Budget cut no impediment for EU chems regulator’s role in unstoppable Green Deal – chief

LONDON (ICIS)–Post-pandemic working practices and Commission allocations for additional projects will allow the EU’s chemicals regulator to just about fund itself after an 8% per year cut in its direct financing, according to its executive director.

Bjorn Hansen, chief at the European Chemicals Agency (ECHA) since 2018, said that the current 2021-2027 EU budget – the multiannual financial framework (MFF) – will mean the regulator’s annual budget will stand at €113m/year, adjusted for inflation.

Roughly one third of ECHA’s income comes from chemicals registrations, those applied for by companies who want to produce and trade chemicals in the 27-country bloc, as set out by the regulatory regime Reach.

Details of ECHA’s financing can be found on its website (opens new tab).

However, Hansen was optimistic because, despite the deep cut in EU funding, ECHA’s “main crown jewel” – its 600-strong workforce – will remain unchanged.

The savings, he said, will come from new post-pandemic working practices, as 50% of those 600 employees are set to remain permanently home-based.

Hansen also spoke about the role the chemicals industry and its regulator can play in the implementation of the EU’s Green Deal, which aims to decarbonise the economy by 2050, and about the regulatory conundrum the UK finds itself in post-Brexit.

The interview was conducted on 26 January 2021.

PANDEMIC HOME-WORKING TO STAY
Like many private companies, ECHA realised in 2020 that home-working is viable as a permanent option; it is not only the home offices that have rapidly sprung  up globally over the last 10 months, but everything linked to former office working habits, which are already fading into history.

Hansen said that not only 50% of ECHA employees will be permanently home based, but also that presidential meetings will be reduced by 50%, and this all will have a knock-on effect on office maintenance spending.

He said this would make it easier to cope with the 8% cut in the ECHA budget.

“[In the final MMF outcome] We ended up not as bad as we had feared; we got a substantial financial cut, but we didn’t get a cut in our main crown jewel: our staff and their knowledge. On one hand, we did our homework analysing where spending could be cut going forward,” said Hansen.

“On the other, the pandemic saved us a lot of money, because we do not travel, we don’t hold meetings physically – paying flights and hotels for experts – which means substantial costs savings. In our Helsinki headquarters, we have saved a lot on things like catering, security, etcetera.”

With half the workforce remote and half the meetings held virtually, half of those savings will obviously remain a permanent feature in ECHA’s day-to-day management.

ECHA’s work may be affected, however, by the amount of outsourcing to contractors it has had to cut; Hansen calls them “interims”, or experts normally hired for a period to do specific tasks, which have been reduced by 40 staff members.

The EU’s MMF does contemplate, however, additional financing for any extra tasks ECHA may be told to undertake. In a previous interview with ICIS, Hansen had complained that new bodies like the Observatory for Nanomaterials (EU-ON), or the waste and microplastics directives would add pressure on an overstretched regulator.

“[Those new tasks] are now coming with fresh resources. If we get an additional task, we get more staff. The cut in interims, however, has impacted on our work and we had to scale down some activities,” said Hansen.

GREEN DEAL: ALL ABOARD?
The pandemic-induced economic downturn prompted the EU to speed up the implementation of the Green Deal. In a push that could be seen in many quarters as undoable, the 27-country bloc has set 2050 as the date when its economy will be ‘carbon neutral’.

The economy is far from that right now. Dependence on fossil fuels for energy production remains high and decarbonising that system in only 30 years will require heavy investment from both private and public sectors.

The hit to some countries’ economies during the pandemic also prompted the creation of a Recovery Fund, whose financing will only be destined for green and digital projects, which are linked to the Green Deal targets.

With his usual optimism, Hansen thinks this is a golden opportunity for the EU to regain an industrial edge, making it the frontrunner of the new, green economy in coming decades.

For a continent that has spent decades philosophising about its industrial demise, being overtaken by the likes of China and the US, becoming the creator of a new economic model would be a true achievement.

The key is to convince companies and public bodies, Hansen said, that this is the only possible way forward if we take into account the social and environmental parts of the equation.

