ECHA key for EU Green Deal to succeed but financing casts shadow – chief

LONDON (ICIS)–The European Chemicals Agency (ECHA) and the industry it regulates will be key actors for the EU’s Green Deal to succeed, increasing the agency’s workload, but EU budget contributors need to finance the regulator accordingly, its executive director said.

Bjorn Hansen continues to be worried about ECHA’s fate given that the current proposals in the table for the 2021-2027 multi-annual financial framework (MMF) the EU is yet to approve would envisage spending cuts of around 2%/year in real terms at the Helsinki-based ECHA.

However, the next MMF is also dependant on the form Brexit will take, and whether the UK continues to be part, or be associated with, EU agencies like ECHA, in which case it would continue making financial contributions.

Responding to Eurostat statistics published last month which showed industrial production of hazardous chemicals has remained broadly stable since 2004, coinciding with ECHA’s creation and the implementation of Reach, Hansen said they were missing how the chemicals industry is moving apace with substitution of substances which are less hazardous.

In a decade that is set to be centred on the environment and the idea of a circular economy, Hansen said that achieving an overhaul of production methods may take 50 years given the great amount of work to do to step away from crude oil- or biomass-based raw materials.

COST CUTTING A THREAT
But in the short-term, Hansen’s main concern is ECHA’s financing and how the ever-increasing tasks assigned to the regulator will put a strain on its role of policing chemicals production in the 27-country EU.

Were the current proposals of a cut of 2%/year to be approved, Hansen said he would make it clear to policymakers that ECHA cannot take on a key role in moving towards a greener economy.

“I am still worried about the budget. Some net donor countries are being reluctant to increase their contributions, and it is still unclear whether the UK will continue to contribute post-Brexit. These uncertainties are there and they will have an influence in the agency,” he said.

“I am still worried that ECHA’s fate will be to go through a cost cutting period despite the demand on us increasing further given the new Commission’s priorities on the environment: Trying to match the demands coming from the Green Deal with a 2%[/year budget] cut doesn’t quite fit.”

In 2020, ECHA has a budget of nearly €116m which will meet the salaries of around 600 employees, 561 of whom are statutory staff.

“ECHA is respected and it is my job to make sure the Commission [EU executive body] and member states see the need for proper financing. Otherwise, my job is to make sure we are not charged with work we don’t have the human resources to do,” added Hansen.

BREXIT CONUNDRUM
The UK officially left the EU on 31 January but everything will remain unchanged during the transition period ending in December, when the UK government envisages to have in place a trade deal with the EU27.

This mean the UK still continues to contribute to the EU budget, and therefore ECHA’s.

However, some clarity about ECHA’s financing may already come in June, when the UK will have to outline the main lines of a trade deal, or otherwise ask for an extension to the negotiations that many see effectively taking much longer than 11 months.

If the UK decides by then it will continue to contribute to the financing of some EU agencies, ECHA’s prospects could be a bit brighter.

The UK and EU chemicals trade groups, CIA and Cefic, have said they favour regulatory alignment post-Brexit, but the membership to agencies like ECHA would also mean, apart from financial contributions, the UK’s compliance with some EU regulation – a red line for those who favour a complete exit from EU jurisdiction.

“It is up to the UK and the negotiations with the EU to decide what regulatory system the UK will have for chemicals after the transition phase. We have heard that international companies adopt Reach as their internal standard rather than to maintain several different standards in order to save money and implement a consistent high level of protection within the global company,” said Hansen.

“Given the integrated supply chains in chemicals across the EU and to the UK, I can definitely understand why UK companies would prefer to have one standard to follow, the EU standard, rather than two standards. Especially because the existing UK companies have already invested to be compliant with the EU standard.”

According to the UK’s CIA, companies based in the country have spent in the last 10 years around £500m in implementing Reach.

The UK kicks off the negotiations with the EU27 on the opposite side, however: Prime Minister Boris Johnson is due to say on later on Monday that the UK aims not to put its industries under EU regulatory bodies.

