EU: Chemical Industry EU Regulatory Cost Doubled: 9.5 Billion-Euros-Bill a Burden for the Industry?

Editor: Dominik Stephan

One of the main cost factors for chemicals production could in fact be the very framework set to ensure a safety and sustainability of the industry: A recent study shows that the regulatory related costs doubled in the decade between 2004 and 2014.

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EU chemicals production between 2004 and 2014 (the timespan covered in the study)
EU chemicals production between 2004 and 2014 (the timespan covered in the study)
(Picture: Cefic)

Brussels/ Belgium – A new study by the European Commission shows that the cost of implementing major regulations for the European chemical industry doubled between 2004 and 2014. While Europe’s regulatory framework for chemicals, along with industry’s own efforts, plays an essential role in ensuring the protection of human health and the environment, the complex regulatory framework also poses a significant burden on chemical companies, amounting to about 10 billion euro per year over the period studied.

When all legislation relevant to chemical companies is cumulated, the estimated average annual total direct cost borne by the subsectors covered by the study during the period 2004-2014 approaches €9.5 billion, representing around 2% of their turnover and 12% of the value added, recent figures show.

This burden is by no means distributed equally among sectors, ranging from nearly 3% for plastics to 23% for crop protection products. Compared to Gross Operating Surplus, the additional cost reaches 30% – indicating that the cost of regulation is a significant factor shaping the profitability of the chemical industry.

“This report, which is part of the Better Regulation process of the Commission, shows facts not opinions. The picture is very clear. Europe needs to focus on its competitiveness, of which the regulatory burden is a big factor”, said Marco Mensink, Cefic Director General.

Among the legislation packages, the three main drivers of regulatory cost are regulations on industrial emissions, generating 33% of the cost, chemicals, followed by the REACH regulation package for chemicals with 29% and worker safety, with 24%.

Download the detailed report here

Energy legislation also contributes to the cost, especially after 2012. The chemical industry will face an increasing cost to comply with stricter emission limit values, with more ambitious CO2 emission reduction targets and energy efficiency objectives.

It should be kept in mind, however, that identified costs are by far not the total cost of regulation. They are only the part that is particularly European legislation. All other horizontal legislation that also impacts the chemical industry is not included. Moreover, the regulatory costs in energy prices are not accounted for in quantitative terms, and pending future regulation is not yet considered.

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