UK Government Report on Chemicals Sector
Description of sector
The UK chemicals sector is highly diverse, including the manufacture of commodity/bulk chemicals, speciality chemicals, polymers (plastics) and consumer chemicals (e.g. personal care and cleaning products). It is principally comprised of approximately 2,500 Small and Medium Enterprises (SMEs) and microbusinesses (employing less than 250 people); these make up 97 per cent of the sector (see employment table below) with a handful of large multinational companies comprising the other three per cent.1
Geographical clustering is important as companies can be located close to both suppliers of their feedstocks and end-users of their outputs, as well as the largenumber of support services (engineering, R&D, electricity, effluent treatment) required. Chemical production is concentrated in four main clusters – Hull, Teesside, a Runcorn and Grangemouth. There are varying levels of business integration between the four main clusters but they all are connected by pipeline for a key input (feedstock), ethylene, which is one of the main building blocks of the industry.
The current EU regulatory regime
The chemicals industry in the UK is regulated through a framework that is largely based on EU legislation. The European Chemicals Agency (ECHA) implements the EU’s chemicals legislation. One of the main pieces of EU chemicals legislation is REACH 1907/2006/EC – Registration, Evaluation, Authorisation and Restriction of Chemicals. This primarily affects manufacturers and importers of chemicals and other substances with a focus on identifying risk.
Applying appropriate risk management measures is a duty on manufacturers, importers and users of the chemicals to ensure their safe management. REACH requires companies to register their chemicals with ECHA before placing it on the market and also provides for additional regulatory controls on the most dangerous chemicals. Those producing and exporting chemicals from outside the EU must comply with REACH either by procuring the services of an Only Representative who take on their legal duties under REACH or by ensuring that the EU based importer they are supplying fulfil the REACH requirements.
The ECHA also facilitates the following EU chemicals regulation:
a. The EU Classification, Labelling and Packaging (CLP) Regulation 2008 requires the identification and labelling of the hazardous properties of chemicals as well as appropriate packaging to ensure a high level of protection to human health and the environment. CLP and REACH work together and alongside the regulations implementing a wide-range of United Nations multilateral agreements (MEAs), restricting the use of the most hazardous chemicals from the market.
b. The EU Biocidal Products Regulation 528/2012 (BPR), which establishes the procedures for an EU-level assessment of active substances before they can be approved and authorised for use in biocidal products on the market.
c. The Export and Import of Hazardous Chemicals EU Regulation No 649/2012 (commonly referred to as the ‘Prior Informed Consent’ Regulation or PIC) requires information exchange between the countries of exporters and importers so that the hazardous properties of the chemical are known to trading parties. A subset of these chemicals is subject to the “prior informed consent” procedure established by the UN Rotterdam Convention and a smaller subset is banned under the UN Stockholm Convention. PIC is marked as EEA relevant by the EU but is considered by the EEA EFTA States not to be relevant for incorporation into the EEA Agreement. Besides covering the 44 substances currently listed in the Rotterdam Convention, the Regulation also applies various trade controls on some 350 other hazardous substances.
Separately, there are EU regulations concerning the placing of plant protection products (pesticides) on the market and setting rules for maximum residue levels in food and feed (Regulation 1107/2009; Regulation 396/2005) as well as a framework for the sustainable use of pesticides (Directive 2009/128/EC). A final strand of EU chemicals legislation comes from Directives made under the worker protection parts of the EU Treaty (the Occupational Safety and Health acquis). There are Directives dealing with chemical agents (which include indicative exposure limits to protect workers involved in chemical production), carcinogens and mutagens, asbestos and biological agents.
The Health and Safety Executive (HSE) is the Competent Authority (CA) for the safety of chemicals, pesticides and biocides. HSE’s regulatory focus is on human health and the environment but it draws on Environment Agency’s (EA) expertise in environmental science in relation to REACH. The Environment Agency is the CA for the implementation of UN multilateral environment agreements (MEAs). HSE is the CA for the PIC Regulation which implements the Rotterdam Convention MEA.
Wider EU legislation applicable to the sector
Free movement of goods
Articles 28-37 of the Treaty on the Functioning of the European Union (TFEU) set out the Treaty provisions on the free movement of goods, including the establishment of the Customs Union. The rules on the free movement of goods mean that goods from one EU Member State can be freely exported to, and imported from, another. This has been achieved by establishing the Customs Union, preventing Member States imposing customs duties and customs formalities on goods imported from other Member States. In addition, these rules prevent Member States imposing restrictions on the quantity of imports and exports of a particular item (e.g. quotas or an import or export ban).
