 million)
€ 2,000 million
€ 300 million
€ 2,300 million
* assuming validation and acceptance of (Q)SARs can be applied within the timeframe envisaged
leading to a cost reduction of € 950 million.
 Estimated costs to downstream users: € 2.8 – 5.2 billion.
The impact of REACH on downstream users of chemicals result mainly from:
- higher prices of chemicals as testing and registration costs are passed through to
users and
- costs due to the need to find substitutes for withdrawn chemical substances and
preparations.
The size of the impact depends on the extent to which the withdrawal of substances
requires an adaptation of the chemicals supply chain and production processes.
Based upon testing and registration costs of € 2.3 billion, in the “normal expectation”
scenario, limited adaptation of the chemicals supply chain is assumed to be required.
This will result in a cost estimate of € 2.8 – 3.6 billion. The “higher substitution costs”
scenario examines the case where the withdrawal of chemical substances requires
an adaptation of the chemicals supply chain, resulting in higher costs of between
€ 4.0 – 5.2 billion.
Table 2: Estimated costs to downstream users*
Net present value (3% discount factor)
Normal expectation
Higher substitution costs
Scenario range of estimates
€ 2.8 – 3.6 billion
€ 4.0 – 5.2 billion
* These estimates include costs passed on from the chemicals sector to downstream users.
 Potential health benefits: € 50 billion over 30 years.
Public health benefits are based on World Bank estimates. This illustrative scenario
is based on a number of prudent assumptions. Diseases caused by chemicals are
assumed to account for some 1% of the overall burden of all types of disease in the
EU. Assuming a 10% reduction in these diseases as a result of REACH would result
in a 0.1% reduction in the overall burden of disease in the EU. This would be
equivalent to around 4.500 deaths being avoided every year. On the basis of a
€ 1 million value of life, the potential health benefits of REACH could then be
evaluated at approximately € 50 billion over a 30 year period.
It is clear that exposure to hazardous chemicals also damages the environment.
However, due to lack of data it is not possible to provide a comprehensive
quantitative assessment of the impacts on the environment. Much of the information
needed will only be available after the chemicals on the market today have been
tested and registered in line with the requirements of REACH.
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