SOCIO-ECONOMIC ANALYSIS Public Version
Legal name of applicant: LANXESS Deutschland GmbH
Submitted by: LANXESS Deutschland GmbH
Substance: 1,2-Dichloroethane EC Number: 203-458-1 CAS Number: 107-06-2
Use title: Use 1: Industrial use as a swelling agent during the sulphonation reaction of polystyrene-divinylbenzene copolymer beads in the manufacturing of strong acid cation exchange resins Use 2: Industrial use as a swelling agent and reaction medium during the phthalimidomethylation reaction of polystyrene-divinylbenzene copolymer beads in the manufacturing of anion exchange and chelating resins Use numbers: 1 & 2
Copyright
©2016 LANXESS Deutschland GmbH. This document is the copyright of LANXESS Deutschland GmbH and is not to be reproduced or copied without its prior authority or permission.
Disclaimer
This report has been prepared by Risk & Policy Analysts Ltd, with reasonable skill, care and diligence under a contract to the client and in accordance with the terms and provisions of the contract. Risk & Policy Analysts Ltd will accept no responsibility towards the client and third parties in respect of any matters outside the scope of the contract. This report has been prepared for the client and we accept no liability for any loss or damage arising out of the provision of the report to third parties. Any such party relies on the report at their own risk.
Table of contents
1 Summary of Socio-Economic Analysis ...... 1 1.1 Background ...... 1 1.2 Requested review period ...... 2 1.3 Key parameters of EDC use by LANXESS Deutschland GmbH...... 2 1.4 Benefits from the continued use of EDC ...... 3 1.5 Balance of benefits and costs ...... 3 2 Aims and Scope of SEA ...... 5 2.1 Aims and scope of SEA ...... 5 2.2 Definition of “Applied for Use” Scenario ...... 20 2.3 Definition of “Non-use” Scenarios ...... 25 2.4 Information for the length of the review period ...... 30 3 Analysis of Impacts ...... 35 3.1 Human health impacts ...... 35 3.2 Environmental impacts ...... 44 3.3 Economic impacts ...... 46 3.4 Social impacts...... 56 3.5 Wider economic impacts ...... 59 4 Combined Assessment of Impacts ...... 61 4.1 Comparison of impacts ...... 61 4.2 Distributional impacts ...... 62 4.3 Uncertainty analysis ...... 63 5 Conclusions ...... 66 5.1 Socio-economic benefits of continued use ...... 66 5.2 Residual risks to human health and the environment of continued use ...... 66 5.3 Factors concerning operating conditions, risk management measures and monitoring arrangements ...... 67 5.4 Factors relating to the duration of the review period ...... 67 6 References ...... 69 7 Annex 1: Economic valuation of excess cancer cases ...... 71 8 Annex 2: Justification for confidentiality claims ...... 73
List of abbreviations
AER: Anion Exchange Resin AfA: Application for Authorisation AoA: Analysis of Alternatives CR: Chelating Resin CSR Chemical Safety Report 1,3-DCP: 1,3-Dichloropropane EDC: 1,2-Dichloroethane FDA: Food and Drug Administration IER: Ion Exchange Resin NSF: National Sanitation Foundation (NSF International) OECD: Organisation for Economic Co-Operation and Development PNEC: Predicted No Effect Concentration R&D: Research and Development ResAP: Council of Europe, Committee of Ministers Resolution SAC ER: Strong Acid Cation Exchange Resin SEA: Socio-Economic Analysis SIDS: Screening Information Dataset TRIPS: World Trade Organisation agreement on Trade-Related Aspects of Intellectual Property Rights
1 Summary of Socio-Economic Analysis
1.1 Background
This Application for Authorisation (AfA) has been submitted by LANXESS Deutschland GmbH. The substance of concern is 1,2-dichloroethane (hereafter referred to as EDC), EC No. 203-458-1, CAS No. 107-06-2. The applicant is applying for two uses of EDC (associated with the production of ion exchange resins (IERs) (see Figure 1-1)) which are associated with a combined consumption of '''#A' (Use 1 accounts for '''''#A ''''''' and Use 2 for ''''' '#A '''''' of the substance:
Use 1: Industrial use as a swelling agent during the sulphonation reaction of polystyrene- divinylbenzene copolymer beads in the manufacturing of strong acid cation exchange resins (SAC ERs); and
Use 2: Industrial use as a swelling agent and reaction medium during the phthalimidomethylation reaction of polystyrene-divinylbenzene copolymer beads in the manufacturing of anion exchange (AERs) and chelating resins (CRs).
Both processes take place within the applicant’s Leverkusen production facility in Germany (Figure 1-2) and, to a certain extent, they are mutually supporting with EDC circulated in one closed loop. In addition, as can be deduced from the use wording, the function of EDC in the processes shares significant similarities.
Given these similarities, to avoid extensive repetition and to ensure synergies between the uses are elucidated, both uses of EDC have been assessed within a single SEA document. Figure 1-1: LANXESS Lewatit® brand IERs Source: Applicant’s information Further justification for this approach is provided in Section 2.1.2.
Despite both identified uses of EDC being confined to the applicant’s Leverkusen facility (as well as key associated ancillary operations), the wider scope of LANXESS’ activities are also of relevance to this SEA. Notably, as well as directly controlling the Leverkusen site, LANXESS operates IER production sites in Bitterfeld (Germany) and Jhagadia (India).
Of particular relevance to the analysis in this SEA is Jhagadia, as this site would be affected by the global IER production restructuring Figure 1-2: Location of LANXESS Deutschland GmbH activities that would ensue following a Leverkusen site theoretically refused Authorisation. Source: Google, GeoBasis – DE/BKG
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 1
1.2 Requested review period
As discussed in detail in the corresponding Analysis of Alternatives (AoA) document, LANXESS Deutschland GmbH has selected separate preferred potential alternatives for each use of EDC. For Use 1, the applicant intends to implement the ‘solventless sulphonation technique’ and for Use 2 the applicant intends to implement the ‘'''''''''' ''#H'''''''''''''''' technique’ (a technique incorporating an alternative substance).
It is critical to note that neither alternative is fully technically and economically feasible at present and both are currently the subject of extensive and targeted R&D campaigns, which began in ''''''''''#E '' '''''''''' (for Use 1) and '''''''''''''#E''''''''''' (for Use 2). Section 2.4 of the SEA sets out, in detail, the practical steps required for the implementation of each alternative and the considerable barriers that must be overcome for the applicant to preserve the high quality of the '''#C'' separate EDC- based IER product grades that are currently produced and sold1. For Use 1, to fully implement the solventless sulphonation technique a minimum of 4 years from the 2017 Sunset Date will be required. For Use 2, to fully implement the ''''''''''#H''''''''' technique a minimum of 12 years will be required. 1.3 Key parameters of EDC use by LANXESS Deutschland GmbH
There are certain key parameters that underlie the conditions of use of EDC and support LANXESS Deutschland GmbH’s request for the continued use of EDC, for both uses applied for:
EDC is a process chemical used in relatively low volumes and subject to extensive recycling back into the process. Its consumption for both uses currently is and will remain below 100 t/y, until the end of the 12 year (longer) assessment period, where use of the substance is intended to be completely eliminated at the applicant’s Leverkusen facility;
Use of EDC takes place in a closed system with tight control of losses;
The Chemical Safety Report (CSR) identifies 5 (relevant) worker contributing exposure scenarios (CS), which involve 12 workers or fewer per shift;
The releases of EDC from the applicant’s Leverkusen facility are very low. Even with an assumed regional population of 20 million around the Leverkusen site, impacts on human health via the environment over the respective (4 and 12 year) assessment periods are very small; and
Finally, as EDC is not present in the final IER products (in any significant concentration), there is no risk of exposure to any worker downstream from the production of the relevant SAC ER, AER and CR products (or to any final consumers).
In conclusion, LANXESS Deutschland GmbH is using a relatively small volume of EDC as a process chemical under very well controlled conditions; this results in very low worker exposure in Leverkusen and very low exposure amongst the local and regional populations.
As a result, the human health benefits from a refused Authorisation would be very small.
1 #C of these product grades are associated with Use 1 and #C' are associated with Use 2. Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 2
1.4 Benefits from the continued use of EDC
Clearly, the greatest beneficiary of continued use would be LANXESS Deutschland GmbH as the company would be allowed to continue to manufacture EDC-based IERs in Leverkusen. By doing so, LANXESS Deutschland GmbH would be able to:
1. For Use 1, avoid lost profit associated with the cessation of EDC-based SAC ER production activities at Leverkusen, estimated to be in the region of '''''''''''#D' '''''''''''''2;
2. For Use 2, avoid lost profit of '''''''''''''#D '''''''''''''' associated with the cessation of EDC-based AER and CR production, as well as related ancillary operations;
3. Avoid costs associated with the ''''''''''''' ''''#D''''''''''''''' ''''''''', the restructuring of operations and an increase in fixed-price production costs at Leverkusen;
4. Recoup the cost ('''''' '#D''''') of 2013-2015 capital investments made to the phthalimide line; and
5. Avoid redundancy costs (estimated at ''''' '''#D''''''''') that would arise from a refused Authorisation as a result of the cessation of AERs and CRs manufactured in Leverkusen.
Other beneficiaries from the continued use of EDC would include:
Customers of LANXESS Deutschland GmbH – these downstream users will be able to continue to utilise IERs, and would not need to source these elsewhere;
Suppliers of materials and services to the Leverkusen manufacturing plant – these stakeholders would be allowed to maintain their contracts with LANXESS Deutschland GmbH;
Workers of LANXESS Deutschland GmbH and of suppliers – these workers would not lose their jobs (19 jobs are projected to be lost at LANXESS Deutschland GmbH with a further 108 jobs being lost amongst suppliers); and
The German government – revenues from taxation on profits made from the operations in LANXESS Deutschland GmbH would be maintained. 1.5 Balance of benefits and costs
This SEA has monetised the costs to human health from the continued use of EDC. Although the assessment of human health itself could not be decoupled between uses, as highlighted in Section 2.1.2, the separate assessment periods have been used when considering final values.
For Use 1, the relevant calculations show that 1.35E-04 statistical excess fatal cancer cases and 1.72E-04 non-fatal cases are predicted from the continued use of EDC over 4 years. The associated Present Value monetised health benefits from a refused Authorisation equate to ca. €675 over the 4 year assessment period.
In addition, the calculated statistical excess cancer cases amongst the general population due to exposure via the environment are 7.42E-05 fatal cancer cases and 9.42E-05 non-fatal cases, with the
2 This figure also takes into account increased profits at the Jhagadia site. Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 3
associated Present Value monetised health benefits from a refused Authorisation equating to ca. €371 over a 4 year period.
On the other hand, it is also possible to monetise the benefits of the continued use of EDC for LANXESS Deutschland GmbH but (generally) not for other stakeholders. It can be calculated that the economic benefits to LANXESS Deutschland GmbH for Use 1 over the assessment period are ca. ''''''''''#D '''''''''''' (Present Value, discounted at 4%).
Taking into account this use, the ratio of benefits over costs is ca. '''''#G'''''''. In light of this large difference between benefits and costs as well as the applicant’s commitment to the substitution of EDC, a review period of 4 years is justified.
For phthalimidomethylation (Use 2), this SEA has also monetised the costs to human (worker) health from the continued use of EDC. The relevant calculations show that 4.06E-04 statistical excess fatal cancer cases and 5.15E-04 non-fatal cases are predicted from the continued use of EDC over 12 years. The associated Present Value monetised health benefits from a refused Authorisation equate to ca. €1,746 over the 12 year assessment period.
In addition, the calculated statistical excess cancer cases amongst the general population due to exposure via the environment are 2.23E-04 fatal cancer cases and 2.82E-04 non-fatal cases, with the associated Present Value monetised health benefits from a refused Authorisation equating to ca. €958 over a 12 year period.
Similarly to Use 1, it is also possible to monetise the benefits of the continued use of EDC for LANXESS Deutschland GmbH but (generally) not for other stakeholders. It can be calculated that the economic benefits to LANXESS Deutschland GmbH for Use 2 and associated ancillary operations (over the 12 year assessment period) are ca. ''''''''''''#D''' '''''''''''' (Present Value, discounted at 4%).
Taking into account Use 2, the ratio of benefits over costs is ca. '''''''#G''''''''. In light of this large difference between benefits and costs and the applicant’s commitment to the substitution of EDC (when technically and economically feasible), a long review period of 12 years (for this use) can be justified.
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 4
2 Aims and Scope of SEA
2.1 Aims and scope of SEA
2.1.1 Introduction
The ECHA document establishing a reference dose response relationship for carcinogenicity of EDC concluded that due to the genotoxic potential of the substance, EDC should be evaluated as a non- threshold carcinogen with respect to risk characterisation (ECHA, 2015).
As a result of the ‘non-threshold’ nature of the substance, in line with ECHA’s guidance on the preparation of an Application for Authorisation (ECHA, 2011) and Article 60(4) of the REACH regulation, the applicant can only be granted an Authorisation if it is demonstrated that:
There are no suitable alternatives to the Annex XIV substance; and The socio-economic benefits of use of the Annex XIV substance (for the uses for which he has applied) outweigh the risks to the environment and human health.
The AoA has conclusively demonstrated that there are currently no suitable alternatives to EDC available to the applicant and this SEA aims to show that the severe adverse socio-economic impacts that would arise along the relevant supply chains from a refused Authorisation would greatly outweigh any reduction in the risk to human health from the continued use of EDC.
As will be detailed below, the consequence of a refused Authorisation would be the closure of '#D' production lines at the applicant’s production site in Leverkusen, Germany, which as well as directly and severely affecting business and revenues, would affect associated businesses within the LANXESS Group and cause noticeable social impacts on the surrounding area. Many downstream users are also likely to be impacted at a global scale, although the impacts on EU based downstream users are likely to be most acute.
