Chemical Safety 2.0: Implementation and Implications of the New TSCA

Keith Belton

Pareto Policy Solutions, LLC

TSCA Reform became Law on June 22

“For the first time in

our history, we’ll

actually be able to

regulate chemicals

effectively.”

--President Barack

Obama, June 22, 2016

Outline

Implementation

Determining Success and Failure

Impacts on Commerce

Recommendations for Manufacturers and Processors

Conclusions

Implementation

The Most Important Sentence in TSCA

“Not later than two years after the date of enactment . . . the Administrator shall develop any policies, procedures, and guidance . . . necessary to carry out the amendments to this Act...”

Details Matter!

“The new regulations

will fundamentally

change the way we

get around them.”

Every Week, EPA is Setting a Precedent

Many EPA-required actions/decisions began on the day of enactment:

New chemical reviews and decisions

Risk assessment and regulation of Work Plan chemicals

EPA is open to questions and feedback and is publishing new implementation info weekly

What Conclusions Can We Draw about Implementation To Date?

EPA is being transparent about its new chemical decisions.

Market innovation in new chemicals is being harmed by the new law.

What Might We Soon Conclude?

EPA will soon reveal where it is going on exposure information.

EPA will soon reveal whether it is making adjustments to the analysis used to support regulation under Section 6.

Determining

Success and Failure

Public Policy: How Do We Define Success or Failure?

The gold standard for evaluating public policy is cost-benefit and cost-effectiveness analysis.

New TSCA Requires Such Analysis

The new TSCA requires that regulations be cost effective and do more good than harm:

Regulate such that the substance no longer presents such a[n unreasonable] risk

Consider costs and benefits of the proposed regulation and regulatory alternatives

Consider whether economically feasible substitutes that benefit health or the environment compared to the regulated substance are available

Why is Cost-effectiveness Important?

For EH&S regulations, wide variation in cost-effectiveness tells us that

we can save more lives at the same cost

and/or

we can greatly reduce cost while saving the same number of lives

What Is Success under TSCA?

Success depends on:

risk reduction / cost

where a BIG number is better than a small

number

In other words, we want a large health improvement at relatively little cost.

Cost-effectiveness depends on the size of the risk being regulated

Across federal regulatory programs, cancer risks higher than 1 in 10,000 are always regulated, and lower than 1 in 1,000,000 never regulated.

EPA programs typically regulate chemicals posing a cancer risk greater than 1 in 1,000,000. This is a relatively small risk.

Smaller risks are more difficult to reduce cost-effectively than bigger risks.

Important Studies on the Cost-Effectiveness of Federal Regulation

Curtis C. Travis et al. 1987. Environmental Science & Technology, 21(5): 415-420.

John F. Morrall III. 2003. “Saving Lives: A Review of the Record.” AEI-Brookings Joint Center for Regulatory Studies.

Randall Lutter et al. 1999. The Cost-Effectiveness-Per-Life-Saved Cutoff for Safety-Enhancing Regulations. Economic Inquiry, 37(4): 599-608

Tammy O. Tengs et al. 1995. Five Hundred Life-Saving Interventions. Risk Analysis, 15(3):369-390.

Cost Effectiveness Varies Greatly Across Federal EH&S Regulations

Regulation OCSLS (2002 $)

CPSC childproof lighters 100,000

FDA reduce trans fat intake

3,000,000

OSHA AEDs in the workplace

240,000,000

EPA land disposal restrictions

530,000,000

EPA formaldehyde 78,000,000,000

EPA solid waste disposal facility criteria

100,000,000,000

Chemical Regulation Cost-Effectiveness

Federal regulations span 6 orders of magnitude in terms of cost-effectiveness.

Safety regulation is more cost-effective than toxin control (specifically, cancer cases avoided).

People are willing to pay up to a certain amount ($9 million in 2002$) save a statistical life.

At some point (>$21 million in 2002$), a regulation does more harm than good from a health perspective.

EPA Must Clear Hurdles to Regulate under TSCA Section 6(c)

It is difficult to regulate a small chemical risk cost-effectively without doing more harm than good.

One must have considerable info about the risk and cost of substitutes.

It makes sense for EPA to evaluate the risk of substitutes when conducting a risk evaluation on a substance for a particular condition of use.

Some EPA Regulations are Very Cost Effective

Some EPA regulatory programs (but not TSCA) to control chemicals have been extraordinarily effective and efficient. These programs are cost effective because both exposure and hazard are relatively high.

Phase Out of Lead in Gasoline

Lead in

gasoline

and average

blood lead

levels in the

US population

are highly

correlated.

Phase Out of Ozone-Depleting Substances

The ozone hole

is shrinking

due to the

global

phase out of

ozone-depleting

substances

(ODS).

Reductions in PM2.5 Pollution

Reductions in

small

particulate

matter pollution

and increases in

life expectancy

are correlated.

The Importance of the Risk Paradigm

The only way to distinguish regulations on the basis of cost-effectiveness is though cost-benefit analysis (CBA).

Hazard-based chemical policies (TUR, IST, substitution analysis) are not risk-based and cannot be evaluated with CBA. This is a serious flaw.

Fortunately, the new TSCA embraces the risk paradigm.

Cost-Effectiveness of the New TSCA

Some implementation issues/decisions will have a disproportionate impact on the success or failure of the law.

Needed information

Risk assessment

Determining “Unreasonable Risk”

Regulatory Stringency

Unanswered Question #1

Needed Information

What information is needed and how will EPA determine this? How costly will it be for EPA to obtain the needed information?

Ideally, EPA should seek only truly-needed information and at very low cost to manufacturers and processors.

Cautionary Tale: 1991 TSCA CAP

EPA’s TSCA office

“clarified” its

TSCA 8(e) criteria

and many companies

realized they had

had to submit many

studies to EPA.