“I think we can [be pioneers in decarbonisation]. But the chemicals industry will only bring in the innovation and solutions to achieve that if they see a clear goal and that their investments will pay off. On that, the institutions can help by providing predictability on what chemicals will be banned, which ones we’ll promote, and what the scientific basis to do that is,” said Hansen.

“I completely agree [with some in the chemicals industry] that this is a risk, but it’s for policy makers to combat that risk, because industry alone cannot conduct that transition. We need to promote those companies that are frontrunners [in innovation].”

However, this would require that the EU controls its borders better and knows exactly what materials are coming into its territory. Hansen said that the efforts of the frontrunners would not pay off if the EU allows imports of non-circular materials, for example, which are used in the manufacturing of final products outside its borders.

When a non-circular material mixes with circular ones, the final product becomes non-circular, and will mostly end up in landfills.

“Burning waste in landfills is not the EU’s 2050 policy either. If we create a more expensive material in the EU that is circular, you have to forbid entrance to those that are non-circular. We need stronger enforcement on borders, external and internal,” said Hansen.

“There is a need to be around chemicals, all materials are chemicals, but you also need other policies that support the innovation needed for circularity. 2050 carbon neutrality will mean we need very different production methods. Chemicals plants are built for two or three decades: we have 30 years until 2050 to achieve this change.”

FORCED TO CATCH UP, OR FORCED OUT
Hansen said the examples of companies taking a lead on this are already out there, especially in Europe and Asia, and he said the EU plays with the advantage that the opinions on climate change are more informed than, for instance, in the US where strong forces linked to the old economy still have an important lobbying power.

“But change will come. If the changes done by the frontrunners have success, those in the middle ground will follow; for the laggers we’ll need regulation to either force them out of the market, or force them to catch up,” said Hansen.

“This is to keep the internal market working with fair competition. What the frontrunners are doing is very encouraging; [there is] a lot of innovation which is what the 2050 goal dictates.

“There is scepticism among many industrial players, but it is not because they don’t think it is possible, but because right now they don’t see the path for their companies: that’s where the regulations can help them see where we are going,” he added.

The awareness about climate in Europe, said Hansen, was the result of a well-informed public opinion. In that sense, he said he was pleased to see science take centre stage during the pandemic, which also should help us see more clearly what the consequences of climate warming are.

In relation to science, Hansen said the EU is a strong player in data, but it does not know it yet. Data has become the main raw material for the new economy, just like crude oil was for the old economy, but the 27 countries in the EU are not utilising their data to prop up innovation.

“Chemicals data comes into this. Throwing that data into the public domain would allow companies, IT start-ups for example, to extract the knowledge for other companies to innovate: there is so much data that needs to be unleashed,” he added.

“For chemicals, this will be a necessity but also an opportunity.”

BREXIT: STILL A CONUNDRUM
The EU and the UK agreed a last-minute trade deal on 24 December 2020 which brought relief to a chemicals industry fearful until then that it could be paying steep tariffs to trade under World Trade Organization (WTO) terms, had a deal not been agreed.

While the ‘cliff edge’ on trade tariffs was avoided, the UK still has to decide what sort of chemicals regulation it wants, and how much it wants to cooperate with the ECHA: within, as a partner, or as a third country?

Hansen was once again sanguine, but added that most UK companies had done their work to ease potential trouble by setting up subsidiaries in the EU. Had they stayed only UK-based, the risk of having to pay again for registrations already filed within the ECHA would have been too great.

“The UK is implementing a version of Reach, but the trade deal does not frame what the UK can do with its version of Reach. There will need to be some sort of re-submission of data by companies who had already filed registration dossiers in the UK when it was part of ECHA’s remit,” said Hansen.

“What we saw in the last 10 days before 1 January, however, was that many companies transferred assets [registrations dossiers] from the UK to the EU: largely, chemicals companies that were in the UK market set up affiliates in some of the EU 27 countries.”

Interview article by Jonathan Lopez

Thumbnail picture: The ECHA flag on top of the organisation’s headquarters in Helsinki, Finland. Source: Lauri Rotko, ECHA.