The SEA also aims to support the arguments made by the applicant as to an appropriate review period for the Authorisation (4 years and 12 years, respectively, for Uses 1 & 2). These timescales are based on detailed analysis of the R&D work completed to date, and the remainder required to be undertaken by LANXESS before a successful and full transition to feasible alternatives can be realised, as described in detail in the corresponding AoA document and summarised in Section 2.4 of this SEA.
2.1.2 Consideration of the applicant’s multiple uses in the context of this SEA
Following the combined assessment of both uses applied for within a single AoA document, the applicant has also considered the sulphonation and phthalimidomethylation uses together when discussing the “Applied for Use” and “Non-use” Scenarios within this SEA.
In coming to this decision, the following pertinent factors have been considered:
Although technically divergent in the context of REACH Authorisation use definitions (in terms of functionality), the nature of EDC’s use in the two processes is, in reality, very similar;
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 5
As highlighted in Section 9.0.1 of the CSR, both uses take place in closed systems in the same building. Shift workers assessed in worker contributing scenario 1 run both processes at the same time and a differentiation between the processes in relation to occupational exposure is impossible;
Releases of EDC from the two uses are treated in the same way and the measurements performed (e.g. of emissions from the incineration plants and the sewage treatment plant) relate to both uses. A differentiation in terms of releases to the environment is therefore also impossible; and
Overall, considering that both uses are in closed systems and that occupational and environmental exposures relate to both uses, these are described in one exposure scenario and assessed together in this CSR. EDC is integrated within the two processes within one closed loop.
Whilst the consideration of the conditions within the “Applied for Use” and “Non-use” Scenarios has been merged, it is important to note that differentiation has been made in terms of the specific costed impacts wherever possible, thereby allowing the reader to assess the overall benefits of each use in a separate manner.
The applicant believes that the nature of the combined analysis applied within this document is realistically the only sensible and reasonable approach that could have been taken. The approach has not only been the most appropriate way to facilitate the preparation of the application (by e.g. avoiding significant repetition and crossover during reporting), but also allows the reader to gain a more integrated picture with regard to the applicant’s uses of EDC, the market for their IER products and the key conclusions of the overall analysis.
2.1.3 LANXESS group structure and relevant activities
The LANXESS Group is a globally operating chemicals enterprise with a portfolio ranging from basic, specialty and fine chemicals to polymers. The responsibilities for the operational business of LANXESS are borne by 10 business units, which are geared towards the needs of the market:
Advanced Industrial Intermediates Inorganic Pigments Liquid Purification Technologies High Performance Elastomers High Performance Materials Leather Material Protection Products Rhein Chemie Additives Saltigo Tyre & Speciality Rubbers
Currently, the production of IERs within the LANXESS group is carried out under the remit of the ‘Liquid Purification Technologies’ business unit. The unit is one of the world's foremost suppliers of products for treating water and other liquid media and holds a leading position in the development and production of IERs, produced under the ‘Lewatit®’ product range. The group also have a strong position in the development of reverse osmosis membrane elements (produced under the ‘Lewabrane®’ product range).
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 6
Although both of the applicant’s uses of EDC are as a process chemical at their Leverkusen site, due to synergies with other LANXESS companies and the potential impacts associated with a refused Authorisation, in the SEA, it is necessary to consider a wider scope of LANXESS’ activities. Consequently, a short but important overview of LANXESS’ organisational structure is provided below.
The applicant (LANXESS Deutschland GmbH) is a wholly owned subsidiary of LANXESS AG, the parent company of the LANXESS group. LANXESS AG functions largely as a management holding company, whilst the applicant and LANXESS International Holding GmbH (another wholly owned subsidiary of LANXESS AG), control the other subsidiaries and affiliates on a global scale. Principal direct or indirect subsidiaries of LANXESS AG have been identified in the following table.
Table 2-1: Principal direct or indirect subsidiaries of LANXESS AG Company name and details Function Samples LANXESS Deutschland GmbH, Germany Production and sales All LANXESS Butyl Pte. Ltd., Singapore Production and sales Performance polymers, performance chemicals LANXESS Corporation, Pittsburgh, U.S.A. Production and sales All LANXESS Elastomeres S.A.S., Lillebonne, France Production and sales Performance polymers LANXESS Elastomers B.V., Sittard-Geleen, Production and sales Performance polymers Netherlands LANXESS Elastomeros do Brasil S.A., Rio de Janeiro, Production and sales Performance polymers Brazil LANXESS Holding Hispania, S.L., Barcelona, Spain Holding company All LANXESS Inc, Sarnia, Canada Production and sales Performance polymers LANXESS India Private Ltd., Thane, India Production and sales All LANXESS International Holding GmbH, Cologne, Holding company All Germany LANXESS International SA, Granges-Paccot, Sales All Switzerland LANXESS N.V., Antwerp, Belgium Production and sales Performance polymers, performance chemicals LANXESS Rubber N.V., Zwijndrecht, Belgium Production Performance polymers Rhein Chemie Rheinau GmbH, Mannheim, Germany Production and sales Performance chemicals Saltigo GmbH, Leverkusen, Germany Production and sales Advanced intermediates Source: Applicant’s information
As can be seen in the following figure, LANXESS’ IER production sites are located in Leverkusen (the core facility of relevance to this AoA and the applicant’s uses) and Bitterfeld, Germany, and in Jhagadia, India. The applicant, LANXESS Deutschland GmbH, directly controls the Leverkusen site and operates the Bitterfeld and Jhagadia sites through the respective wholly owned subsidiaries; ‘IAB Ionenaustauscher GmbH’ and ‘LANXESS India Private Limited’.
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 7
Figure 2-1: Location of LANXESS IER production and technical facilities Note: Red dots represent production sites and black dots represent technical service centres Source: LANXESS (2010)
In the context of this SEA, while the main focus will be on the applicant’s production site in Leverkusen, the activities of the two other LANXESS IER production sites have links to the applicant’s activities in relation to IER production and sales. For the benefit of the reader, a summary of the relevant activities for each of these sites has been provided below.
Activities at Leverkusen site of relevance to this SEA
As discussed, LANXESS Deutschland GmbH (the applicant), is seeking Authorisation for two uses of EDC:
Use 1: Industrial use as a swelling agent during the sulphonation reaction of polystyrene- divinylbenzene copolymer beads in the manufacturing of SAC ERs; and
Use 2: Industrial use as a swelling agent and reaction medium during the phthalimidomethylation reaction of polystyrene-divinylbenzene copolymer beads in the manufacturing of AERs and CRs.
Both uses take place within the applicant’s Leverkusen production facility in Germany (Figure 2-2) with EDC circulated in one closed loop. The uses are associated with a combined consumption of '''#A '''''' (Use 1 accounts for '''''' #A ''''''' and Use 2 for '''''#A ' ''''''' of the substance.
The applicant’s activities at Leverkusen extend far beyond IER production utilising EDC. Indeed, Leverkusen is LANXESS’ most important production site and in addition to the manufacture of IERs, production activities also relate to basic chemicals, intermediates and active ingredients for pharmaceuticals and pesticides, raw materials for paints and coatings, plastics additives, leather chemicals and synthetic rubbers. Leverkusen is also a major centre for LANXESS’ R&D activities.
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 8
Figure 2-2: LANXESS Leverkusen site Source: Applicant’s information
Of relevance to this SEA, there are two noteworthy ancillary operations undertaken at the Leverkusen facility. Both operations are of relevance to Use 2 (phthalimidomethylation) only:
The first relates to the applicant’s production of additional IER products. These products do not utilise EDC in their production but their sales are ‘tied-in’ (i.e. sold together / ‘bundled’) with EDC-based IER products; and The second is the result of industrial symbiosis between the applicant’s facility and a separate LANXESS plant at the Leverkusen site. This plant ''''''''''''''''''''''' #B ''''''''''''''''''' ''''''''' ''''''''''''''''''''' ''#B''' ''''''' '''''''''''' '''''''''''''' '''''''''''''' ''''''' utilises phthalate lye, a by-product from the phthalimidomethylation process.
A summary of the key activities of the applicant at Leverkusen, of relevance to the SEA, is provided in Figure 2-3 (additional detail is provided in Section 2.2, where the Applied-for-use scenario is discussed).
Figure 2-3: Integration links and relevant activities of the applicant at the Leverkusen site
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 9
Activities of IAB Ionenaustauscher GmbH of relevance to this SEA
In Bitterfeld, LANXESS produces IERs and filtration membranes under the remit of the Liquid Purification Technologies business unit. At this site, around 30,000 m3 of IERs are manufactured each year. The site does not use EDC.
At the present time (2016) a proportion of the IER production at Bitterfeld is tied-in with sales of IERs produced using EDC at the applicant’s Leverkusen facility. However, given the applicant’s ongoing R&D program associated with the implementation of alternatives, by the Sunset Date (i.e. the start of the assessment period considered within this SEA) it is envisaged that there will be no more ‘tie-in’ sales at Bitterfeld associated with EDC-based products from Leverkusen.
Consequently, under the “Non-use” Scenario explored in detail within this SEA, it is expected that there will be no significant impacts at Bitterfeld. As a result of this, activities at Bitterfeld have not been considered further in this SEA as they do not materially affect the outcome of the analysis.
Despite this approach, it is important to highlight that in the longer term it cannot be said with certainty that there would be no impact at Bitterfeld. If the long term production profitability of operations at Leverkusen are affected by the cessation of activities under the “Non-use” Scenario, this may indeed have knock on impacts for the Bitterfeld site. However, such theoretical impacts are not quantifiable within this SEA.
Figure 2-4: LANXESS Bitterfeld site Source: Applicant’s information
LANXESS Jhagadia Site
The LANXESS Jhagadia site (operated by LANXESS India Private Limited) has production facilities associated with several LANXESS business units (Advanced Industrial Intermediates, Liquid Purification Technologies, Material Protection Products, Rhein Chemie Additives and High Performance Materials). Under the remit of Liquid Purification Technologies, the site includes a state-of-the-art IER production plant which was opened in December 2010 and boasts a capacity of 35,000 m3.
The plant manufactures a wide range of LANXESS’ Lewatit® brand IERs for industrial water treatment, the semiconductor and pharmaceutical industries, food production and power generation, and is serving a growing demand for clean water due to the trend towards urbanisation in India coupled with an increasing population.
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 10
In the context of this SEA, it is important to consider LANXESS’ IER activities at Jhagadia as the site would be affected by the global restructuring activities that would ensue as the result of a theoretically refused Authorisation (these activities relate to Use 1 only).
As highlighted in Section 3.3.1, under the “Non-use” Scenario, the applicant would attempt to mitigate production losses associated with their inability to manufacture EDC-based SAC ERs at Leverkusen by transferring a proportion of these production activities (for higher margin products) to Jhagadia. Given that the Jhagadia site is operated by a wholly owned subsidiary of the applicant, the potential for increases in profits as a result of these additional production activities are taken into account within the assessment of impacts.
In a similar nature to the links between the Leverkusen and Bitterfield IER plants, at the present time, a proportion of the IER sales at Jhagadia are ‘tied-in’ with sales of IERs produced using EDC at the LANXESS Leverkusen facility. Again, however, by the Sunset Date (i.e. the start of the assessment period considered within this SEA) it is envisaged that there will be no more ‘tie-in’ sales at the Jhagadia site associated with EDC-based products from Leverkusen. Consequently, ‘tie-in’ sales at Jhagadia are not considered.
Figure 2-5: LANXESS Jhagadia site Source: Applicant
2.1.4 Temporal boundaries
Two assessment periods have been selected for the assessment of impacts in this SEA, 4 years and 12 years starting from the Sunset Date in November 2017. These have been selected based on the respective periods that will be required for LANXESS to realise its transition to technically and economically feasible alternatives for Use 1 and Use 2, assuming that the ongoing R&D implementation plans (as described in the AoA) deliver successful results.
2.1.5 Geographical boundaries
As clearly demonstrated in Section 2.3, the applicant’s response to a refused Authorisation will have impacts that occur outside the EU as well as inside. These impacts relate not only to the direct operations of other LANXESS subsidiaries but also to non-EU based upstream suppliers and downstream users, of which the applicant has many (as identified in Table 2-2).
Whilst LANXESS have attempted to discuss these non-EU impacts in a detailed fashion (particularly in relation to the LANXESS plant in Jhagadia, India), it must be noted that extra emphasis has been
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 11
given to describing, quantifying and distinguishing what will happen with regard to impacts inside the EU.
The decision to present the impacts in this manner has been based on ECHA’s guidance on socio- economic analysis as part of an application for Authorisation (ECHA, 2011b) which states that “it should be kept in mind that the final comitology decision on whether or not to grant an Authorisation will most likely focus mainly on impacts inside the EU” and “a clear distinction should be made between impacts inside and impacts outside of the EU boundaries”.
2.1.6 Relevant supply chains
Suppliers to the applicant
Considering EDC itself, the applicant is not a manufacturer, but, rather, a downstream user of the substance. LANXESS consumes EDC in the range of 1-100 t/y '''#A''' t in 2014). According to information derived from the ECHA Dissemination Portal, EDC has been registered by 36 active registrants for a total tonnage range of 1,000,000 - 10,000,000 t/y3 (as of 13 September 2015). The quantities used by LANXESS Deutschland GmbH are a very small fraction of the tonnage placed annually on the market; EDC is mainly used for the production of vinyl chloride monomer and the European production capacity of vinyl chloride monomer is very substantial4. As a result, impacts on manufacturers and distributors of EDC are assumed to be negligible, and will not be considered in detail in this SEA.
