Chemicals cost-benefit analysis

Keywords Environmental economics, Cost-benefit analysis, Chemical additives... 

This paper will summarize briefly some work my colleagues and I at Decision Focus Incorporated have carried out for EPA to show how decision analysis might be used to assist decision making under TSCA ( 5). I will first briefly review the concepts of quantitative risk assessment and cost-benefit analysis to show how decision analysis fits with these concepts and provides a natural way of extending them. Then I will illustrate the approach using a case study on a specific chemical, perchloroethylene. 

This long-term view of the costs and benefits of TSCA, why these cannot be quantified and how they may be managed better, characterizes the chapter by the Conservation Foundation s J.C. Davies. His critique of cost-benefit analysis contrasts that of D.W. North. Regardless, he lists separately some benefits and costs of TSCA. As to new chemicals, there is very limited evidence that unreasonable risks may have been averted from a few new chemicals. In general, aside from systems for defining new chemicals and monitoring these, if needed, he finds no significant benefits in this area of TSCA. 

Making companies prepare plans which focus on safer chemical use has proved particularly successful in the USA. The benefits of mandatory pollution prevention planning have been demonstrated in the state of Massachusetts. Here, over 550 companies had to assess toxic use reduction options with technical help supplied by university and government experts. Toxic use reduction strategies included material substitution and product reformulation. Within ten years, industry has reduced the use of toxic chemicals by 40%, by-product waste by 58% and toxic emissions by 80%. A cost benefit analysis reveals that the same companies saved a total of Saved a total of USD 14 million (Euro 18.76 million) overthis period through the adoption of more efficient and safer processes. The programme is ongoing and has been expanded to community outreach and assessment of substitutes forsome hazardous material flows and products within the state. 

A requirement to provide a Substitution Plan with all applications for an authorisation will prevent unnecessary requests for authorisation and focus attention on safer chemicals. If substitution is not currently feasible for a particular use, the use of an authorised chemical would be allowed under a strict risk management regime, providing social need could be demonstrated and a positive cost/benefit analysis provided. The authorisation would be time-limited to allow the development of safer substitutes, and manufacturers and/or users would be required to produce a substitution development plan to enable substitution to take place before the authorisation expires. 

Following the process optimisation, the design of the Chemical Leasing business model should be initiated. Besides a detailed cost benefit analysis the essential part of this phase is the elaboration of the Chemical Leasing contract with all the related financial, legal, technical, management, implementation and monitoring issues for the implementation of ChL. 

Define the unit of payment, which is directly related to the functions performed by a chemical, e.g. metal pieces degreased, m3 water cleaned. Carry out a detailed cost benefit analysis (CBA) to evaluate the expected environmental and economic savings of the ChL business model. 

The depth of a cost-benefit analysis for the implementation of Chemical Leasing depends on the mutual trust of the partners and the transparency of the cost-structures of producer and user. The method used has to be adapted to the individual case and may follow the principles presented here in a flexible manner. 

Cost-benefit analysis A quantitative evaluation and decision-making technique where comparisons are made between the costs of a proposed regulatory action on the use of a substance or chemical with the overall benefits to society of the proposed action often converting both the estimated costs and benefits into health and monetary units. 

The fourth core element, the maximin principle, could partly be said to relate to the no data, no market-element , since this in principle prevents the marketing of a chemical rather than the opposite in case of uncertainty. However, this point refers to data gathering activities and not to decision-making on the basis of uncertain data. On the latter point, no provision in REACH explicitly recognises or implements the maximin principle, not even under the restriction tide. On the contrary, traditional cost-benefit analysis plays a central role in the authorisation and restriction procedures. 

The Chemical Industry Position As this paper has shown, cost-benefit analysis has now been incorporated into the regulatory process of many, though not all, agencies dealing with health, safety and the environment. The American chemical industry is, of course, profoundly affected by those agencies, since their rules deal with its operations, its products, its wastes and its relation to the conmunities in which chemical plants are located. It is therefore worthwhile to examine what the position of the industry is toward cost-benefit analysis in regulatory impact determinations. 

Issuance of the policy position of the Chemical Manufacturers Association is only an early step in the role CMA expects to play in the national debate over cost-benefit analysis in regulatory affairs. A number of CMA committees are actively engaged in examining the many issues involved, and worthwhile contributions to the debate from the chemical industry are likely. 

In the past the environmental impact of lubricants has been considered only in terms of the recycling of lubricant at the end of its useful life, but henceforth, all impacts must be known and understood and the benefits of using chemicals must be demonstrable and significantly outweigh any adverse consequences in terms of a cost-benefit analysis. A sound health and environmental performance will really be, at least in Europe, a prerequisite for continued operation. 

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