News 2017 / October

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Chemical tax can be very effective and more countries should try it

Written By Anne-Sofie Andersson
tax on hazardous chemicals

Putting a tax on products that contain hazardous chemicals is a very effective tool to reduce the negative impact these chemicals have on health and the environment.

How so? Simply because paying tax means less profit for the company behind the product. And even if it tries to account for the tax cost by raising the price it usually leads to a smaller profit anyway, since customers will be less inclined to buy the product at a higher price point. Therefore, being taxed is something companies looking to make healthy profits will want to avoid.

The most rational way forward in a scenario like this is then of course to remove the reason you’re being taxed in the first place. In the case of chemicals in products this would mean getting rid of the hazardous chemicals.

“Since it’s such a touchy issue, it needs to be handled very diplomatically and implemented in such a way that you maximise its effect without making it toothless”

Taxation is one of the few tools EU member states have if they want to protect their citizens from toxic substances to an even larger extent than what the EU’s chemicals legislations currently do, and it is an option that ChemSec would like to see member states explore even more than today. It could play an important role in driving the transition towards safer products, especially since REACH and other EU-wide legal frameworks are moving so slowly.

But it’s not uncontroversial. There are always some people whose faces turn tomato red whenever taxes are brought up – no matter if the intention of the tax holds the potential to help current and future generations to avoid a plethora of health-related issues.

However, since it’s such a touchy issue, it needs to be handled very diplomatically and implemented in such a way that you maximise its effect without making it toothless.

The recently adopted tax on flame retardants in electronic equipment in Sweden is a good example. It shows that even if you get only the smallest details wrong, the incentive for substituting toxic chemicals is considerably weaker than it could be.

The electronic tax addresses the problem of halogenated flame retardants, which is important, as all brominated and chlorinated flame retardants cause toxic emissions when incinerated in the waste phase. The tax also covers flame retardants based on phosphorus. However, some of the preferred alternatives to halogenated flame retardants are in this group. Even though this category is taxed at a lower rate, it still decreases the incentive to phase out halogenated flame retardants, which is very unfortunate. It would make more sense to handle the phosphorus-based alternatives case by case based on their hazardous properties.

Now Sweden is moving ahead with a new chemical tax. A study looking at taxing hazardous chemicals in other kinds of products is currently ongoing. Unfortunately it seems that the study tends to build on risk evaluation, even though it was commissioned with the precautionary approach and the Swedish government’s goal of a toxic-free environment as founding principles.

For those of you unfamiliar with these terms, they basically mean that if there are uncertainties around a substance and its potential toxic properties, Sweden wants to be safe rather than sorry, and there should be no known toxic substances released into the environment. It does not mean that it’s OK to release known toxics into the environment as long as you can measure the risk.

Furthermore, relevant risk assessments on the scale the study is leaning towards will be almost impossible to carry out. To demonstrate a decreasing level of risk in the environment you would need data that quantifies the current level of risk and be able to show how a tax would decrease it. This would ultimately lead to the conclusion that the input data is insufficient, thereby delaying or avoiding the incentives for substitution and innovation.

Luckily there is a solution. There is already a European consensus regarding 174 substances that are identified as Substances of Very High Concern (SVHCs) and should be phased out, since their intrinsic properties make them harmful to humans and the environment.

Why try and reinvent the wheel and create a new and very complicated tax system based on risk when all the chemical research has already been done and dealt with?

A national tax on SVHCs in consumer products holds real potential to speed up the transition towards safer products, and Sweden, as well as other countries that want to move faster than EU-wide legislation, should focus on how to minimise the use of well-known hazardous substances.

Anne-Sofie Andersson

Anne-Sofie Andersson
Executive Director, ChemSec