In addition to EDC, the applicant also purchases several additional feedstocks for their EDC-based IER manufacturing activities. An overview of these materials and the applicant’s upstream supply chain for the sulphonation and phthalimidomethylation processes is provided in Table 2-2. Further discussion on raw materials purchased by LANXESS and potential upstream impacts has been provided in Section 3.3.2.
Table 2-2: LANXESS upstream supply chain Materials sourced upstream for IER Number of EU suppliers Number of non-EU suppliers production Use 1 - IER production in Leverkusen (via sulphonation process) EDC Styrene Divinylbenzene #C Oleum 65% Sodium hydroxide Use 2 - IER production in Leverkusen (via phthalimidomethylation process) EDC Styrene Divinylbenzene #C Phthalimide Formaldehyde solution 30% Sulphuric acid
3 ECHA Dissemination portal, http://echa.europa.eu/information-on-chemicals/registered-substances (accessed on 27 September 2015). 4 In 2009, European vinyl chloride monomer production capacity was 10.4 million tons (http://www.marketwired.com/press-release/vinyl-chloride-monomer-production-expected-to-grow-27- annually-through-2020-1364433.htm, accessed on 7 August 2015). Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 12
Table 2-2: LANXESS upstream supply chain Formic acid Methyl chloride #C Chloroacetic acid Dimethylphosphite
Customers of the applicant
Introduction
Section 2.2 of the corresponding AoA document provides detailed background information on IERs, noting their special utility in a wide variety of processes as well as analysing their production and classification. Annex 3 of the AoA also identifies the wide range of IERs marketed by LANXESS, as well as their potential applications5. As can be deduced from this analysis, it is apparent that the IER market is extremely diverse, and conditions will depend on the end-use sector in question.
Given the diverse nature of the market, below, a broad overview has been provided to demonstrate key themes and areas of expected growth. The justification for this broad approach is strengthened when one considers that it is not only the applicant’s EDC-based IERs that would be affected by a refused Authorisation (see discussion on tie-in sales in Section 2.1.3), and hence, the discussion of the market as a whole appears appropriate and proportional.
The Global IER market
LANXESS estimates that the global production of synthetic IERs is in the region of 500,000 m3. Production and consumption is concentrated mainly within industrialised countries, with significant capacities in the US, UK, Japan, Russia, Germany, France and Italy. In addition, large production facilities also exist in Canada, South Korea, China, India, Mexico and Eastern European countries (Ramaswamy, et al., 2013).
The market is dominated by a small number of manufacturers, all typically producing a wide range of IERs under distinct brand names. A summary of the key global manufacturers of IERs (and associated IER brands) is provided in Table 2-3.
Table 2-3: Leading IER manufacturers and their relevant brand names Company IER resin brands Ion Exchange India - Dow (includes Rohm & Haas) Amberlite™ Amberjet™ Dowex™ Duolite™ Marathon™ Monosphere™ LANXESS (includes Sybron) Lewatit® Ionac® Mitsubishi Diaion® Purolite Purolite® Thermax Tulsion® Sources: LANXESS (2010); Schmidt-Traub et al (2012); Dow (2013); MarketsandMarkets (2015)
5 169 IER product variations are detailed within this annex.
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 13
In addition to the presence of the main global manufacturers, there are many other companies producing IERs – reinforcing the diverse and highly competitive nature of the market. For example, a report highlighted by Bloomberg (2010) notes that ResinTech Inc., Thermax, Jiangsu Suqing Water Treatment Engineering Group Co., Finex Oy, Azot JSC, Tokem JSC, Eichrom Technologies Inc., Cognis Deutschland GmbH & Co. KG and Taiyuan Resin Factory are ‘key and niche players’ within the market. Another (albeit somewhat dated) source, specifically discussing the Russian IER market, notes that in addition to Dow and LANXESS, it is also dominated by Purolite, Azot, Smoly, Tokem, Ural Chemical Company and Omis (Creon, 2005).
Further searches carried out on wholesale marketplaces such as Alibaba (http://www.alibaba.com), TradeKey (http://www.tradekey.com/), EC21 (http://www.ec21.com/), ECPlaza (http://www.ecplaza.net), TradeEasy (http://www.tradeeasy.com/), and Made in China (http://www.made-in-china.com/) also confirm the presence of scores of additional companies (many of which are based in Asia) producing and distributing IERs.
With regard to the situation of the applicant, a summary of their specific product markets and their criticality has been provided in Table 2-4. As can be seen, for some types of resins, LANXESS are the only worldwide producer. However, in others the high level of competition between the main manufacturers is apparent; Siemens (self-described as the largest distributor of IERs) highlights the high level of competition concerning similar products, in a product brochure, which contains a cross reference guide for some equivalent IER products produced by the two EDCAC members and the other main manufacturers (see Table 2-5).
Given these competition considerations, it is perhaps unsurprising that there are many additional materials being researched to introduce more cost-effectiveness, tolerance and new applications to ion exchange processes (Inamuddin & Luqman, 2012).
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 14
Table 2-4: LANXESS IER product markets and their criticality IER products/grades sold in each sector Number of EU Number of non- Sector Customer group Critical products / grades Quantity Example customers2 EU customers* (m3/y) grades1 Strongly acidic catalysts for BPA synthesis '' '''''''''' '' '''''' with unprecedented selectivity and ''' ''''''#C '''' '''''' conversion as compared to benchmark Catalysis BPA/ MTBE ''''#C '''''' '''#C '''' '''#C '''' ''' ''''''''''' ''''' Palladized catalysts for water ''' '''''''''' '''''' deoxygenation – LANXESS is the only provider worldwide MDS small sized grades with unique Removal of Ca and other '''''''''#C '''''''' ''''' Chloro Alkali ''''#C '''''' selectivity and operating capacity on the '''#C '''' ''''#C '''' salts ''''''''' ''''' ''''''' '''''' market ''''''''' '''''''''' ''''' MDS small sized grades with Chroma. Fructose/ Glucose '''''''' ''''' unprecedented uniformity coefficient for '''''#C ''''' ''' '#C ''''' ''' #C ''''' Separation Separation '''''''' '#C ''''''''' ''' highest resolution in chromatographic '''''''' ''''' separation ''''''''''''''''' '''''' Monodisperse large sized chelating resins ''''''' #C ''''' ''''' with resistance to abrasion and attrition; Mining Precious metal separation ''''''' #C '' ''''''' '''#C ''''' ''' #C ''''' ''''''''' ''''' '''''''' MDS resins with highest operation '''''' capacity on the market ''''''''''''#C '''''''' '' Highly crosslinked strong acid cation resin Power Ind Water Treatment '''#C ''''''' ''''#C '''' '''''#C ''''' '''''''' ''''' '''''' for condensate polishing in power plants Decolorisation, Sugar/ '' ''''''#C ''''' '''''' Weak basic anion exchange resins for low purification of sugar syrup, ''''#C '''''' '''#C ''''' '''#C '''' Sweetener ''' ''''''''' '''''' isomerisation of glucose/fructose etc. High capacity chelating resin for waste Pharmaceutical industry, '''''''''''''''''''' ''''' water treatment Others electronic industry ''''''' '''''' Weak base anion resin for chromate (Pharma, (microprocessors and flat ''''#C ''''' ''''''' ''#C ''' '''''' removal from waste water '''#C '''' '''#C ''''' Specialised panels manufacturing), '''''' '''''''''' ''''''' High purity polisher resins for ultra pure Water) galvanic industry, etc. '''''' water preparation in the electronic and pharmaceutical industries 1 Note: ‘(S)’ denotes that product is produced via the sulphonation process (Use 1). ‘(P)’ denotes that product is produced via the phthalimide process (Use 2). 2 Approximate figure Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 15
Table 2-5: Siemens Ion Exchange Resin and Media Cross Reference Guide Siemens brand (description) Amberlite® Lewatit® Ionac® Diaion® Dowex® Purolite® Rohm & LANXESS Sybron Mitsubishi Dow Chemical Purolite Haas Co Weak Acid Cation (WAC) exchange resins C-271 (acrylic weak acid macroporous cation resin used in dealkalising and IRC-76 CNP-80 MAC-3 C-106 Softening) (Dowex Marathon® MAC- 3) C-281 (acrylic weak acid gel cation resin used in dealkalising and softening) IRC-86 CC WK-40 C-105 Strong Acid Cation (SAC) exchange resins C-211 (standard cation resin used for softening and demineralisation) IR-120 (Lewatit C-249 SK-1B HCR-S C-100 (Amberjet® MonoPlus® (Dowex 1200) S-100) Marathon® C) C-361 (premium cation resin used in hot condensate polishing, and more IR-122 (Lewatit C-250 SK-110 HGR-W2 C100X10 resistant to oxidative attack and physical attrition) (Amberjet® MonoPlus® (Dowex 1500) S-200) Marathon® C-10) C C-381 (high cross-linked macroporous strong acid cation resin used in hot IR-200 (Lewatit PK-228 (Dowex C-150 condensate polishing, highly resistant to oxidative attack, and suitable at MonoPlus® Marathon® MSC) elevated temperatures) SP-112) Weak Basic Anion (WBA) exchange resins A-399 (high capacity weak base anion resin used in demineralisation and acid IRA-96 (Lewatit WA-30 (Dowex A-100 removal applications. Excellent regeneration efficiency) MonoPlus® Marathon® MP-64) WBA-2) A-444 (high capacity weak base anion resin used in demineralisation and acid IRA-67 VP OC 1072 A-845 removal applications. Recommended in applications with high organics. Excellent regeneration efficiency) Strong Basic Anion (SBA) exchange resins A-244 (Type II strong base gel anion with high regeneration efficiency) IRA-410 (Lewatit ASB-2 SA-20A SAR A-300 (Amberjet® MonoPlus® (Dowex 4600) M-600) Marathon® A2) A-284 (Type I standard strong base gel anion used in demineralisation with good IRA-400 ASB-1 SA-10A SBR-C A-600 silica removal. Recommended in non-regenerable applications) (Amberjet® (Monosphere® 4200) 550A)
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 16
Table 2-5: Siemens Ion Exchange Resin and Media Cross Reference Guide Siemens brand (description) Amberlite® Lewatit® Ionac® Diaion® Dowex® Purolite® Rohm & LANXESS Sybron Mitsubishi Dow Chemical Purolite Haas Co A-464 (Type I porous strong base gel anion used in demineralisation with good IRA-402 (Lewatit ASB-1P SA-12A SBR-P A-400 silica removal. Recommended in regenerable applications) (Amberjet® MonoPlus® (Dowex 4400) M-500) Marathon® A) A-674 (Type I macroporous strong base gel anion used in demineralisation with IRA-900 (Lewatit A-641 PA-312 (Dowex A-500 good silica removal and better resistance to organic fouling. Recommended in MonoPlus® Marathon® MSA) regenerable applications on surface influent waters) MP-500) A-714 (acrylic strong base anion resin used in demineralization and organic IRA-458 VP OC 1071 A-850 traps. Highly resistant to organic fouling) Adapted from source: Siemens (2013)
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 17
Size and direction of the Global IER market
Ramaswamy, Huang, & Ramarao (2013) note that it is extremely difficult to find reliable quantitative estimates of the IER market, due somewhat to the fact that IERs are hidden in overall commodity production data.
The authors do note, however, that due to the wide range of applications of IERs worldwide, demand is expected to surpass $535 million by 2015 (this contrasts with the US$1.15 billion prediction by LANXESS in Figure 2-8). Another projection, by Global Industry Analysts, predicts the size of the industry will reach US$1.7 billion by 2018 (ThomasNet, 2013). Similarly, MarketsandMarkets (2015) states that the industry is projected to reach $2.03 billion by 2019, at a Compound Annual Growth Rate (CAGR) of 5.82%.
In water softening and de-ionisation applications, IERs are generally considered commodity chemicals as they are characterised by large-scale production, a low level of market growth and high levels of competition. In contrast, IERs used in smaller markets such as pharmaceuticals are more typically classified as speciality chemicals (Ramaswamy, et al., 2013). According to PRWeb (2010), even though the IER market faces competition from membrane separation technologies, such as reverse osmosis, it is projected to fare well over the coming years, with usage of IERs as cations in water softening continuing to be the largest end-use application. Growth in the market is mainly the result of the increasing need for pure water in a range of end-use sectors, a rise in the population and the corresponding global increase in urban living, pollution and need for resources (Ramaswamy, et al., 2013).
These conclusions appear to be supported by the findings of the Global Industry Analysts market report (as discussed in ThomasNet (2013)). This source notes that the fastest growth in the market will take place in drinking water and wastewater treatment, which are estimated to have a compound annual growth rate (CAGR) of 5.2%. It is also predicted that there will also be a sharp rise in the adoption of IERs for new application areas such as biofuels, spectrometry, pharmaceutical, chromatography, and electronics sectors, due in large part to their chemical stability. The report names Asia-Pacific as the single largest market for IERs worldwide, adding that the region is also forecast to emerge as the fastest growing market with a projected CAGR of 6% over the analysis period (2010-2018). This growth will be spurred by large-scale industrial developments and limited natural water resources. Growing industrialisation has created a critical need for conservation and reuse of water worldwide, especially in India, Taiwan, China, and other developing countries.
Notably, these issues are also highlighted by LANXESS (2010) which predicts that, by 2030, there will be an expected global shortfall for water of 40% (see Figure 2-6), with 47 countries projected to suffer from moderate or severe water stress (LANXESS, 2010). Furthermore, a projection for 2025 suggests that approximately 4.8 billion people will only have access to polluted water resources (LANXESS, 2010). It is predicted that these factors will drive the demand for clean water and thus IERs.
