The problem was revealed in a consultation paper published by the HSC on 11 September.1 It contains proposals for amending the so-called "CHIP" regulations which set out how chemicals should be classified and packaged safely, and customers provided with information via labels containing standard risk and safety phrases and via safety data sheets.
The vast majority of CHIP's requirements are derived from EU legislation, and most of the proposed new amendments will implement four Directives.
The most important of these from an environmental perspective is the 1999 Directive on dangerous preparations. This replaced a 1988 Directive which required for the first time that preparations "dangerous for the environment" should be classified and labelled as such. But it took the 1999 Directive to set out the detailed classification rules.
The environmental risks covered by the Directive are toxicity to aquatic organisms and damage to the ozone layer. Toxicity to flora, fauna and soil organisms will be covered once criteria are agreed at EU level.
Other changes made by the four Directives require preparations containing sensitisers to carry warnings to alert consumers, supply of safety data sheets on request to professional users on some preparations not classified as dangerous, and new or revised hazard classifications for almost 500 dangerous substances.
The implementation deadline for all four Directives is 30 July 2002. The HSC has held back the consultation because two of the Directives were only finalised in July. With the consultation period running until 11 December, this means that the new CHIP regulations will not reach the statute book until next spring.
Considerably longer transition periods have been allowed in earlier CHIP amendments. This has helped keep costs to industry to a minimum by allowing time for revised labels to be designed, and for products on the market with soon-to-be-outdated hazard information on labels and packaging to be sold.
This time, however, a transitional period of only a few weeks will be available. And, in view of the potential consequences outlined in the consultation paper, the question may well be asked whether the HSC should have consulted earlier on the 1999 Directive, from which the key new requirements stem - or at least whether it should have been communicating with industry on the implications.
The HSC now finds itself in a bind. As the paper notes, "there is no flexibility in the Directives as regards timing," and so "at this stage" it feels obliged to prepare the regulations as if they were to be implemented next July.
However, the paper then says that "this does not mean that this matter is closed." The HSC is "particularly anxious" for information on the likely costs of the new package. It is also looking for guidance from industry on whether the flexibility allowed in the 1999 Directive not to label preparations as "dangerous for the environment" where the quantities of the chemicals concerned are so small that there is "no foreseeable risk" to the environment will help reduce costs.
A preliminary regulatory impact assessment attached to the consultation paper provides further clues to official thinking. It says that there are "a number of options" as to the timing of implementation - either implement by next July and meet the UK's Treaty obligations, or extend the timetable "in order to minimise costs." The latter course, the paper concedes, is "normally not acceptable" - but the HSC has looked at transitional periods of six and 12 months.
Discussions with some sectors of industry have produced "very provisional" cost estimates which have alarmed the HSC. The figures suggest that costs will escalate steeply the shorter the transition period - and on worst case assumptions could exceed £1 billion.
The estimates are shown in the table. They suggest that the paints and coatings sector faces the biggest hit - amounting to 40-50% of the total industry bill.
The HSC believes that 75% of the sector's products will need new labels carrying the risk phrases for dangers to the environment, or sensitisers, or both. This, though, will account for only £19 million of the industry's costs.
Much the biggest component of the bill will arise from stocks of finished product held by manufacturers, warehouses or retailers. Companies face the choice of relabelling or disposing of products and empty containers which are not sold by the time the regulations enter into force. On worst case assumptions, the costs involved are put at £148-261 million even with a 12-month transitional period - around 4% of the industry's annual turnover - and they would roughly double with a six-month lead-in.
Manufacturers of detergents and other cleaning products will face the same dilemmas, though on a lesser scale because fewer of their goods will be caught by the new risk phrases and most also have shorter shelf-lives. Even so, costs could amount to 0.5% of the sector's turnover with a 12-month transition.
The HSC has yet to obtain advice from other sectors, so its estimates of the regulations' potential impact on these are broad brush. They include a £15-65 million bill for manufacturers of basic chemicals classed as category 3 carcinogens. A new risk phrase will be needed on labels on an estimated 10,000 products containing these substances.
The sectors consulted by the HSC told it that these costs could be cut by up to 90% by stock management and some product reformulation to avoid the need for relabelling in the coming months. However, the HSC has not accepted this estimate in full in drawing up its own best case assumptions - which are that relabelling and product disposal costs could amount to £150 million with a 12-month transition, rising to £460 million with a six-month lead-in.
"This initial assessment," the paper concludes, "suggests how crucial an adequate transition period is in limiting costs to industry. The effect of shortening the transition period from 12 to six months results in costs to industry that would outweigh the potential safety and health benefits of the entire CHIP classification regime for a period of around five to ten years - even given the best case assumptions."
Further costs to industry which are not affected by the length of the transition period will arise from three sources:
However, a study by consultants DNV has concluded that not many sites will be affected. An estimated 23 will come under COMAH as lower-tier sites and will need to prepare major accident prevention policies. Another 11 will become top-tier sites and will need to produce detailed safety reports and emergency plans. The total initial cost to these businesses is put at £1.5 million.
The HSC estimates that 3,200 of these plants will be capable of modification to reduce their trichloroethylene consumption below the one tonne per year qualifying threshold under the Directive. Another 700 firms will have to switch to alternative cleaning processes. Only around 100 plants are fully enclosed systems capable of meeting the emission standard.
The one-off cost of these changes is put at £105-117 million - but it is unclear how long companies will have to make these investments. The solvents Directive allows until 2007 for existing installations to be upgraded to comply with its emission limits, but it also provides that substitution of carcinogens should be carried out in "the shortest possible time."