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ECHA boss warns of potential funding shortfall

07/05/12

Do not cut proposed subsidy or agency will not be able to complete its tasks, warns Dancet

ECHA’s executive director Geert Dancet has warned that the agency’s ability to complete its tasks is threatened in the long term by a potential shortfall in its funding. The agency’s revenue is based on fees charged to industry and, when accumulated fees are insufficient to fund the annual budget, by EU subsidies. Concerns about a possible shortfall in funding up to 2020 were discussed at the agency’s recent Management Board meeting (CW 27 June 2012).

Mr Dancet says the European Parliament and Council are currently discussing the European Commission’s proposal for the 2013 EU budget and the multiannual financial framework for 2014-2020 (MFF). For ECHA the proposal foresees over the period 2014-2020 a total amount of subsidy of €385m to implement REACH and CLP, and €28m to cover its new duties under the biocidal products Regulation and Prior Informed Consent (PIC) Regulation. But Mr Dancet says the recent restrictive Council position on the 2013 EU budget indicates however that Member States intend to reduce the budget of all EU institutions in 2013 and 2014-2020.

Looking ahead the agency faces high uncertainty over the amount of fee income expected, says Mr Dancet. It has developed optimistic and pessimistic scenarios based on predicted fees coming in between 2014 and 2020. Mr Dancet says under the optimistic scenario €385m will be okay. But if the pessimistic scenario plays out, the subsidy could be far below what the agency needs. Although there are many variables, he says the shortfall could be up to €165m. “What we wanted to explain to the Management Board is that the €385m should not be reduced,” Mr Dancet says, noting the tendency of the EU Council to cut back on the budget proposed by the Commission.

Turning to the agency’s new responsibilities under the biocidal products Regulation Mr Dancet says the Council and Parliament are asking the agency to do new tasks, but have not agreed the fee structure. He notes that there are intensive discussions between the Commission and member state biocidal authorities. With the regulation entering into force in September 2013 he says the subsidy, staffing and fee revenue needs to be clear by the end of this year as otherwise the situation would be extremely difficult. "If we are not adequately resourced, what do they want us to do? Part of the regulation?” he questions.

The ability to reliably predict fee income has been difficult for both REACH and biocides. “If the Commission wished to pay the balance with subsidies but cannot guarantee sufficient maximum amounts, an agency like ours suffers from permanent uncertainty” he added.

It is unclear how many companies will seek EU-level authorisation for biocidal products through ECHA as they have the option of applying to individual member states too. Again, Mr Dancet says the agency will have an optimistic and a pessimistic scenario. A much simpler approach, he adds, would have been to charge annual fees to companies in order for them to market products.

The REACH authorisation process is already providing significantly less fee income than predicted and that has partly contributed to the current concern. Comparing ECHA’s previous and current multiannual work programmes, overall the agency’s income is reduced by around €17m in 2012, between €8m-€20m in 2013 (based on different reports) and €18m in 2014.

Mr Dancet says that a delay in agreeing the first authorisation list, the slow pace of adding substances to the list and the low appetite from industry to apply for early authorisations all contributes to the low fee revenue from authorisation. He points out that ECHA’s third recommendation for prioritisation of substances to be added to the authorisation list, made in December 2012, is not certain to be adopted by the end of this year. This is too long, he says.

He notes that the market is moving towards early substitution of substances on the authorisation list to avoid the costly authorisation process. While this is good for human health and the environment, it has contributed to ECHA’s emerging budget problem.

Although this indicates the agency would need less staff for processing authorisation applications, Mr Dancet questions whether ECHA should reduce overall staff levels. “I believe we should not [reduce staff] because there are other pressures, most notably to go beyond the minimum of 5% of dossiers passing compliance checks.”

That pressure is coming from EU member states, the European Parliament and the Commission, but if we do not get a commitment from the Budgetary Authority regarding the €385m we may not be able to do more than the legislative minimum of evaluations, he says.

He says the Management Board agrees with the agency on the need to look at alternative ways to finance its activities; income from REACH fees and charges is one target. The REACH fee Regulation is due to be revised by the Commission by the end of this year.

As well as adjusting fees for inflation, ECHA has also communicated suggestions for charging fees for inquiries made under REACH and dossier updates that are made in response to compliance decisions.

He finally appealed that “the EU budgetary and political authorities should understand that Europe needs a strong chemicals agency that is efficient and effective in protecting human health and the environment from hazardous substances because this will strengthen both the image of the EU as leading the world on chemicals legislation as well as the leading position of the European chemicals industry in the world market.”

According to the Commission, the aim is to have an agreement on the multiannual financial framework (MFF) by the end of the year so that the 2014 draft EU budget, that is the first covered by the MFF, can be presented in time. Draft budgets for the year ahead are usually presented in April of the preceding year. The follow-on sectorial legislative proposals should be adopted in such way that would allow using the budgetary allocations as of 1 January 2014. It also notes that all detailed information on Commission´s proposals for the next MFF is for the time being purely internal and still subject to on-going negotiations. The final numbers therefore can be different from those proposed.

The EU Council presented conclusions on the issue at the end of June.

Emma Chynoweth and Philippa Jones







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