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 18
Figure 2-6: Projected shortfall for clean water, global water supply & demand (billion m3) Source: LANXESS (2010)
In addition, economic development and rapid industrialisation in Asia is anticipated to increase the demand for water in industrial uses, with already significant and increasing water pollution in this area intensifying the need for water treatment technologies. Further growth is also expected due to the rise of an affluent middle class in China, which is expected to hugely increase the domestic demand for cartridges (containing IERs) in water purifiers (LANXESS, 2010).
Furthermore, the predicted worldwide increase in the use of nuclear power is also expected to drive the demand in the IER market. By 2030, it is predicted that China will overtake the USA to become the largest producer of nuclear power in the world and it is expected that industrial and emerging economies will increasingly rely on nuclear power to meet their energy needs (LANXESS, 2010). Figure 2-7 presents the projected increases in nuclear power capacities for China, India and the USA.
Figure 2-7: Worldwide growth of nuclear power use, Capacity of nuclear power (GWe) Source: LANXESS (2010)
Figure 2-8 displays the predicted growth in worldwide IER demand for water treatment attributable to selected regions. Consistent with the above discussion, it can be seen that the largest increases in demand are expected to be driven by the Asia-Pacific region. Demand is also expected to grow steadily in the US market, with the situation in Europe somewhat stagnant.
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 19
Figure 2-8: Worldwide ion exchange resins demand Source: (LANXESS, 2010) 2.2 Definition of “Applied for Use” Scenario
2.2.1 Introduction
The “Applied for Use” Scenario details the “baseline” or “business as usual” situation that would arise should Authorisation be granted. In this regard, it covers the continued industrial use of EDC at Leverkusen as6:
A swelling agent during the sulphonation reaction of polystyrene-divinylbenzene copolymer beads in the manufacturing of strong acid cation exchange resins (‘Use 1’); and A swelling agent and reaction medium during the phthalimidomethylation reaction of polystyrene-divinylbenzene copolymer beads in the manufacturing of anion exchange and chelating resins (‘Use 2’).
While the applicant will continue to use EDC, extensive R&D efforts will be undertaken to implement alternatives, which will be phased in gradually. Based on detailed R&D plans highlighted in Section 2.4 (and outlined in detail in Section 5 of the corresponding AoA document), full implementation of the solventless sulphonation technique is envisaged to be possible 4 years from the Sunset Date. For phthalimidomethylation, the full implementation plan for the '''''''''''' #H'''''''''''''''''' technique is predicted to take 12 years from the Sunset Date.
2.2.2 Overview and scenario projections
Sulphonation and phthalimidomethylation
Details on the projected production, sales, turnover and profit values associated with SAC ERs produced via the sulphonation process (Use 1) as well as connected SAC ER substitution values (associated with the gradual implementation of the solventless sulphonation technique, as described in detail in Section 5.3.2 of the corresponding AoA document) have been provided in Table 2-6 and Table 2-7, taking into account the 4 year assessment period for Use 1.
6 Justification for the combined nature of the “Applied for Use” Scenario has been provided in Section 2.1.2.
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 20
Table 2-8 and Table 2-9 provide the respective values for IERs produced via the phthalimide process (Use 2) and the associated alternative technique.
For simplicity, the revenue streams for each operation take into account full year periods (i.e. 4 years = 2018 - 2021; 12 years = 2018 - 2029). In reality these figures would be run from the 22 November 2017 Sunset Date (i.e. 4 years = November 2017 – November 2021; 12 years = November 2017 – November 2029).
It is noted that all projections for 2018-2019 are based on the applicant’s ongoing business plan. From 2020 onwards, LANXESS has assumed an annual ''#D'''' increase in production volumes and a corresponding rise in turnover and profits associated with all IER production. Given the market conditions (as highlighted in Section 2.1.6), such a figure is believed to be realistic7.
In addition to these assumptions, and specifically in relation to phthalimidomethylation (Use 2), LANXESS has also factored in the effect of downtime associated with the implementation of the alternative technique8, as well as the fact that implementation must occur in a staggered manner (one production line at a time).
Ancillary operation 1: Tie-in sales
As highlighted in Section 2.1.3, the applicant’s Leverkusen plant is part of a much larger site producing a variety of products including IERs that do not utilise EDC in their production.
It is pertinent to consider the applicant’s production of these additional IER products in the SEA as some non EDC-based IERs produced at Leverkusen are sold in combination with those produced via the uses applied for. For example, in most water treatment plants utilising IERs several filters are combined which use a WAC ER followed by a SAC ER, a WBA ER and finally a SBA ER. Also, in the sugar / food processing industry, porous anion resins produced via the phthalimidomethylation process are often combined with (non-EDC based) porous cation resins.
As most customers prefer to purchase all resins from the same supplier (for obvious guarantee reasons) the continued production of SAC ERs, AERs and CRs via sulphonation and phthalimidomethylation ensures that LANXESS are able to supply all resins needed in such instances. Similarly, the applicant also produces mixed bed IERs9, which are mixtures of a SAC ER with a SBA ER. As highlighted in Section 2.1.3, these types of sales do not only occur at Leverkusen and a proportion of the IER production at separate sites owned by LANXESS (in Bitterfeld, Germany and Jhagadia, India) is also ‘tied-in’ with sales of IERs produced using EDC at the applicant’s Leverkusen facility.
However, despite the current (2016) broad relevance of ‘tie-in’ sales to SAC ER, AER and CR production, it is necessary to consider only a specific fraction of these ‘tie-in’ sales in detail within the “Applied for Use” Scenario. This is because the applicant’s ongoing substitution efforts for the
7 It should also be noted that the uncertainty analysis in Section 4.3 takes into account alternative projections which assume that there is no growth in the market from 2020 onwards. This does not make a significant difference to the outcome of the analysis, with benefit to cost ratios associated with a granted Authorisation remaining very high. 8 For sulphonation (Use 1) it is not anticipated that the phase-in of the solventless process will incur any significant production line downtime. 9 Mixed bed IERs are mainly used in the water purification industry for polishing process water to achieve demineralised water quality (such as after a reverse osmosis system) (Lenntech, undated).
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 21
sulphonation use are anticipated to result in the ability to replace certain SAC ERs associated with ‘tie-in’ sales by the start of the SEA assessment period (i.e. EDC’s sunset date). Furthermore, the applicant also has the ability to manufacture certain SAC ER grades outside of the EU (in their Jhagadia site) under the situation of a theoretically refused Authorisation, meaning that no significant impacts for bundle sales associated with SAC ERs are envisaged, when the “Non-use” Scenario is considered.
Importantly, this is not the case for ‘tie-in’ sales linked to the production of porous anion resins via the phthalimide process (which itself is associated with a significantly longer substitution timeframe). These ‘tie-in’ sales are produced only at the Leverkusen site and must be considered under the “Applied for Use” Scenario, as they would all be lost under a theoretically refused Authorisation. Table 2-10 presents values for these ‘tie-in’ sales linked the phthalimide use.
Ancillary operation 2: Utilisation of phthalate lye by-product
Section 2.1.3 also highlights that the applicant’s Leverkusen site hosts a plant that manufactures chemicals used worldwide in ''''''' '''''''''''''' '''''''''''''' '''''''''''''' '''''''''' '''''''''''''''''''''''' '''''''''' ''''''''''''' ''''''' '''''' ''''''''''''''''''''''' '''''''''''''''''' '''' '''''''''''''''''''''''' '''''''''' '''''''''''''''''''''''' '''''''''''''''''''' ''''''''' ''''' '''''' ''''''''''''''''''''''''''' ''''''''''''''' '''''''''' ''''''''' '''' '''''' ''''''''''''''''' '''' ''''''''''''''''''' ''''''''' ''''''' '''''''' ''''''''''''''' ''''''' '''' ''''' '''''''''''''''' ''''' ''' '''''''''''''' '''''' '''''''''''' ''''''' '''' '''''' '''''''''''''' '''''''''''''''''''''' '''''#B'''''''''''' '''''' '''''''''''''''''' ''''' ''' '''''''''''''''''''' '''''''' ''''''' ''''''''''''''''''' ''''''''''''''''''''''''''''''''''''''''''' ''''''''''''''''' ''''''''''''''' '''''''''''' '''''''''''''' '''''''''''''''''' ''''''' '''' ''''''''''''' ''''''''''''' ''''' ''''''''''' ''''''''''''''''' '' ''''''' ''''''''''''' ''''''''''''''''''' '''''''''''''''''''''''' '''''' '''''''''''''''''' '''''''' ''''''' ''''''' '''''''''''''''''' ''''''' ''''''''''''''''' '''''' '''''' ''''' ''' ''''''''''''''' '''''''''''
Under the “Applied for Use” Scenario, the phthalate lye by-product will continue to be fed '''#B'''' '''#B''''' from the applicant’s phthalimidomethylation plant to the '''''''''''' #B'''''''''''''' plant. The applicant notes that this industrially symbiotic relationship avoids the need for the applicant to pay for the disposal of phthalate lye (via wastewater treatment), and saves the ''''''''''''#B''''''''''''' plant an estimated '''''' ''#D'''''''''' each year in sourcing costs. With regard to the quantities of phthalate lye by-product produced, the average volume from 2010-2014 was approximately '''''''#D'''''' '''''. As a rule the complete amount of phthalate lye is used up by the ''''''''''''' ''#B'''''''''''''''' plant.
It should be noted that the applicants planned substitution of the EDC-based phthalimide process and implementation of the alternative technique is not anticipated to make a material difference to the volume of phthalate lye by-product produced.
Summary of “Applied for Use” Scenario and associated projections
Figure 2-9 sets out the “Applied for Use” Scenario in relation to LANXESS’ operations of importance to this SEA.
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 22
Figure 2-9: Summary of the “Applied for Use” Scenario
Table 2-6: LANXESS’ projections of SAC ER sales, turnover and profit in 2018-2021 under the “Applied for Use” Scenario (for EDC-based SAC ERs) Production / Source of estimate Revenue Profit Period Year sales volume (€) (€) (m3/y) 2018 2019 2020 #D
period review review 2021 Requested
Table 2-7: LANXESS’ projections of IER sales, turnover and profit in 2018-2021 under the “Applied for Use” Scenario (for SAC ERs substituted for the solventless sulphonation process) Production / Source of estimate Revenue Profit Period Year sales volume (€) (€) (m3/y) 2018 2019 2020 #D
period review review 2021 Requested
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 23
Table 2-8: LANXESS’ projections of IER sales, turnover and profit in 2018-2029 under the “Applied for Use” Scenario (for EDC based phthalimidomethylation production process) Production / Source of estimate Revenue Profit Period Year sales volume (€) (€) (m3/y) 2018 2019
2020 2021 2022 2023 #D 2024 2025 2026 2027
Requested review period 2028 2029
Table 2-9: LANXESS’ projections of IER sales, turnover and profit in 2018-2029 under the “Applied for Use” Scenario (for substituted AERs and CRs produced via the alternative technique) Production / Source of estimate Revenue Profit Period Year sales volume (€) (€) (m3/y) 2018 2019
2020 2021 2022 2023 #D 2024 2025 2026 2027
Requested review period 2028 2029
Table 2-10: LANXESS’ projections of ‘tie-in’ IER sales, turnover and profit in 2018-2029 under the “Applied for Use” Scenario (related to AERs and CRs) Production / Source of estimate Revenue Profit Period Year sales volume (€) (€) (m3/y) 2018 2019
2020 2021 2022 2023 #D 2024 2025 2026 2027
Requested review period 2028 2029
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 24
2.2.3 Sources of information
Information on the state and projected future of the EU (and global) markets for relevant products produced by LANXESS has been obtained from the applicant and via extensive research of Internet literature.
2.2.4 Conditions of “Applied for Use” Scenario
No specific conditions are envisaged beyond those described in the relevant Exposure Scenarios. 2.3 Definition of “Non-use” Scenarios
2.3.1 Introduction
The AoA has conclusively demonstrated that there are, at present, no technically and economically feasible, suitable and available alternatives to the applicant for either the sulphonation or phthalimidomethylation processes. Based on the applicant’s detailed R&D plans, for sulphonation, this will be the case for at least 4 years following the Sunset Date, and for phthalimidomethylation this will be the case for at least 12 years following the Sunset Date.
Given the strong synergies associated with IER production across LANXESS’ global network of production sites, there is a variety of different ways that the applicant (and, by association, other LANXESS subsidiaries) could react to the above-described effects. All potentially realistic options have been set out in the following “Non-use” Scenarios, which are assumed to start from the November 2017 Sunset date.
“Non-use” Scenario 1: Implementation of ''''''''''' #H''''''''''''''''''' and solventless sulphonation at the sunset date; “Non-use” Scenario 2: Implementation of 1,3-DCP (in line with the AoA timeline); “Non-use” Scenario 3: Implementation of 1,3-DCP (fast-tracked); and “Non-use” Scenario 4: Partial closure and restructuring
The following sections discuss the “Non-use” Scenarios in more detail.
2.3.2 “Non-use” Scenario 1 – Implementation of '''''''''' #H'''''''''''''''''' and solventless sulphonation at the sunset date
Under this scenario, at the sunset date the applicant would stop using EDC and switch to solventless sulphonation (for Use 1) and the '''''''''' ''#H''''''''''''''''' technique (for Use 2).
Clearly, such an option is completely incompatible when the findings of the AoA are considered. Put simply, the applicant has concluded that neither alternative can be considered technically feasible, economically feasible or available in its current form and hence (as also highlighted in Section 2.4 of this document), they have embarked on significant R&D projects in order to overcome the obstacles associated with each potential alternative’s implementation. The practical steps of the R&D plan demonstrate that many hurdles will have to be overcome before full implementation is feasible, with respective review periods of 4 and 12 years required.
