ECHA

Socio-economic analysis is an integral part of the authorisation and restriction processes introduced by REACH. Its main purpose is to support ECHA's opinion and the European Commission's decision making by describing the impacts of choosing one course of action over another.

This may include impacts on industry, workers, consumers, regulators and the environment. As chemicals play a central role in our society, it is crucial to evaluate both the costs and the benefits related to any proposal affecting their uses in an appropriate manner.

What is socio-economic analysis?

Within the framework of REACH, socio-economic analysis (SEA) supports decision making by considering whether society would benefit from:

• a restriction being adopted (compared to continued use or other risk management options); or
• an authorisation being granted for continued use of a substance of very high concern (compared to refusing the authorisation).

SEA assesses the impacts of a change against what would happen if the change did not occur. In an application for authorisation for example, this could involve comparing a situation where the applicant continues using a substance of very high concern with a situation where it would be substituted with a safer but less effective one. The change-over may require investment and result in increased costs for both the company and other actors in its supply chain.

How are the impacts assessed?

Regulatory risk management tends to result in higher costs but also greater benefits. It is important to know who will be affected by a measure and what the consequences for the various actors will be.

The starting point for the SEA is an assessment of the affected companies' options, if they were not able to use the substance in question. As this essentially includes an analysis of alternatives, the net costs of adopting any such alternative substance or technology are crucial. Their assessment should be as realistic as possible, considering the companies' actual context (such as their technologies, location, markets) and decisionmaking processes.

Various methodologies exist to analyse the impacts. In the context of restrictions and applications for authorisation, cost-benefit analysis and cost-effectiveness analysis are two of the most widely-used methods.

Cost-benefit analysis converts all benefits into monetary units so that they can be directly compared to the costs. The conversion is based on valuation techniques that derive the willingness-to-pay (WTP) to avoid certain health risks or environmental damage. Costeffectiveness analysis, on the other hand, compares the impacts (in their natural units) to the costs.

An example is the abatement cost per unit of emission of the chemical substance. Cost-effectiveness analysis is often used when the health or environmental impacts of the use of the chemical are either unknown or cannot be expressed in money equivalents. Sometimes the impacts can only be described in a qualitative, or semi-quantitative, manner. In these cases, one may still assess the compliance cost.

SEA can be complemented by a distributional analysis, which tells who would gain and who would lose from the regulatory action. For example, some chemicals manufacturers may lose business due to a restriction. At the same time, there may be market opportunities for those manufacturers that produce alternative, safer substances. Hence, the impacts of the restriction are shared unevenly by different industries, social groups, and/or regions. If the expected impact on a specific group is disproportionally high, this might be factored into the overall SEA.

To sum up, a high-quality SEA should be conducted and presented in an unbiased way to support, not replace, the opinion and decision making. It should naturally describe uncertainties and assumptions. SEA always requires multi-disciplinary expertise as it relies on information related to a wide range of issues, such as technical processes, business strategy, market analysis, health and environmental impacts and valuation techniques.

What ECHA does

ECHA's Risk Management Implementation Unit currently has a team of seven staff members who carry out socio-economic analysis. This team is responsible for the methodological development and support to ECHA, including its Committees.

ECHA has also carried out and published several studies related to the methodologies and approaches for analysing the socio-economic impacts of chemicals regulation.

ECHA's Committee for Socioeconomic Analysis (SEAC) evaluates applications for authorisation (as well as comments received in the public consultation) to formulate their opinions on whether the related socio-economic benefits outweigh the risks of continued use of a substance of concern. It also evaluates restriction proposals in a similar manner to evaluate if the costs of the proposed restriction are proportionate to the risk reduction. SEAC works in close cooperation with the Committee for Risk Assessment (RAC) and bases its assessment of the risks on the conclusions of RAC. Their opinions are sent to the European Commission for decision making.

Further information:

• Socio-economic analysis in REACH 
• Committee for Socio-Economic Analysis
• Preparing your application for authorisation
• Guidance for Socio-economic analysis – Restrictions
• Guidance on the preparation of an application for authorisation
• Terminology – in 23 languages

Did you know?   SEA and restrictions In the restriction process, the proposing Member State (or ECHA on request of the European Commission) is responsible for the SEA. It should cover in particular the additional cost due to the restriction and the associated human health or the environmental impacts. Social and broader economic impacts and consequences for society as a whole are sometimes also described. The result of the SEA is documented in the Annex XV restriction report, which is scutinised by SEAC and RAC. It is also posted on ECHA's website for comments for six months. Overall,SEA is helpful in demonstrating if the costs are proportionate to the benefits of the restriction, and if there are any particular reasons for time limited or permanent derogations.   SEA and authorisation  A company or a group of companies is responsible for the SEA as part of their application. While the REACH Regulation does not require applicants to present a SEA, so far, all applicants have done one. As SEA is closely linked with the analysis of alternatives, ECHA has recently provided a recommended format which makes it easier for the applicants to document their SEA and the analysis of alternatives in a single document. SEA is used by SEAC when it gives its recommendation to the European Commission on the duration of the review period for an authorisation to use a substance.

Text by Nedyu Yasenov
Top image: Fotolia

If you liked this article, you may also like:   What to know about…REACH authorisation, Newsletter 4/2015   Restrictions under REACH, Newsletter 5/2010   Socio-economic analysis is not an afterthought, Newsletter 2/2009