This legal framework also prevents non-tariff barriers that may restrict the free movement of goods across the EU market in less direct ways. For example, it prevents Member States applying product standards and regulations that make it harder in practice for goods coming from one Member State to be sold withinanother. The Treaty provisions on the free movement of goods also introduce the ‘mutual recognition’ principle (when goods which are not covered by EU product standards and regulations have been lawfully manufactured and marketed in one Member State, another Member State cannot then require it to comply with additional rules). Finally, goods imported from other Member States must be treated in the same way as goods produced nationally.
Free movement of services
Articles 49, 56 and 57 TFEU set out the Treaty provisions on the free movement of services. This is split into 2 areas: freedom of establishment and free movement of services. Generally, the principle of freedom of establishment provides that companies and self-employed individuals may conduct business in another Member State on a permanent basis. The freedom to provide services covers the situation where a service, provided for remuneration, is provided on a temporary basis.
Also important to the free movement of services is the Recognition of Professional Qualifications Directive (2005/36/EC). This requires Member States to recognise the professional qualifications of nationals from other Member States, which makes it easier for professionals to move to another Member State and practise their profession there on a temporary or established basis. It provides for a system of automatic recognition of qualifications on the basis of agreed minimum training standards in a number of specific professions. Automatic recognition is also extended to certain industrial, craft and commercial professions on the basis of professional experience.
A “general system” of recognition applies to professionals not covered by automatic recognition and allows for compensatory measures to be taken to address where there may be differences between national requirements for professional training.
Safety ad Health at Work, 1989
The European Framework Directive on Safety and Health at Work (Directive 89/391/EC) guarantees minimum safety and health requirements throughout Europe while Member States are allowed to maintain or establish more stringent measures. Other specific EU measures include
Directive 2009/104/EC – use of work equipment;
Directive 99/92/EC – risks from explosive atmospheres;
Directive 92/58/EEC – safetyand/or health signs;
Directive 89/656/EEC – use of personal protective equipment;
Directive 89/654/EEC – workplace requirements; Directive 98/24/EC – chemical
Directive 2004/37/EC – carcinogens or mutagens at work.
Seveso III Directive
The production, storage and use of dangerous substances with particular hazards and at quantities above specific thresholds are controlled by Directive 2012/18/EU (the EU “Seveso” III Directive), implemented in the UK by the Control of Major Accident Hazards Regulations 2015 (COMAH). The Directive builds on a regulatory system that has been in place across the EU for thirty years and ensures that there are common EU safety standards for high hazard sectors such as the chemicals industry.
EU Waste Directive, 2008
The EU Waste Directive lays down basic waste management principles: it requires that waste be managed without endangering human health and harming the environment, and in particular without risk to water, air, soil, plants or animals, without causing a nuisance through noise or odours, and without adversely affecting the countryside or places of special interest.
Industrial Emissions Directive (IED), 2010
All chemical production installations are subject to the Industrial Emissions Directive (IED), regardless of size. The IED commits EU Member States to control and reduce the impact of industrial emissions on the environment.
A review of “Best Available Technique (BAT) Reference” (BREF) documents applicable to the chemicals sector is currently underway, including the proposed introduction of a new BREF on Waste Gas Treatment in the Chemicals Sector (WGC) to deal with air pollutants common to the chemical industry.
EU Emissions Trading System (EU ETS) Directive 2003
Phase IV is currently under negotiation. EU ETS establishes a scheme for greenhouse gas emission trading within the Community. This Directive has been amended a number of times and tertiary legislation has been adopted to further implement the provisions in the Directive. The ETS is the main policy lever implemented to meet the EU’s 2020 target and will contribute about 50% of the emissions reductions needed to meet the UK’s Carbon Budgets between 2013 and
EU Circular Economy Package
The Circular Economy Package is currently under negotiation. It seeks to effect a transition to an economy where the value of products, materials and resources is maintained in the economy for as long as possible and the generation of waste is minimised. It consists of an Action Plan and the Waste Package. The Action Plan lays out a suite of proposals on circularity and resource efficiency which will each be taken forward on an individual basis (e.g. the revision of the Fertilisers Regulation mentioned below). The Waste Package is a series of legislative proposals to amend a number of directives, including the Waste Directive mentioned above. Negotiations began in early 2016 and are likely to continue well into 2018.