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 25
2.3.3 “Non-use” Scenario 2 – Implementation of 1,3-DCP (in line with the AoA timeline)
As concluded within the corresponding AoA document, 1,3-DCP meets the necessary technical comparison criteria as an alternative for both the sulphonation and phthalimide processes, but due to the required R&D activities, engineering work and process parameter modifications, the substance cannot be deemed technically feasible at this time. If the applicant was to implement the alternative following a structured and step-wise R&D implementation plan, theoretically, this could be achieved by November 2023 at the earliest (6 years after the sunset date for EDC)10.
Theoretical conversion from EDC to 1,3-DCP would also require significant investment costs. R&D activities have been estimated at ''''''''' #D''''''''''' and the cost of adapting equipment has been estimated at '''''''' #D '''''''''. In addition, there would be reduced turnover and profit during implementation due to the plant downtime and retraining and requalification costs would also arise, the latter being estimated at more than ''''' '#D ''''''''. The applicant would also anticipate a 5% increase in their ongoing operating costs.
Perhaps most critically, considering the implementation of 1,3-DCP one must also focus on the likely chain of events that would ensue during the substance’s theoretical 6 year implementation period.
Indeed, following a refused Authorisation for EDC, at the sunset date the applicant would need to address an immediate SAC ER, AER and CR supply void. For AERs and CRs, produced via the phthalimidomethylation process, this would not be a possibility as Leverkusen is the only facility with the required technology to produce these resins11. However, for SAC ERs produced via the sulphonation process the applicant would restructure their global SAC ER production activities, with the LANXESS plant in Jhagadia shedding lower margin IERs (e.g. commodity type IERs) in order for LANXESS to maintain sales of higher margin ‘critical’ products.
As highlighted in Section 2.1.6, the commodity type IERs that would be shed by Jhagadia have particularly competitive markets and competitors who in many instance offer very similar products (see Table 2-5). Consequently, even if 1,3-DCP was successfully implemented, over the course of the 6 years of lost production, the applicant would find re-entry into market extremely difficult with a significant amount of (if not all) their current customers purchasing the required products elsewhere.
In essence, “Non-use” Scenario 2 is overly convoluted and unrealistic. The applicant would essentially be implementing an expensive R&D plan which would be unlikely to result in any economic gain.
Further compounding the infeasibility of this option is the substance’s unfavourable hazard profile. This would make obtaining the necessary finance required to implement such an option extremely difficult, as regulatory risk management considerations would also need to be taken into account.
10 Although the implementation of this substance would take longer than the solventless sulphonation process (for Use 1), such a timescale may appear attractive when compared to the 12 year implementation timeline for the '''''''''''''''''#H'''''''''''''''''''' technique. However, here it is critical to also note that 1,3-DCP exhibits positive genotoxicity test results. Together with the close structural relationship to other dichlorinated short-chain aliphates, with proven or suspected carcinogenic properties, 1,3-DCP is suspected of having carcinogenic properties of its own and thus cannot be considered a suitable alternative. 11 “Non-use” Scenario 4 provides explanation on why another phthalimidomethylation unit would not be built.
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 26
2.3.4 “Non-use” Scenario 3 - Implementation of 1,3-DCP (fast-tracked)
As discussed under “Non-use” Scenario 2, a significant hindrance associated with the implementation of 1,3-DCP (in addition to its poor hazard profile) is its 6 year implementation timeline, which effectively renders the option null and void due a loss of custom that would ensue within the context of a highly competitive market (exacerbated by global restructuring activities that would also occur).
Consequently, “Non-use” Scenario 3 considers another theoretical potential option for the implementation of 1,3-DCP. Under this scenario, the applicant would declare a ‘force majeure’ type situation, and attempts would be made to implement 1,3-DCP as quickly as possible i.e. forgoing much of the R&D work associated with the optimisation of new ‘recipes’ for each product type. Essentially the approach here would be to provide customers with products as quickly as possible; however, their quality will not have been rigorously tested in line with standard LANXESS procedures. In such a theoretical scenario, the applicant believes that a switch could be completed as quickly as two years after the sunset date.
Whilst such a scenario could potentially result in the quicker resumption of the applicant’s activities, it is a very high risk strategy. Two years of downtime will still mean it is likely that the applicant would lose a significant proportion of their current customers. Furthermore, under this scenario, there is the clear potential for the implementation to yield SAC ERs, AERs and CRs of insufficient quality, to the extent that they would not be accepted by customers.
In addition to this is the potential for significant reputational damage to LANXESS’ well established Lewatit IER brand that would be associated with the production of poor quality products. In this regard, it is necessary to consider that LANXESS hold many global contracts with organisations that purchase several types of IERs (not only those produced using EDC) and hence, such damage could have severe ramifications.
In conclusion, an attempt to fast-track 1,3-DCP (or any other alternative) and implement the substance without detailed consideration and consultation with LANXESS customers is a high risk option that could result in poorer end-products and reputational damage. Such a “Non-use” Scenario is very unappealing.
2.3.5 “Non-use” Scenario 4 – Partial closure and restructuring
Introduction
Whereas “Non-use” Scenarios 1, 2 and 3 consider various options associated with the implementation of potential alternatives highlighted in the corresponding AoA document, “Non-use” Scenario 4 considers appropriate managerial actions that would ensue following a theoretically refused Authorisation. Under this scenario, the applicant considers a partial closure at Leverkusen, coupled with the restructuring of their global IER production activities in order to minimise losses and supply chain disruption to the extent possible.
Key parameters of “Non-use” Scenario 4
The applicant considers this scenario to be the most realistic “Non-use” Scenario. The associated parameters have been set out in detail below and are also summarised in Figure 2-10.
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 27
Sulphonation
Under this scenario, production of all EDC-based SAC ERs at Leverkusen will cease. However, some sulphonation activities will remain (those that do not require the use of EDC), meaning that '''''''#D ''''''' '''' '''''' '''''''' '''''''#D '''''''''''''''''' '''''''''' '''''''' ''''''''''.
When considering the “Non-use” Scenario, it is important to note that the separate LANXESS facility in Jhagadia, India is also capable of producing EDC-based SAC ERs. Consequently, the applicant would attempt to mitigate production losses associated with their inability to manufacture EDC- based SAC ERs at Leverkusen by transferring a proportion of these production activities (for higher margin products) to Jhagadia.
Essentially, this restructuring activity will ensure that, at the global scale, LANXESS’ EDC-based SAC ER production capacity is utilised as advantageously as possible.
Given that the Jhagadia site is operated by a wholly owned subsidiary of the applicant, the potential for increases in profits as a result of these additional production activities has been taken into account within the assessment of impacts. Increases in production, sales, revenue and profit values at the Jhagadia site as a result of a refused Authorisation have been provided in the following table.
Table 2-11: LANXESS’ projections of increased IER sales, turnover and profit in 2018-2021 under “Non-use” Scenario (for sulphonation activitities at Jhagadia) Production / Revenue Profit Period Year Source of estimate sales volume (€) (€) (m3/y)* 2018
2019 2020
period
review review
Requested 2021 #D
Phthalimidomethylation
Unlike for the sulphonation use, the applicant does not own alternative facilities capable of producing AERs and CRs via the phthalimide process. Consequently, the applicant’s entire EDC- based AER and CR production at Leverkusen (''''''''''''''''#D'''''' '''''''''') will cease and remain at zero for the remainder of the assessment period, with no global restructuring.
Theoretically, the applicant could make efforts to invest in a new non-EU plant in order to continue production. However, this is not a feasible option. A preliminary estimate provided by internal LANXESS experts for the development of such a plant is '''''''' #D '''''''''. Furthermore, the internal process for approval of such an investment in addition to the time needed for planning, ordering of the parts, building and commissioning the new lines would take at least 4 years. During this time, most (if not all) of the applicant’s EDC-based AER and CR customers would be lost. Moreover, given the present financial situation of LANXESS it is considered highly unlikely required investments for such a project could be obtained.
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 28
Ancillary operation 1
As the “Non-use” Scenario results in the cessation of the AER and CR production via the phthalimidomethylation process, all associated ‘tie-in’ sales (as presented in Table 2-10) will also be lost. These ‘tie-in’ sales are produced only at the Leverkusen site.
Ancillary operation 2
As a result of the closure of the applicant’s phthalimidomethylation lines at Leverkusen, phthalate lye (produced as a by-product) from the process will no longer be internally available to the LANXESS '''''''''''''' #B''''''''''''''''' plant at the Leverkusen site. This material will therefore need to be purchased on the open market.
Impacts upstream and downstream
Impacts would also arise upstream from the applicant (i.e. among their suppliers) as well as downstream (e.g. customers). The impacts on the different groups of stakeholders are highly variable and discussed further in Section 3.3.
Figure 2-10: Key parameters of “Non-use” Scenario 4 Red highlights indicate primary impacts, orange highlights represent secondary impacts
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 29
2.3.6 Likelihood of “Non-use” Scenarios
With “Non-use” Scenarios 1, 2 and 3 being discredited as unrealistic, only “Non-use” Scenario 4 can be assessed in detail in this SEA. Hereafter, any reference to the “Non-use” Scenario will refer to “Non-use” Scenario 4.
It should also be noted that this is associated to have the least overall impact to LANXESS, when considering their global activities under the Liquid Purification Technology Business Unit as all other scenarios will result in a much higher loss of business – due to the time required to transition to the potential alternatives. 2.4 Information for the length of the review period
As discussed in the corresponding AoA document12, for both Applied-for uses, the applicant is currently implementing R&D projects aimed at the full substitution of EDC. Considerable barriers must be overcome for the applicant to preserve the high quality of the '''#C'''' separate EDC-based IER product grades that are currently produced and sold and the length of the requested review periods needs to be sufficiently long to allow LANXESS to implement these activities, whilst avoiding the type of global restructuring and partial closure that would be required should the Authorisation be refused (as described within the chosen “Non-use” Scenario).
The practical steps of the R&D demonstrate that to make the solventless sulphonation and '''''#H''''' '''''''''#H'''''''' techniques technically feasible, respectively, for sulphonation and phthalimidomethylation, a minimum of 4 and 12 years from the November 2017 Sunset Date is required. The expected timeline for the applicant’s R&D projects from proof of principle to plant implementation are provided in Table 2-13. A summary of activities in relation to each of the uses applied for is also provided below. Figure 2-11: LANXESS IER development Source: Applicant Use 1 - Required steps to allow solventless sulphonation as a technically feasible alternative to EDC
In '''''''''''#E''''' ''''''''', the applicant began the technical phase of an R&D campaign in an attempt to assess the possibility for implementation of the solventless sulphonation process at the Leverkusen facility, and overcome the technical and economic feasibility barriers hindering its implementation. The initial proof of principle phase of this programme ran until ''''''' #E''''''''' and verified that there was indeed potential behind the applicant’s concept and it warranted further consideration.
Subsequent to this phase, the applicant began following a detailed plan for the development, validation and plant implementation steps associated with all ''' #C''''' grades of SAC ER currently
12 The required steps to allow use of solventless sulphonation and the '''''''''''#H '''''''''''''' technique as alternatives for EDC are provided in detail in Section 5 of the AoA document. Section 6.3 of the AoA also includes an overall conclusion and information on future research and development planned by the applicant.
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 30
produced via the EDC-based process. Essentially, for SAC ERs to be converted to the solventless process, product recipes must be individually optimised in a procedure comprising the internal validation of product quality by pilot trials, as well as experimentation by customers to ensure their requirements are fulfilled. Technical solutions may also be required for the suitable formulation of lab recipes, in addition to the installation of new equipment.
Table 5.15 in the corresponding AoA document breaks down the standard '''''' '#E'''''''''''' timeline associated with the conversion of a single SAC ER product recipe to the solventless technique and includes plant implementation steps. Essentially, the steps highlighted within the table will be undertaken for each product, but in a staggered manner to ensure a consistent and manageable project workflow. In this respect, it is anticipated that there will be an approximate '''#E'''' month gap between the start of the development phase for each individual product. Taking this into account, the total timeframe for implementation of the solventless technique across all SAC ERs is presented in Table 2-13. As can be seen, the applicant expects the R&D and plant implementation to be complete by the end of Q3 (September) 2021. There is the potential for feasibility barriers to remain for individual products; however, by ''''''' '''''#F'' '''' '''''''''', the applicant expects to have a good idea as to whether full scale implementation can be achieved. Certainty over this factor should be achieved by ''''''' '''''#F''' '''' '''''''''.
Based on the current and anticipated future implementation of the applicant’s R&D plan, and considering the November 2017 Sunset Date for EDC, a minimum 4 year review period for the sulphonation use applied for in this AfA is required.
Use 2 - Required steps to allow the '''''''''''#H'''''''''''''' technique as a technically feasible alternative to EDC
In '''''''''''''#E'''''' ''''''''', the applicant began an R&D campaign in an attempt to assess the possibility for implementation of the ''''''''''#H'''''''''''''' technique at the Leverkusen facility, and to overcome the technical and economic feasibility barriers associated with its implementation. The initial proof of principle phase of this program ran until ''''''' ''''''' '#E' '''''''' ''''''''' and it was concluded that the concept warrants further consideration.
As a result of this, the applicant intends to follow a detailed plan for the development, validation and plant implementation steps associated with all ''' #C''''' grades of AERs and CRs currently produced via the EDC-based process.
Expectations are that the planned R&D work on the new chemistry might lead to more efficient processes with less consumption of raw materials and leaner equipment than assumed in the first estimates provided in the corresponding AoA document. However, this will require in-depth investigation, and for now cautious assumptions can only be made. First, basic R&D work will be undertaken to understand the chemistry of the new process as well as its influencing factors. This will be followed by the testing of different catalysts, as well as an additional proof of principle study for 3-4 leading IER products. Raw material optimisation will be researched as will analysis of the recycling of product streams, waste management and technical handling of chemicals within the process. The development of a technically viable process will also involve optimisation of new recipes for each product type, as well as piloting and validation of the products by customers.
