How Much Do Chemical Bans Really Cost?

Yesterday ECHA produced a report entitled “Estimating the abatement costs of hazardous chemicals. A review of the results of six case studies”.

The report looks at how to work out the cost of the substitution of hazardous chemicals.

The costs of substituting one chemical for another are a key issue in REACH. It is not new to EU product regulation. Working out the financial merits, or the lack of them, for phasing out the use of a chemical has been a fact of life for years under the RoHS Directive.

Is there a Perfect Model?

This report looks at whether there is a perfect model to use in working out these costs and savings. The answer is no.

The main conclusion of the report is that it is not straight forward and there is no simple method for working out the costs or the relative benefits/losses or the lack of them.

The study looks to estimate the cost of abatement for:

• Nonylphenol (NP) and nonylphenolethoxylates (NPE) used primarily as surfactants in the textile sector;

• Four phthalates (DEHP, DBP, BBP and DIBP) used as plasticisers in a wide range of processes and products;

• 1,4 dichlorobenzene (DCB) used in air fresheners and toilet blocks;

• Lead used for pellets in shotgun cartridges;

• HBCDD, a brominated flame retardant used in polystyrene insulation material;

• MDA for various uses, including polyimides and as a hardener in resins and adhesives

 Guestimates

The aim of the work was to improve the capability in assessing the costs of producing the use, permissions or exposure of hazardous substances, to explore and develop some of the theoretical and methodological aspects specific to hazardous chemicals, and to understand what barriers there might be too useful estimation.

The authors of the report acknowledge from the beginning that the cost estimates are “subject to significant uncertainty”.  The need to do guestimates is touched on in the report. The reasons vary. Sometimes the producers have wanted to keep the information confidential. In other instances, the costs of switching from one substance to another have been overestimated, but in others under estimated.

There is a basic challenge of working out what the cost benefits in the “case of the use of hazardous substances the bad will generally be negative impacts on human health and the environment.”  The report notes the cost benefits of not using hazardous substances in reduced waste treatment and emission control costs is often not accounted for.

There appears to be a simple complexity to working out the costs for substituting hazardous chemical substances. The report notes that in some cases the higher costs never materialized.

Simplicity v Complexity

And, a simple cost comparison between and existing substance and a replacement does not provide an accurate measure of the real cost of substitution.  Just because one substance is cheaper than another can often fail to take into account reduced emission controls and waste treatment costs of the replacement.

There is an interesting debate about how to take into account replacing “sunk capital costs” when using a new substance. As the costs of the old capital are cost, some are of the view is that those costs of replacement should be excluded. The old machinery is a sunk cost and its only value is the value of being sold on or scrap. Others think that some account should be taken.

Interestingly, the report is not categorical on whether substituting substances leads to overall higher prices. Sometimes reducing the use of a substance might actually generate savings because the alternatives are cheap.

No Simple Answer

Working out the costs of benefits for substituting is not as clear cut as it is other areas like air pollution. The report concludes:

That complexity, especially compared with ‘more traditional’ abatement costing relating to, e.g., air pollution, is often related to the fact that hazardous substances, as well as potentially having negative impacts on human health and/or the environment, have quite particular functions which are the source of their value and the reasons why they are used in the first place. Abatement options, including substitution to alternative substances or technologies, often impair this functionality, which in turn implies reductions in value…

The challenge in estimating abatement costs in these circumstances is to account for these impacts on value and the costs of any mitigating actions which might be adopted as a response. This is a challenge because the value of the specific function in question is generally not observable in the prices of products and the costs of processes (which are essentially bundles of input characteristics each with their own value or cost). Differences in price between alternatives are an inaccurate measure in these situations since the price of a substance is only one input into the total cost of the process, and using a ‘cheaper’ alternative might involve incurring costs in other ways. Hence, the cost of reductions in value complementary inputs and/or mitigating actions associated with using alternatives are difficult to observe, measure and estimate, but knowledge of each is necessary to estimate abatement costs accurately” (p.13-14).

The report is a fair and objective look at the issue. There is no silver bullet and it is complex. But, just because it is complex does not mean the information is not useful.

Aaron McLoughlin