Inside Track

The EU Regulation on Registration, Evaluation and Authorisation of Chemicals (REACH) came into force in 2007 to ensure the protection human health and the environment as well as promoting the use of alternative methods for assessment of hazards of substances.

We have launched this week a new REACH service for manufacturers.  This service includes information for manufacturers on their obligations under REACH, the most up to date information on substances registered under REACH as part of a free e-alert scheme and consultancy advice for those who are looking for more tailored advice.

There are two guidance documents published today; Guidance for Manufacturers and Obligations for Downstream Users.  The guidance for manufacturers is intended to provide members with a straightforward and practical understanding of the requirements under REACH.  Although one might think REACH is just for the chemical industry, manufacturing uses many of these chemicals and are increasingly coming under pressure to find less hazardous substitutes for commonly used chemicals; REACH is expected to affect around 30,000 substances on the EU market.

REACH will not only affect manufacturers who directly use chemicals in production, it will also affect manufacturers that assemble imported components into products that are eventually placed on the European market.  The second guidance document published this week is dedicated to providing these ‘downstream users’ with information about their obligations, namely in ensuring that your uses are registered and you following the Safety Data Sheets.

It is important to understand what risks you might be exposed to through REACH, even if you are not directly obligated.  As a ‘downstream user’ of chemicals registered under REACH, you will face some specific legal obligations and importantly, some business continuity risks.

A substance that is present in one of your products may be restricted under REACH, and could even risk being withdrawn from the market; this will disrupt your supply.  There may be reputational damage with your customers by failing to comply with the REACH disclosure requirements, if you are not fully aware of the chemicals present in your products, you cannot make them aware of them. This could lead to loss of business and a threat of fines and prosecution if you do not fully comply with the legal requirements of REACH.

In a nutshell, you need to make sure that you are fully aware of the chemicals present in the products you produce and sell and ensure that your customers are also aware of these by communicating this information to them.

As part of this launch, we are also offering members the opportunity to sign up to e-alerts that will keep you informed with the most up to date REACH information, such as latest changes or additions to Candidate Lists of Intended Substances of Very High Concern (SVHCs), which can affect your business continuity.  You will have the most up to date information about which chemicals are under consideration, restricted, banned or authorised under REACH; ensuring you can reduce this business risk.

Please visit www.eef.org.uk/reach to download the guidance document, sign up to the e-alert system or seek consultancy advice.

Today UK MEPs defied David Cameron by voting against the proposed move to a -30% reduction target for EU ETS.  There are cries of heresy and betrayal, that these MEPs are throwing our future away and Europe will lose out to race to a ‘green economy’.  But let’s just take a step back and remember why this vote was even on the agenda.  EUROFER’s director general, Gordon Moffat stated in a press release recently that:

“After the Copenhagen failure, the EU would be foolish to again unilaterally increase its GHG objective.  Before Copenhagen, the Union affirmatively stated that it would only move to -30% if binding measures would be taken by other countries, comparable to the EU’s -20%. Clearly no other country has followed Europe. It cannot therefore credibly justify a move to -30%.”

It is very important to remember this point.  It was never on the agenda because Europe didn’t think we were not going far enough with our carbon reduction targets, but because it was meant to act as an incentive to entice other countries to set reduction targets.

When talking about this race to a green economy, I wonder if we have lost sight of the goal:  We, in Europe, are the only ones with such a scheme.  Our biggest competitors, China and the US, do not have carbon reduction targets.  How can we lose if we are the only ones in the race? 

If Europe continues to impose higher costs than other countries - unregulated countries – production will be pushed out of Europe and to our competitors.  This will in no way reduce carbon emissions; it will merely move it to these more unregulated areas and at the same time Europe loses the jobs and investment that a tighter target will supposedly bring.

Martin Callanan MEP was quoted in the Guardian as stating: "Conservative MEPs have always been sceptical of the EU unilaterally increasing its target to 30% without a worldwide agreement. I am in favour of increasing the EU target to 30%, or even higher, in the context of a global agreement where our competitor countries take similar action. Increasing our own targets while the rest of the world does nothing will have virtually no measurable effect on global emissions, because it will force large EU emitters to relocate to other countries outside the EU where they will continue to emit at a much lower cost.  We are also concerned that the higher carbon emission costs resulting from an increased target will feed through into energy price increases for domestic consumers"

It is also important to remember that this vote was not so narrowly lost as some would like to think, the vote was lost by more than a third.  So perhaps those voting against it are not just blindly doing so, maybe they are also looking at this from a common sense perspective?