Unlike for corresponding R&D activities on the sulphonation use, the applicant has no previous experience of the '''''''''' #H''''''''''''''''' technique. Essentially, the phases of its implementation would be completely novel. Issues could arise from the scale up of the recipes from the pilot phase, as associated techniques will be completely unproven. It is also uncertain whether the specified
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 31
product quality and performance parameters can be achieved and further uncertainty can be associated with customer tests which would not be initiated for several years.
All of these factors, on top of the need for additional steps in the R&D plan mean there is a significant timeframe associated with the applicant’s planned activities. Table 5.21 in the corresponding AoA document breaks down the standard ''''''#C''''''''' timeline associated with the conversion of a single AER/CR product recipe to the '''''''''''' ''#H''''''''''''' technique, and includes plant implementation.
Essentially, the steps highlighted within the table will be undertaken for each product, but in a staggered manner to ensure a consistent and manageable project work flow. In this respect, it is anticipated that there will be an approximate '#E'' month gap between the start of the development phase for each individual product. Taking this into account, the total timeframe for implementation of the ''''''''''' '#E''''''''''''''' technique across all AERs/CRs is presented in Table 2-13. As can be seen, the applicant expects the R&D and plant implementation to be complete by the end of Q1 (March) 2029. There is the potential for feasibility barriers to remain but the applicant expects to have a good idea as to whether full scale implementation can be achieved by ''''''' '''''''#F' '''' '''''''''', and certainty of this by ''''''''#F''''''''''''.
Based on the current and anticipated future implementation of this R&D plan, and considering the November 2017 Sunset Date for EDC, the applicant requires a minimum 12 year review period for the phthalimidomethylation use applied for in this AfA.
Additional notes on the business case for Authorisation
Under the “Non-use” Scenario, the applicant has assumed that '''#D production lines at Leverkusen will close (''#D' for sulphonation '''''#D''' for phthalimidomethylation). ''' '''''''#D''''' ''''''' will continue (producing SAC ERs that do not utilise EDC in their production), and the applicant will also continue to manufacture acrylic resins (for use in the food industry) at the production facility, over #D' production lines.
The yearly turnover for the acrylic products is in the region of ''''''''#D '''''''''''', with respective profits between ''''''''''#D ''''''''''''''. '''''''''''' ''''''' ''''''''''' ''' ''''''''''' '''''''''''''''''''''''' ''' '''''' ''''''''''' ''''' '''''''' ''''''''''''''''' ''''''''' ''''''' '''''''''''''''''''''' '''''''''''''''''''' ''''''''''''''''''' '''#D'''' '''''''''''''''''''''''' '''''''''''''''' '''' '''''' ''''''''' ''''''''''' ''''''''''' '''' ''''''' ''''''''''''''''''''' ''''''' ''''''''''' ''''''''''''''
Although the applicant has not wished to overstate this factor when defining and discussing the “Non-use” Scenario, it is important to highlight that the mid to long term profitability of the additional lines is very questionable under the “Non-use Scenario” due to an increase in fixed-price production costs. Assuming profitability could not be sustained a potential option would be to move the acrylic products to Jhagadia in the future, as there is the possibility to produce these here also. This would result in the entire closure of all IER related production at the Leverkusen facility.
Conclusion
Finally, the applicant would also like to highlight that, for the phthalimidomethylation use, he fulfils many of the criteria and considerations that may lead to the recommendation of a long review period. This justification is summarised in the following table.
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 32
Table 2-12: How the applicant fulfils ECHA criteria and considerations for a ‘long’ review period for the phthalimidomethylation use ECHA criteria* and considerations that would lead How applicant fulfils criteria / considerations to a recommendation of a long review period 1 The applicant’s investment cycle is The length of the R&D required for conversion to an demonstrably very long (i.e. the production is alternative technology is long, with an associated capital intensive) making it technically and timescale of over '''#F'' years (note that the 12 year economically meaningful to substitute only requested review period reflects the fact that the when a major investment or refurbishment applicant’s substitution activities began in ''''#E'''') takes place 2 The costs of using the alternatives are very high and very unlikely to change in the next decade as technical progress (as The applicant’s detailed R&D programme demonstrated in the application) is unlikely to demonstrates that feasibility hurdles cannot be bring any change. For example, this could be overcome within the next decade (i.e. that at least a 12 the case where a substance is used in very year Authorisation period is required (from 2017)) low tonnages for an essential use and the costs for developing an alternative are not justified by the commercial value 3 The applicant can demonstrate that research Previous R&D carried out has identified a need for and development efforts already made, or further R&D. As clearly highlighted in Section 5-4 of just started, did not lead to the development the AoA and this section of the SEA, LANXESS is already of an alternative that could be available implementing a detailed R&D campaign in order to within the normal review period move away from EDC, and improve the feasibility of the '''''''''' '''#H'''''''''''''''''' technique.
The minimum timeframe that is absolutely necessary is 12 years from the Sunset Date in 2017 and the applicant has provided a detailed timeline that outlines all the steps within this process 4 The possible alternatives would require Recertification and requalification are an important specific legislative measures under the consideration at the downstream user level. The relevant legislative area in order to ensure applicant must supply the appropriately certified and safety of use (including acquiring the qualified products where required. This issue is necessary certificates for using the discussed in Section 5-3, as well as Annex 4 of the AoA alternative) 5 The remaining risks are low and the socio- This SEA demonstrates that the remaining risks are economic benefits are high, and there is clear very low and significantly outweighed by the high evidence that this situation is not likely to socio-economic benefits of continued use of the change in the next decade substance. The number of workers exposed to EDC is small. The overall benefit to cost ratio associated with a granted Authorisation is very high, at '''''''#G'''''''''' *Source: ECHA (2013)
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 33
Table 2-13: Overall minimum foreseeable timeframe for the implementation of alternatives for the sulphonation and phthalimidomethylation uses Timeline Step 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 Overall minimum foreseeable timeframe for the implementation of the solventless sulphonation technique (Use 1 alternative) Proof of principle
Development
#E & F Validation
Plant implementation Overall minimum foreseeable timeframe for the implementation of the '''''''''' '''#H' ''' technique (Use 2 alternative) Proof of principle
Development
Validation #E & F
Plant implementation
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 34
3 Analysis of Impacts
3.1 Human health impacts
3.1.1 Introduction
This section examines the potential benefits to human health from a refused Authorisation for the use of EDC by the applicant. A comparison between the anticipated exposure during the Applied-for use and the “Non-use” Scenario is carried out and the number of excess statistical cancer cases is calculated using the Exposure Risk Relationship (ERR) for EDC, recently published by the Risk Assessment Committee of ECHA (RAC) (ECHA, 2015). Both fatal and non-fatal cancer cases are calculated and given a monetary value based on the value of statistical life for the avoidance of a death by cancer and the willingness to pay for the avoidance of developing cancer from a latest study by the Charles University of Prague on behalf of ECHA.
During the “Applied for Use” Scenario, use of EDC in the Leverkusen plant will continue for the totality of the assessment period of 4 Years for Use 1 and 12 years for Use 2. Under the “Non-use” Scenario, no EDC will be used, so no exposure to the substance would arise.
As highlighted in Section 2.1.2, the assessment of human health (and environmental) impacts cannot be decoupled between uses. However, separate values can be applied taking into account the two assessment periods. Consequently, where useful, 4 year and 12 year values are provided.
3.1.2 Hazard profile for EDC
EDC is classified as Carcinogen 1B (H350) (“may cause cancer”) and has the CLP Annex I Index Number 602-012-00-7. The substance was proposed to be included in REACH Annex XIV for this reason. Similarly, IARC categorised EDC as “possibly carcinogenic to humans (Group 2B)” (IARC, 1999).
The substance is classified for mild acute effects (eye and skin irritation, harmful if swallowed) and physicochemical hazards (flammable liquid). However, the acute toxicological endpoints are not examined in this SEA as protection from carcinogenicity would generally offer protection against acute effects as well.
The estimates of excess cancer risk presented in the RAC paper on the ERR of EDC (ECHA, 2015), are shown in Table 3-1. These are based on the T25 value, which is the daily dose (mg/kg body weight) inducing a tumour incidence of 25% upon lifetime exposure, assuming a linear dose-response. The RAC utilised the Nagano et al. (2006) study to calculate a T25(inhalation,rat) value, for a period of 6 hours/day for 5 days/week lifetime exposure, using the following equation:
C x (Reference incidence 0.25)/(incidence at C – control incidence) x (1 – control incidence)/1
T25(inhalation, rat) = 160 x (0.25)/(0.50 – 0.16) x (1-0.16)/1
3 T25(inhalation, rat) = 98.8 ppm (approximately 406 mg/m )
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 35
Table 3-1: Cancer risk estimates for EDC – RAC Exposure-risk Relationship Route of exposure Population T25 Descriptor Cancer risk for 1 unit amount -5 Oral General T25(oral, human) 1.2 x 10 per µg/kg bw/day population 20.7 mg/kg bw/day -7 3 Inhalation Workers T25(inhalation, human) 6.0 x 10 per µg/m 100.8 ppm (414.4 mg/m3) -6 3 General T25(inhalation, human) 3.45 x 10 per µg/m 3 population 17.6 ppm (72.5 mg/m ) -8 Dermal Workers T25(dermal, human) 4.2 x 10 per µg/kg bw/day 1% absorption 5920 mg/kg bw/day -6 T25(dermal, human) 2.1 x 10 per µg/kg bw/day 50% absorption 118.4 mg/kg bw/day -7 General T25(dermal, human) 1.2 x 10 per µg/kg bw/day population 1% absorption 2070 mg/kg bw/day -6 T25(dermal, human) 6 x 10 per µg/kg bw/day 50% absorption 41.4 mg/kg bw/day Note: worker calculations assumed exposure time of 8h/day, 5 days/week, 48 weeks/year for 40 years out of a lifetime of 75 years and a standard respiratory volume, breathing 10m3 per day. Adult human body weights were assumed at 70kg. The general population were presumed to breathe 20m3 of air per day
3.1.3 Human health impacts under the “Applied for Use” Scenario
Exposure Scenario
LANXESS has one European site (Leverkusen, Germany) using EDC in the production of SAC ERs, AERs and CRs.
In the LANXESS Leverkusen Ion Exchange plant the production of IERs is running continuously the whole year, 24 h a day. Typically, the production is only interrupted once a year for 1 week for annual maintenance break. The processes using EDC are closed systems without direct handling of EDC by operators except for raw material unloading from road tank (connecting/disconnecting ball joint pipe system with dry break coupling and sampling) and maintenance. There are auxiliary operations, however, which require direct handling of EDC. These are:
EDC sampling for quality control Unloading the raw material from the road tanker it was delivered in (connecting/disconnecting ball joint pipe-system from storage tank to road tank) Maintenance operations Quality control work in the laboratory.
There are 6 worker contributing scenarios (CS) to the exposure scenario for the use of EDC. These are examined in more detail in the CSR and include:
CS1 - Production process of SAC exchange resins and Phthalimide (PI) based resins, including storage, transfers, recycling, waste treatment CS2 - Unloading of EDC from road tank CS3 – Non-routine maintenance CS4 – General annual maintenance and cleaning
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 36
CS5 – Sampling of EDC from road tank for quality control CS6 – Handling in laboratory for quality control
Exposure levels
Levels and frequency of exposure are presented in the following table, alongside the estimated increase in excess cancer risk, as described in the CSR. CS6 is not taken into account in the estimates of statistical excess cancer cases since laboratory analyses (PROC15) are exempt from Authorisation requirements.
Table 3-2: Exposure levels and excess cancer risk for workers under the “Applied for Use” Scenario CS Route of TWA 8h exposure Correction factor Corrected exposure Excess cancer exposure for frequency risk for each worker CS1 Inhalation 0.085 mg/m3 Frequency: 1 0.085 mg/m3 5.1 x 10-5 Dermal - - - - Combined routes 5.1 x 10-5 CS2 Inhalation 0.0043 mg/m3 0.0025 0.000011 mg/m3 6.5 x 10-9 Dermal 0.066 µg/(kg x d) 0.0025 0.00017 µg/(kg x d) 6.9 x 10-10 Combined routes 7.1 x 10-9 CS3 Inhalation 0.023 mg/m3 0.02 0.00045 mg/m3 2.7 x 10-7 Dermal 0.0020 µg/(kg x d) 0.02 0.000040 µg/(kg x d) 1.7 x 10-10 Combined routes 2.7 x 10-7 CS4 Inhalation 0.25 mg/m3 0.0083 0.0020 mg/m3 1.2 x 10-6
Dermal 0.0066 µg/(kg x d) 0.0083 0.00055 µg/(kg x d) 2.3 x 10-10
Combined routes 1.2 x 10-6 CS5 Inhalation 0.036 mg/m3 Frequency: 0.00025 mg/m3 1.5 x 10-7 0.0071125
Dermal 0.0066 µg/(kg x d) Frequency: 0.00047 µg/(kg x d) 2.0 x 10-9 0.0071125
Combined routes 1.5 x 10-7 CS6 Inhalation 0.00269 mg/m3
Dermal 0.0083 0017 µg/(kg Not considered in the SEA – exempt from Authorisation x d)
Combined routes N/A Source: Chemical Safety Report
These estimates take into account the lifetime mortality estimates associated with carcinogenicity for workers exposed to EDC that have been developed by RAC. RAC’s paper assumes a linear relationship between exposure level and excess cancer cases, as follows:
RAC ERR (inhalation): 6×10-7 per µg/m3 x concentration [mg/m3] RAC ERR (dermal): 2.1x10-6 per µg/kg bw/day x concentration [mg/kg bw/day]
This dose-response relationship is used in the excess cancer risk estimates in the CSR and the figures shown in Table 3-2 apply to each exposed worker for a total working life of 40 years. Therefore, to
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 37
estimate the excess cancer risk per worker per year or over the assessment periods of 4 and 12 years, the figures in the table need to be:
Divided by 40, to obtain annual excess cancer risks for each worker exposed to EDC Multiplied by 4 and 12, to obtain cumulative 4 and 12 year excess cancer risks for each worker exposed to EDC.