SUBSTITUTION IS WORKING
In January, Eurostat published an overview of production of industrial chemicals in the EU since 2004, showing that production of chemicals that can be hazardous for the environment or human health had remained practically stable during the 2004-2018 period.

That period coincided with the implementation of Reach in 2007 and the creation of ECHA, whose main remit is to make sure chemicals are produced in a safer manner.

Hansen stated the obvious – “all chemicals are hazardous” – to say that the figures missed a key aspect how in the last decade substitutions of very hazardous chemicals for other less hazardous substances has worked.

ECHA regularly updates its lists of substances of very high concern (SVHC) on which restrictions in use can be implemented.

It is for that substitution that Hansen thinks ECHA’s work is paying off, arguing that the benefits of having less dangerous chemicals in the EU has improved both human health and the environment.

“I think it’s important to interpret the numbers coming from Eurostat … Are the citizens safer [than before Reach]? That is where I can answer yes. You don’t see in the Eurostat statistics, but you see that in the output of work ECHA has done: We are producing more than we were, but we are doing it in a way that protects our citizens, workers, and the environment,” said Hansen.

“To me, these statistics do not say whether the situation of Reach is bad or good. Quite a large number of chemicals are hazardous, and what we are trying to do is to substitute the most hazardous by other substances which are less hazardous: And we have evidence that that substitution is happening.”

The implementation of Reach did come at a cost for companies, however, an aspect they have always criticised as it would put them in a competitive disadvantage against other large producers like China or the US.

For Hansen, the benefits of Reach offset its disadvantages, adding that while manufacturing production across the EU may have decreased since Reach’s implementation, the regulation itself was not the decisive factor for what the industry has come to call ‘carbon leakage’.

“The cost of Reach is not the cause for de-localisation. We went to some quite efforts in the last Reach review to find cases of companies for which the Reach costs were the main reason to move out of the EU, and we couldn’t find any,” said Hansen.

“This doesn’t mean they don’t exist, but they were difficult to find. On the other hand, I don’t exclude that for some SMEs [small and medium enterprises] the Reach cost is disproportionate.”

He said the main reasons for companies to de-localise to other jurisdictions would tax or labour costs, rather than environmental regulations.

CIRCULARITY WILL MEAN MORE ECHA INVOLVEMENT
The EU is set to embark in a green industrial strategy which would see the EU becoming a neutral carbon dioxide (CO2) emitter by 2050, as per the Green Deal outlined by the new European Commission.

According to the new Commission’s president Ursula von der Leyen’s plan, EU industry will need to move from fossil fuel raw materials toward more sustainable ones, a key aspect where the chemicals industry will take centre stage.

In an economy with nearly total dependence on fossil fuels, the challenge of policing a more circular economy will fall under agencies like ECHA, according to Hansen, an aspect which makes proper financing for the regulator a priority.

Whether companies are really convinced about the changes the new Commission wants to implement apace, Hansen thinks that some of them do see the need and opportunity to change production methods.

He complimented what he considered real progress in new technologies that could change the face of manufacturing, highlighting how chemicals recycling is on the research agenda of many producers or how waste use for production of materials has kicked off, including production out of CO2.

“I don’t see the Green Deal moving forward without chemicals being central to it. Since we implement chemicals legislation, taking care of the scientific arm of that policy, ECHA will play a role. The natural tendency of public authorities is to go quicker than industry, but I think the chemicals industry sees the need for change,” said Hansen.

“Companies are clearly seeing the economic necessity of moving away from using raw oil or biomass as the sourcing of chemicals manufacturing and move towards waste-based sources.”

Hansen said however that achieving a true circular economy will be a long process, if ever achieved. His idyllic idea of “materials being recycled over and over and over again, thousands of times” is still a far-cry from the current reality.

“That’s why I say it may take us half a century to get there [true circular economy].”

ECHA’s chief added it will be necessary to make sure that companies are accountable if they “try to circumvent” greener regulations implemented in coming decades.

“Those companies that see the necessity for change and invest in it, they get an easier time.”

Interview article by Jonathan Lopez

Front page picture source: ECHA