Study on the Impact of Authorisation NeRSAP 7 Bilbao, Spain 12-13 February 2018 Pavel Prokes European Commission DG for Internal Market, Industry, Entrepreneurship and SMEs REACH Unit

Impact of REACH Authorisation (Eftec, Apeiron, Peter Fisk Associates, The Economics Interface –December 2017) Objective: To obtain evidence on the overall impact of Authorisation procedure in terms of: Changes in the EU market for SVHCs (and their alternatives) Instances of substitution & Evidence of the ‘announcement effect’ Costs / Benefits of the authorisation process Affordability of authorisation for SMEs

Impact of REACH Authorisation Methods used to collect evidence: → Developing consultation tools– 4 different questionnaires for industry stakeholders, NGOs, MS Competent Authorities, Commission. → the final number of respondents: 64 (+23 partial responses) → Further follow up with survey respondents and 50 targeted interviews. → Collating data from Eurostat (export import and production data) and from ECHA. → Collating evidence from other studies and a public consultation for the REACH 2017 Evaluation.

Impact of REACH Authorisation Case studies were developed using the survey data to establish links between the changes in the market for selected substances and REACH authorisation. Tier 1 case studies on three specific substances (Chromium Trioxide, Trichloroethylene, and Dibutyl Phthalate). Tier 2 case studies contribute to the study by collecting data on specific aspects such as substitution, risk management and evidence of the announcement effect.

1. Changes on the market (SVHCs) → In terms of sales, SVHCs have generally followed the same market trend as the overall EU chemicals market (data of Eurostat (PRODCOM). → 57% respondents to the survey indicated that they experienced ‘significant’ market impacts due to Authorisation for DU markets (production and supply of SVHCs). → Most indicated that Authorisation has had no ‘significant’ impact on the market for known alternative substances / products (13% reported increased number of suppliers of alternatives). → Most respondents said REACH Authorisation had had no significant net impact on sales revenue or employment (22% reported impact on sales, 15% on employment) . → The survey found limited cases (3) of where companies reported having ceased production and/or relocated outside the EU.

2. Substitution and Evidence of the Announcement effect → 43% surveyed companies have substituted SVHC (with 60 examples provided), 53% were investigating the possibility of substituting. → For approx. 59% respondents Authorisation was among the main 3 drivers for substituting. → Substitution was also encouraged by other legislation and by other factors such as consumer demand (requests), the ‘stigma’ of using SVHCs, companies’ internal policies. → There is evidence of substitution despite applying for authorisation being a cheaper option (likely linked to the perceived uncertainties associated with authorisation). → In 53% of the cases substitution took between one and four years. In 27% of cases 5 to 10 years, 12% took longer (11 to 20 years), 2% took over 20 years.

2. Substitution and Evidence of the Announcement effect → Classifying a substance as an SVHC and placing on the substance on the candidate list does trigger and drive substitution work and improving RMMs: Around 66% of respondents had substituted a use of an SVHC before the substance was included on the authorisation list. Around 50% of respondents had improved RMMs before the substance was included on the authorisation list (i.e. at the stage of SVHC identification and inclusion into candidate list).

2. Substitution and Evidence of the Announcement effect → The decision to substitute is taken at different stages of the authorisation process.

3. Costs of Authorisation

3. Costs of Authorisation → There are uncertainties for the costs of implementing RMM given the small sample size of respondents. → Large variation incurred for A) the substitution costs with a large proportion of respondents (78%) reporting one-off substitution costs in the €0-€1m range but costs over €10m also reported. B) costs of participating in public consultations – the average time spent per submission varies from up to 1 day to 40 days. → In many cases companies substituted at higher costs than would be the costs of applying for authorisation (premium on business certainty). → Total compliance costs are impossible to estimate without knowing how many firms are affected.

4. Benefits of Authorisation Environmental (improved RMM, reduced exposure) → Evidence coming from the online survey, interviews, and AfAs to date, suggests that authorisation is resulting in an improvement in RMMs at all stages in the authorisation process (37% respondents using SVHC reported such an improvement). → Lack of evidence (publicly available historical exposure data) did not allow for a quantification of the benefits of substitution in terms of exposure for workers/releases to environment. → On the other hand, qualitative evidence (approx. 50 % of the respondents) suggests that improvements in exposure for workers and decreases in releases to the environment has occurred.

4. Benefits of Authorisation Economic: → No clear benefits in terms of increased sales, revenue or employment can be attributed to Authorisation - most respondents who substituted indicated a net loss in sales or no net change. → No company reported benefits in terms of lower operating costs. → Authorisation creates opportunities for alternative products while providing time for adaptation: Example: HBCDD granting the authorisation allowed progressive introduction of the alternative as it became sufficiently available on the market but also protected the market for the suppliers of the alternative by safeguarding the demand for the flame retardant.

5. Affordability for SMEs → Financial constraints are an important factor for SMEs both due to their limited ability to invest up-front in substitution activities and to meet the costs associated with applying for authorisation.

Follow up → Publication on DG GROW website in December 2017 https://ec.europa.eu/growth/content/commission-publishes-study-impacts-reach-authorisation_en → REACH Evaluation 2017 (Staff Working Document accompanying the Communication) – Input for conducting an evaluation of the Authorisation process with respect to 'effectiveness' (meeting the objectives) and 'efficiency' (cost/benefits). → Presentation of the study & discussion at the CARACAL (7 March) and the EPG Working group on REACH (6 April).

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