Quantification of excess cancer cases
Since the RAC ERR refers to additional total cancer cases, it is also necessary to differentiate between the number of fatal and non-fatal cases. Notably, the RAC has utilised the Nagano et al. (2006) study to calculate the ERR for cancer incidence, which focused primarily on mammary gland (breast) cancer as the most sensitive endpoint. However, it was accepted that systemic EDC exposure in humans may manifest itself as alternative cancer endpoints. The RAC paper on the exposure-risk relationship, notes, “Therefore, the choice of mammary tumours for this risk assessment is based rather on genotoxic potential and the best dose-response rather than its relevance to a specific human cancer”. It is worth noting that beyond breast cancer, haemangiosarcomas and forestomach tumours in rats, in addition to lung, reproductive and liver tumours in the mice model have been reported in the relevant scientific literature. Therefore, to err on the side of caution, a general approach utilising collated cancer mortality statistics has been used in this analysis (breast cancer is associated with relatively low mortality, compared to other forms of cancer).
Estimates of total cancer fatality and survival rate were derived from the GLOBOCAN 2012 database for Germany as shown in Table 3-3. Cancer types concerned were for all cancers excluding non- melanoma skin cancer13.
Table 3-3: Incidence and mortality of cancer, GLOBOCAN data for Germany (2012) – All cancers excl. non- melanoma skin cancers, all ages Rate Overall Incidence 493,780 Fatalities 217,636 Fatality rate 44.08% Survival rate 55.92% Source: http://globocan.iarc.fr/old/bar_sex_site.asp?selection=290&title=All+cancers+excl.+non- melanoma+skin+cancer&statistic=1&populations=4&window=1&grid=1&info=1&color1=5&color1e=&color2= 4&color2e=&submit=%C2%A0Execute%C2%A0 (accessed on 19 June 2015)
Table 3-4 shows the calculated annual and cumulative excess risk levels across all workers of LANXESS under the “Applied for Use” Scenario.
13 If only breast cancer had been selected, in 2012, the mortality rate in Germany was 22.7%. Consequently, the assumptions above make the calculations more conservative.
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 38
Table 3-4: Excess number of fatal and non-fatal cancer cases in the applicant’s plant in Germany as a result of exposure to EDC during the 4 and 12 year assessment period unders the “Applied for Use” Scenario Excess cancer Total excess Number of Number of Number of risk estimate cancer risk for CS workers excess cancer excess cancer per worker in all workers per involved fatal cases non-fatal cases CSR CS CS1 + CS2 60 5.1E-05 3.1E-03 1.3E-03 1.71E-03 combined CS3 + CS4 5 1.5E-06 7.5E-06 3.3E-06 4.19E-06 combined CS5 1.5E-07 1.1E-06 4.6E-07 5.87E-07 7 CS6 Not considered in the SEA – exempt from Authorisation Working lifetime, 40 years 3.07E-03 1.35E-03 1.72E-03 Assessment period, 4 years 3.07E-04 1.35E-04 1.72E-04 Assessment period, 12 years 9.21E-04 4.06E-04 5.15E-04 Annual values 7.67E-05 3.38E-05 4.29E-05
Overall, 3.07E-04 and 9.21E-04 additional statistical cancer cases are predicted as a result of occupational EDC exposure at the applicants plant, respectively over the assessment periods of 4 and 12 years (NB. cases due to dermal exposure are insignificant in comparison to inhalation exposure).
Monetisation of health impacts for the “Applied for Use” Scenario
For the purposes of this SEA, a figure of €5,000,000 is used to provide estimates of the health damage costs associated with mortality due to cancer and a figure of €396,000 is used to provide estimates of the health damage costs associated with non-fatal cancer cases, as explained in Annex 1 (Section 8). These values were applied to the estimated annual number of fatal and non-fatal cancer cases, respectively. The values obtained were spread out over the 4 year and 12 year assessment periods and discounted at a rate of 4%. The following table presents the estimated number of cancer cases among workers and the associated costs, in Present Value terms, for the assessment periods.
Table 3-5: Present value and annualised economic value of mortality and morbidity effects among workers (discounted @4% per year) Use 1 (4 year assessment period) Mortality Morbidity Total number of cases 1.35E-04 1.72E-04 Annual number of cases 3.38E-05 4.29E-05 Present Value (PV, 2014) € 614 € 62 Total PV costs € 675 Total annualised cost € 186 Use 2 (12 year assessment period) Total number of cases 4.06E-04 5.15E-04 Annual number of cases 3.38E-05 4.29E-05 Present Value (PV, 2014) € 1,587 € 159 Total PV costs € 1,746 Total annualised cost € 186
In conclusion, the economic burden of worker health impacts in the “Applied for Use” Scenario is projected to be very low.
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 39
Exposure of humans via the environment
Table 3-6 summarises the results of the calculations performed in the CSR, regarding excess cancer risks for humans exposed via the environment, in local and regional areas surrounding the Leverkusen plant.
Table 3-6: Excess cancer risk for human exposure via the environment under the “Applied for Use” Scenario (CSR results) Leverkusen Scale Inhalation exposure Oral exposure Total exposure Regional assessment* 6.21E-11 3.66E-11 9.87E-11 Local assessment* 4.73E-08 6.72E-09 5.40E-08 Source: Chemical Safety Report * as will be discussed below, “local” is assumed to refer to an area within a 1,000 metre radius around the Leverkusen plant, while “regional” refers to an area of 40,000 m2 around the site (i.e. an area of a 113 km radius)
The plant is located in the Leverkusen, Germany, which has a population of 159,92614. As shown in Figure 3-1, the plant is situated within a large industrial zone (ChemPark), which is bordered by the River Rhine in the west, a residential zone in the north/north-east, a golf course in the east and by industrial and residential zones in the south.
Figure 3-1: Aerial view of Leverkusen (via Scribble Maps)
14 Information from Regionaldatenbank Deutschland: https://www.regionalstatistik.de/ (accessed on 16 October 2014).
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 40
As regards the number of inhabitants that would be potentially exposed to EDC via the environment, the following conservative assumptions are made:
Local exposure of residents: considering a 1,000 metre radius around the plant, residents of the city of Leverkusen are living only to the north, and total 17,915 (the applicant asked the local administration for the number of inhabitants living within this area);
Local exposure of workers: as seen in Figure 3-2 the Leverkusen plant is situated in a large industrial area known as Chempark. In the east, south and west of the plant the periphery of 1,000 m includes only the Leverkusen Chempark site, the river Rhine and some logistical sites of the Chempark. There are, at present, approximately 27,700 people working at Chempark. It is assumed that ca. 2/3 of the workers, thus ca. 18.500 people, are working in within the 1,000 m and are potentially affected. For workers, it is assumed that they will be exposed for 8 hours a day (so exposure needs to be reduced by a factor of 3) and for an assumed 240 days per year (so exposure needs to be adjusted by a factor of 240÷365 = 0.66); and
Regional exposure: human exposure via the environment is calculated for the regional scale with the help of the EUSES software. In it, the region is an area of 40,000 km2 with 20 million inhabitants. This can be assumed to be a circle of a 113 km radius. The local population also needs to be extracted from the regional population to avoid double-counting (see Figure 3- 2).
The calculation of the excess cancer cases among the general public is shown in Table 3-7.
Table 3-7: Excess number of fatal and non-fatal cancer cases among citizens exposed to EDC during via the environment during the 4 and 12 year assessment periods under the “Applied for Use” Scenario
cancer cases
fatal cancerfatal Exposure - route Scale Assessment period (yrs)
Increase riskin at overlevel review period Number of exposed citizens Numberof excess cancer cases Numberof excess Fatal Numberof excess non cases Use 1 (4 year assessment period) Oral + Local 4 2.88E-09 17,915 5.16E-05 2.27E-05 2.89E-05 Inhalation residents Oral + Local 4 6.31E-10 18,500 1.17E-05 5.15E-06 6.53E-06 inhalation workers Oral + Regional 4 5.26E-12 19,963,585 1.05E-04 4.63E-05 5.88E-05 Inhalation Total excess cancer cases over a 4 year assessment period 1.68E-04 7.42E-05 9.42E-05 Total excess cancer cases per year 4.21E-05 1.86E-05 2.35E-05 Use 2 (12 year assessment period) Oral + Local 12 8.64E-09 17,915 1.55E-04 6.82E-05 8.66E-05 Inhalation residents Oral + Local 12 1.89E-09 18,500 3.50E-05 1.54E-05 1.96E-05 inhalation workers Oral + Regional 12 1.58E-11 19,963,585 3.15E-04 1.39E-04 1.76E-04 Inhalation Total excess cancer cases over a 12 year assessment period 5.05E-04 2.23E-04 2.82E-04 Total excess cancer cases per year 4.21E-05 1.86E-05 2.35E-05
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 41
The total number of statistical cancer cases for the general population over the 4 year assessment period would be 1.68E-04. Over the 12 year assessment period the figure would be 5.05E-04.
Figure 3-2: Local and regional areas of populations exposed to EDC via the environment (via Scribble Maps)
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 42
As for workers, the selected values for mortality and morbidity were applied to the estimated number of fatal and non-fatal cancer cases, respectively. The values obtained were spread out over the assessment periods and discounted at a rate of 4%. The following table presents the estimated number of cancer cases and associated costs, in Present Value terms, for the assessment periods.
Table 3-8: Present value and annualised economic value of mortality and morbidity effects among humans exposed to EDC via the environment Use 1 (4 year assessment period) Parameter Mortality Morbidity Total number of cases 7.42E-05 9.42E-05 Annual number of cases 1.86E-05 2.35E-05 Present Value (PV, 2014) € 337 € 34 Total PV costs € 371 Total annualised cost € 102 Use 2 (12 year assessment period) Parameter Mortality Morbidity Total number of cases 2.23E-04 2.82E-04 Annual number of cases 1.86E-05 2.35E-05 Present Value (PV, 2014) € 871 € 87 Total PV costs € 958 Total annualised cost € 102
Under the “Applied for Use” Scenario, the economic burden arising from the estimated number of cancer cases among the general population can be seen to be very low.
Consumer exposure
Exposure of consumers is not considered relevant, as there is no significant concentration of EDC contained within end IER products and as EDC manufactured IERs are not made available to the general population but are used in an industrial environment only.
3.1.4 Human health impacts under the “Non-use” Scenario
Impacts on the health of workers
Under the “Non-use” Scenario, production of all EDC-based SAC ERs at Leverkusen will cease. Thus, under the “Non-use” Scenario, no added risk from exposures to EDC would arise. On the other hand, the restructuring of activities could lead to increased exposure for workers outside the EU, as Lanxess would increase production of EDC-based SACs in Jhagadia, India. Furthermore, if EDC is used by competitors outside the EU, exposure of workers outside the EU to EDC might increase.
Impacts on the health of the general public
Since the applicant would cease the use of EDC there would be no exposure of the general population via the environment to EDC. However, as shown earlier, the current levels of exposure and the associated excess risks of cancer for the general population are very low. It should also be noted, as above, that restructuring of activities could lead to increased exposure to the general population outside the EU.
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 43
3.1.5 Comparison of impacts under the “Applied for Use” and “Non-use” Scenarios
Table 3-9 summarises the above discussion. Human exposure to EDC is currently very tightly controlled; therefore, a refused Authorisation would confer small benefits to EU workers’ health and EU citizens’ health in the notional region surrounding the Leverkusen plant.
Table 3-9: Summary of human health impacts under the “Applied for Use” and the “Non-use” Scenarios Human Parameter Impacts under the “Applied for Use” health Scenario Impacts under the impact area 4 years 12 years “Non-use” Scenario assessment period assessment period
Statistical excess Nil in the EU number of cancer 3.07E-04 9.21E-04 Impacts outside the EU Workers’ cases disregarded health Monetised human € 675 € 1,746 Assumed nil health costs Statistical excess Nil in the EU Exposure via number of cancer 1.68E-04 5.05E-04 Unknown but probably the cases low outside the EU environment Monetised human € 371 € 958 Assumed nil health costs 3.2 Environmental impacts
3.2.1 Introduction
EDC is listed in REACH Annex XIV due to its carcinogenic effects. Nevertheless, for completeness, this section looks into EDC emissions, alongside the consumption of energy and emissions to wastewater, and the generation of waste under both the “Applied for Use” and “Non-use” Scenarios. It also considers impacts on the environment from increased transportation of end products to EU based downstream users of IERs.
3.2.2 Environmental impacts under the “Applied for Use” Scenario
Releases of EDC to the environment
As EDC is listed in REACH Annex XIV due to its carcinogenic classification, an analysis of environmental impacts is not required due to very low EDC releases to the environment. According to the CSR, the local Predicted Environmental Concentration (PEC) in surface water during an -3 emission episode is shown in the CSR to be 1.02×10 μg/L. Thus, relative to the PNECFreshwater of 1100 µg/L that can be assumed for EDC15, the releases from the applicant’s site are insignificant.