The Compliance Audit

Program (CAP)

provided EPA with

much information

it did not use.

The Paperwork Reduction Act Matters

EPA must get OMB approval for information collections under TSCA (e.g., PMNs).

OMB looks at the “practical utility” of the information and whether burden is minimized (i.e., a cost-benefit test.).

OMB approval lasts three years at most.

Interestingly, EPA pushed nearly all of its TSCA ICRs through OMB in 2015 just before enactment. These do not expire until 2018.

Unanswered Question #2

Risk Assessment

How will risk analysis be conducted? Will it be conducted objectively and consistently?

Ideally, risk analysis would convey expectedrisk to the exposed population(s) through probability distributions.

Does EPA Overestimate Risk?

EPA has very good technical guidance on the conduct of risk assessment.

Unfortunately, EPA does not always follow its own guidance.

The National Academies of Science and US GAO have been critical of EPA risk assessment programs (IRIS, TSCA existing chemicals).

The new law did not change EPA risk assessment practices. Will EPA put its “thumb on the scale” when assessing risk?

Troubling Public Comment

Default assumptions used in a risk assessment should be health protective in all cases and under all conditions. EPA should determine the maximum total risk for the most exposed or most vulnerable people from potential future maximum use.

Good News: The New Law Anticipates External Risk Analysis

TSCA requires EPA to develop guidance for external parties to submit draft risk evaluations.

This guidance is likely to be consistent with (1) EPA’s rulemaking on how it will conduct risk evaluation and (2) EPA’s own risk assessment guidance.

The pace of risk evaluations can increase if EPA leverages external risk evaluation. Will EPA do this?

How Can EPA Best Leverage External Risk Analysis?

Risk analysis is used to evaluate new and existing (prioritization, evaluation, and regulation) chemicals under TSCA.

EPA must be transparent in how it conducts risk analysis. That is, EPA risk analysis must be capable of being replicated.

EPA must consistently apply its own risk analysis methods.

EPA must accept external risk analysis that comports with its own methods.

Troubling Public Comment

EPA should never rely solely or principally on an external draft risk evaluation, even if it conforms to EPA guidance and practice.

Unanswered Question #3

Determining “Unreasonable Risk”

Given an objective risk analysis, how will EPA decide whether a substance presents an unreasonable risk and therefore subject to regulatory control?

Ideally, EPA will focus on big risks and not small risks.

Troubling Public Comment

The mere presence of a “safer” alternative equates to unreasonable risk, and subsequent regulation should restrict consumer choice. It is not reasonable to continue to expose humans or the environment to an avoidable hazard.

Unanswered Question #4

Regulatory Stringency

How stringent must regulations be to control chemicals not meeting the safety standard?

Ideally, regulate such that net benefits are maximized.

Efficient Regulation

This figure shows

that regulation

should ideally

be set at the point

where net benefits

are maximized

(where MC=MB).

What Do These Questions Imply?

Implementation decisions

will have as large an impact on commerce

as the content of the legislation

Impacts on Commerce

Impact of the New Law on Commerce

Despite these unanswered questions, we know enough about the new law to be able to foresee the direction of chemical markets. The new law will:

Level the chemical playing field

Increase chemical testing and information generation

Shift product de-selection efforts

Spur greater product stewardship

Level the Chemical Playing Field

The old TSCA focused on data-rich substances over data-poor substances.

The old TSCA focused most on new chemicals and less on existing chemicals.

The new TSCA shifts the focus: new and existing held to the same standard, and ignorance is not to be rewarded.

In the aggregate and over the long term, new chemicals will garner a larger market share of the chemicals market than they had under the old TSCA.

Increase Chemical Testing and Information Generation

The old TSCA created a Catch-22 on chemical testing.

The new TSCA makes it easier for EPA to compel testing and information generation needed to implement the Act.

Expect manufacturers and processors to abandon the lowest-value or lowest-profit substances to avoid costs of information generation associated with risk evaluation. (Not unlike EU REACh.)

Shift Product De-Selection Efforts

Downstream customers (retailers, consumer products companies, etc.) may shift their de-selection efforts to be more aligned with EPA’s risk prioritization and evaluation efforts.

To the extent states can regulate chemicals in commerce, they will also be influenced by EPA’s efforts, but exactly how is difficult to predict at this point in time.

Spur Greater Product Stewardship

Some manufacturers and processors (those with capability in risk assessment) will undertake their own risk evaluations in anticipation of EPA efforts under the Act. EPA implementation actions will be critical here.

Expect manufacturers and processors to shift their portfolio toward substances that EPA has deemed low priority, including substances in EPA’s Safer Choice program.

Recommendations

for Manufacturers and Processors

Recommendations

Given that the most critical implementation decisions have yet to be reached, what should manufacturers and processors do today?

Recommendation #1

Engage with EPA.

“Politics is a contact sport.”

--former Senator Alan Simpson

Recommendation #2

Conduct your own risk evaluation

on each of your products.

Recommendation #3

Enlist the aid of your supply chain

to evaluate the risk

of each substance

in your portfolio.

Recommendation #4

Act as though your entire portfolio

should consist of substances

EPA has determined are safe.

Conclusions

Key Take-Away #1

Every action you take

should be predicated on the belief that regulation should reward, and not penalize, good performance.

Key Take-Away #2

It is not axiomatic that regulators act to reward good performance.

Regulation is often inefficient

and too often ineffective.

Key Take-Away #3

Good regulation

doesn’t just happen.

Engage with regulators.

Do not leave it to others.

Questions?

Feel free to contact me:

Keith Belton

Pareto Policy Solutions LLC

202-740-3368

Email:

keith.belton@paretopolicysolutions.com