I attended an event at Chatham House to discuss the implications for climate change negotiations and multilateral diplomacy.  HE Patricia Espinosa, the Mexican Secretary for Foreign Affairs spoke to delegates about the challenges for the next round of international climate negotiations later this year in Durban, expressing the integral role of innovative technology and low carbon economies to enable sustainable growth. 

EEF welcome this support for the role of low carbon technologies.  Manufacturing has a crucial role to play in enabling this transition to a low carbon economy and helping the UK Coalition Government to become the ‘greenest Government ever’. 

This includes not just ‘industries of the future’ but the ‘industries of the past’ Chris Huhne seems to think are on their way out.  These are the companies that supply the building blocks for low carbon technologies: such as the steel that is used in offshore wind turbines and high-speed rail tracks and the chemicals that are produced for use in insulation and energy efficient lighting.  EEF research in our 2010 report ‘Changing the Climate for Manufacturing’ shows that for every unit of greenhouse gases emitted by the global chemical industry during its operations, it has helped other to save double that amount through the products and technologies it produces.

We need to move to the low carbon economy in a cost effective manner, this means not just burdening energy intensive industries with extra costs to the point where they are uncompetitive.  This is where Ms Espinosa’s call for resurgence in multilateralism rang true to me – but in the sense that we need to think about reducing carbon emissions globally.  If the US and China and developing countries do not impose the restrictions we have in Europe, we will simply continue to outsource our production – and therefore carbon emissions – to these cheaper to produce in countries. 

In Europe we may pat ourselves on the back for our carbon reduction strategies, but until this is tackled in the round, we are simply moving the problem, and unfortunately UK innovation and jobs with it.

EEF will be keenly following the lead up to Durban and developing our position to ensure that the role manufacturing plays in enabling the move to a low carbon economy is given due credit.

Since its launch in 2009, the CRC has faced much criticism, not least by ourselves.  Many have long argued that the CRC is too complex, that this goes against the coalition’s commitments to simplify taxation and reduce regulatory burden. 

And last year, when the Government announced that revenue from CRC will not be recycled to companies, many accused the Government of introducing a ‘stealth tax’ and removing one of the only incentives in CRC.

Earlier this year DECC published a series of informal discussion papers for priority areas for CRC reform following complaints from stakeholders.  These focussed on simplification, overlap with other climate change schemes, and unnatural grouping of companies.

And so, finally, yesterday DECC announced the simplification of the CRC Energy Efficiency Scheme.  This long awaited announcement did go some way to simplification and although EEF are happy to see there are attempts to simplify the scheme, DECC could have gone further.

Yes, we are happy to see that some of the most complicated parts of the CRC have been removed, for example the qualification rules, which will now focus on only half hourly electricity meters and the flexibility of how you disaggregate.

We are happy to see that there will be two sales of allowances per year and that they will be fixed price and not cap and trade.

The blanket CCA exemption is welcomed as making it easier for companies to understand whether they are in or out.  However, read on a little further and you read ‘…there may be a requirement for the level of the threshold…to be revisited to ensure the bulk of the coverage of the scheme is retained’.  EEF are concerned this is a signal to lower the threshold of CRC in future meaning more companies who are not au fait with the complexities (that yes still exist) will be caught under the scheme meaning a new generation of participants who will struggle to get their heads around the scheme.

CRC is now essentially a tax, but could do without the League Tables that add no value whatsoever and provide no comparable data.  Gareth Stace, EEF Head of Climate and Environment stated in ENDS yesterday:

“The CRC is now essentially a straightforward tax and government must ensure that the only reporting requirements on employers are those that are needed to ensure that the correct amount of tax is paid.” 

There will be a consultation in 2012 on these proposals, until then there is a call for feedback on today’s announcements by September.  EEF will be responding to this to push DECC to go that bit further and truly provide something that is simplified.