As far as atmospheric releases are concerned, according to the CSR, the regional PEC in air (total) is estimated at 1.8×10-8 mg/m3 and the annual average local concentration in air, 100 m from point source was estimated at 1.37×10-5 mg/m3. The WHO guideline value for the 24-hour time-weighted
15 PNECfreshwater as derived in the registration dossier (ECHA CHEM) and by OECD SIDS.
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 44
average for EDC is 0.7 mg/m3 (WHO, 2000). Overall, the extensive environmental mitigation measures and standards adopted at the applicant’s site successfully manage the environmental risk arising from the use of EDC.
Water consumption, energy consumption and waste generation
At present, the applicant consumes ''''''' ''''''''#B'' '''''''''' water and ''''''''' '''''''#B '''''''''''''' energy in the manufacture of IERs via the sulphonation process. For the phthalimidomethylation process, the applicant consumes and '''''''' ''''#B ' ''''''''''' water and '''''''' '''''''#B''' '''''''''''' energy. Water and energy consumption will also increase in the future due to the foreseen increase in the tonnages of IERs manufactured at Leverkusen.
3.2.3 Environmental impacts under the “Non-use” Scenario
Given that the outcome of the “Non-use” Scenario would be the discontinuation of AER and CR production in Leverkusen, and a reduction in SAC ER production at the site, the following consequences might be expected:
1. Water and energy consumption would decrease significantly;
2. Associated wastewater generation and treatment would also decrease significantly;
3. Decommissioning of ''' ''''''''''''''''''''''''''''''''''''''''''#B'''''''' ''''''' '' ''''''''''''''''''''''' ''''''' would be required; and
4. Customers of LANXESS would need to import IER products from outside the EU.
The “Non-use” Scenario would result in estimated '''''''' '''''#D''' '''''''''' water consumption reduction. Wastewater generation from these activities would decrease significantly in Germany but given that the market for IER products will remain, similar activities are likely to be initiated outside the EU. Therefore, whilst a positive effect on EU natural resources could be assumed, the global outcome is likely to be largely neutral.
The “Non-use” Scenario would also result in a '''''''''' ''''''''#D' '''''''''''''' energy consumption reduction. Similarly, however, energy would be used elsewhere for the manufacture of replacement products. Given that the greenhouse effect is a global phenomenon, it can be assumed that the reduction in greenhouse gas emissions in the EU would be balanced by a largely equivalent increase in emissions outside the EU.
As remaining demand for IERs would not cease, one can also consider externalities from transport associated with an increase of imports of IERs from non-EU locations, into the EU. In this regard, the applicant has provided estimates in the following table for the amount of IER products currently sold to EU customers that would be replaced by imported products.
Table 3-10: Additional EU IER imports associated with the “Non-use” Scenario IER sectors Amount of IER products currently Origin of imports (own site/ competitors)* sold to EU customers replaced by imported products (m3/y) Catalysis '''''#C ''''' India (own production site in Jhagadia) Chloro Alkali '''#C '''' USA, Japan, China (competitors) Chroma. Separation '''#C '''' India (own production site in Jhagadia) Mining '''#C ''''' USA, Japan, China (competitors) Power '''#C '''' USA, Japan, China (competitors)
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 45
Table 3-10: Additional EU IER imports associated with the “Non-use” Scenario IER sectors Amount of IER products currently Origin of imports (own site/ competitors)* sold to EU customers replaced by imported products (m3/y) Sugar/ Sweetener ''''''#C '''' USA, Japan, China (competitors) Others (Pharma, '''#C ''''' USA, Japan, China (competitors) Specialised water) *Transportation mode: Ocean container
Given that the total tonnages involved are not particularly large, the overall externalities would be insignificant and thus do not merit further consideration in light of other impacts (i.e. economic ones). 3.3 Economic impacts
3.3.1 Economic impacts for the applicant
“Applied for Use” Scenario – Use 1 parameters
Substitution considerations
As noted in Section 2.2.2, while the applicant will continue to use EDC, extensive R&D efforts will be undertaken to implement the solventless sulphonation technique, which will be phased in gradually. Based on detailed R&D plans highlighted in Section 2.4 (and outlined in detail in Section 5.3 of the corresponding AoA document), full implementation of the technique is predicted to take 4 years from the Sunset Date, although LANXESS anticipates that they will have replaced a number of EDC- based SAC ER products by the start of the assessment period.
The “Applied for Use” discussion therefore considers the split in sales, turnover and profits associated with the substitution of those products that will still be EDC-based at the start of the assessment period. The assumptions also take into account LANXESS’ intention to substitute higher volume/margin products in initial years.
Projected profitability of EDC-based SAC ERs
Under the “Applied for Use” Scenario, the applicant would continue using EDC in the manufacture of SAC ERs whilst gradually transitioning these products to the solventless sulphonation technique. In Section 2.2, Table 2-6 presented the projected IER sales, turnover and profits associated with this use.
This table has also been the basis for the development of Figure 3-3, which shows the sales of SAC ERs during the 4 year assessment period along with the associated turnover and profit (discounted at a rate of 4%). For the applicant’s EDC-based sulphonation activities the Present Value of the cumulative turnover over the period 2018-2021 will be ''''''''''' #D''''''''''''' and the Present Value of discounted profits will be '''''''''' #D'''''''''''''.
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 46
#D
Figure 3-3: Sales, turnover and profit figures from production of EDC-based SAC ERs
Projected profitability from the ongoing substitution of SAC ERs
Over the assessment period (in line with the applicant’s implementation timeline highlighted in Section 5.3.2 of the corresponding AoA document) it is also assumed that EDC-based SAC ERs are being gradually replaced by SAC ERs produced via solventless sulphonation. Consequently, sales of ‘substituted’ SAC ERs produced using this technique will be increasing, accounting for the decrease in volumes associated with the EDC-based sulphonation process (as shown in the preceding sub- section). This will result in the following presentation of sales with discounted turnover and profit values (based on Table 2-7).
For the applicant’s substituted SAC ERs, the Present Value of the cumulative turnover over the period 2018-2021 will be ''''''''''''#D '''''''''' and the Present Value of discounted profits will be ''''''#D ''' ''''''#D '''''''.
#D
Figure 3-4: Sales, turnover and profit figures from production of substituted EDC-based SAC ERs
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 47
“Applied for Use” Scenario – Use 2 parameters
Substitution considerations
As noted in Section 2.2.2, while the applicant will continue to use EDC, extensive R&D efforts will be undertaken to implement the alternative technique, which will be phased in gradually. Based on detailed R&D plans highlighted in Section 2.4 (and outlined in detail in Section 5.4 of the corresponding AoA document), full implementation of the technique is predicted to take 12 years from the Sunset Date, '''''''' ''''''''''''''''''' '''' '''''' '''''''''''#E & #F ''''''' '''' '''''''''' ''''''''' '''' '''''''''' '''''''''''16.
The “Applied-for Use” parameters therefore factor in the effect of downtime associated with the implementation of the alternative technique, as well as the fact that implementation must occur in a staggered manner (one production line at a time).
Projected profitability of EDC-based AER and CR sales
Under the “Applied for Use” Scenario, the applicant would also continue using EDC in the manufacture of AERs and CRs. In Section 2.2, Table 2-8 presented the projected IER sales, turnover and profits associated with this use.
This table has also been the basis for the development of Figure 3-5, which show the sales of EDC- based AERs and CRs during the 12 year assessment period along with the associated turnover and profit (discounted at a rate of 4%). The Present Value of the cumulative turnover over the period 2018-2029 will be ''''''''''''''#D'''''''''''' and the Present Value of discounted profits will be ''''''#D '''' ''''#D '''''.
#D
Figure 3-5: Sales, turnover and profit figures from production of AERs and CRs
16 This takes into account the standard '''''''#D'''' timeline associated with the conversion of a single AER/CR product recipe to the '''' ''''''#H'''''technique, and the fact that the development phase of the applicant’s associated R&D campaign started in '''' #D''''.
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 48
Projected profitability from the ongoing substitution of AERs and CRs
Over the assessment period (in line with the applicant’s implementation timeline highlighted in Section 5.4.3 of the corresponding AoA document) it is also assumed that EDC-based AERs and CRs are being gradually replaced by AERs and CRs produced via the '''''''''' #H'''''''''''''' technique. Consequently, sales of ‘substituted’ AERs and CRs produced using this technique will be increasing, accounting for the decrease in volumes associated with the EDC-based phthalimide process. This will result in the following presentation of sales with discounted turnover and profit values (based on Table 2-9). The Present Value of the cumulative turnover over the period 2018-2029 will be '''''''''''''#D ''''''''''''' and the Present Value of discounted profits will be ''''''''''''#D''''''''''''.
#D
Figure 3-6: Sales, turnover and profit figures from production of substituted AERs and CRs
Projected profitability associated with ancillary operations
Ancillary operation 1 (‘tie-in’ sales): In Section 2.2, Table 2-10 presents production, sales, turnover and net profits associated with ‘tie-in’ IER sales linked to the applicant’s production of AERs and CRs via the phthalimide process / ''''''''''' '#H'''''''''''''''''' technique, over the assessment period. This table has been the basis for the development of Figure 3-7 which show the sales of respective IERs during the 12 year assessment period, along with the associated turnover and profit (discounted at a rate of 4%). For these sales, Present Value of the cumulative turnover over the period 2018-2029 will be '''''''''''''#D' '''''''''''' and Present Value of discounted profits will be ''''''''''''' #D'''''''''''''.
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 49
#D
Figure 3-7: Sales, turnover and profit figures from ancillary production of ‘tie-in’ IERs
Ancillary operation 2 (phthalate lye integration): Under the “Applied for Use” Scenario, the LANXESS ''''''''''' #B''''''''''''''''' plant will continue to save ''''' #D''''''' per year in phthalate lye sourcing costs. Over the period 2018-2029, the Present Value of discounted savings will be ''''''''''#D'''''''''. It is important to highlight that the implementation of the ''''''''''''#H'''''''''''''' technique is not expected to make any material differences to the volume of phthalate lye by-product produced ('''''' ''''''''''''''''' '''''' ''' '''''''''''''''''' '''' ''''''' '''''''''''''''''''''''' ''''''''' '''' ''''''#B & #D ''''''''''''''''''''''' ''''''''''''' ''''''' ''''''' '''''''' ''''''' ''''''''''''' '''''''''''''''''''''' '''''''' ''''''' '''''''' '''''''''''''''''').
“Applied for Use” Scenario – Summary
A summary of cumulative turnover and profit figures under the “Applied for Use” Scenario is provided in the following table.
Table 3-11: Summary of cumulative turnover and profit figures under the “Applied for Use” Scenario Assessment Present value of Present value of Activity period discounted turnover discounted profits Production of EDC-based SAC ERs 4 years Production of substitute SAC ERs Total (Use 1) Production of EDC-based AERs/CRs Production of substitute #D AERs/CRs 12 years Production of AER/CR tie-in products Phthalate lye integration
Total (Use 2) Overall Total
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 50
“Non-use” Scenario - Use 1 parameters
The following economic impacts are considered under the “Non-use” Scenario, taking Use 1 into account:
1. Impacts associated with closure of ''''''' '''' '''''''' '''''''''#D''''''''''''''' ''''''''' at Leverkusen and restructuring of SAC ER production activities (including SAC ER production increase at Jhagadia).
Impacts on profitability
Sulphonation: Using the figures set out in the discussion of the “Non-use” Scenario in Table 2-11, Figure 3-8 presents the projected sales, turnover and profit for SAC ER production at Jhagadia over the 4 year assessment period. Net Present values of discounted turnover associated with the “Non- use” Scenario are ''''''''''''#D ''''''''''''', with equivalent profit levels of '''''''''''''#D ' '''''''''''''.
#D
Figure 3-8: EDC consumption and turnover and profit from production of additional SAC ERs at Jhagadia
Decommissioning costs
In the “Non-use” Scenario, in addition to the loss of sales turnover and profits described above, the applicant would also incur one-off decommissioning and site remediation costs associated with the closure of the ''' ''''''''''''''#D'''''''''''' ''''''' at Leverkusen.
Costs associated with a change in the production set up for the sulphonation process are estimated to be in the region of ''''' '''#D '''''''.
“Non-use” Scenario - Use 2 parameters
The following economic impacts are considered under the “Non-use” Scenario:
1. Lost profit from closure of the phthalimidomethylation lines at Leverkusen; and
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 51
2. Impacts on ancillary operations.
The applicant would also lose the residual value of recent capital investments associated with the phthalimidomethylation process; however, this is not strictly considered an economic cost and will not be aggregated with the costs outlined above. Such costs are relevant though to considerations for the appropriate length of an Authorisation review period.
Impacts on profitability
As the applicant will cease EDC-based AER and CR production on the sunset date, the total losses associated with the “Non-use” Scenario are identical to the Present Value of the cumulative turnover and the Present Value of discounted profits, as presented in the “Applied for Use” Scenario. It is important to consider that under such a situation LANXESS Deutschland GmbH would also lose all associated ‘tie-in’ sales of IER products sold with their AERs and CRs. Furthermore, no substitution will have occurred by the November 2017 sunset date – and consequently, no sales or profits can be attributed to the '''''''''''#H''''''''''''''' technique. As highlighted in Table 3-11 the total Present Value of the cumulative turnover over the period 2018-2029 for these activities is '''''''''''#D''''''''''' and the respective cumulative profit is '''''''''''''#D ''''''''''''''.
An additional aspect to consider is that under the “Non-use” Scenario, the ''''''''''''''#B''''''''''''''' ''''''''''#B''''''''''''' will no longer make savings of '''''' '''#D '''''''' per year in phthalate lye sourcing costs. Over the period 2018-2029, the Present Value of additional costs are expected to amount ''''''#D '''' ''''''#D '''''''.
Loss of past investment
As discussed in the CSR, in recent years the applicant has invested much effort into the improvement of EDC containment measures associated with the phthalimide process. A summary of the measures undertaken since 2013 has been provided in the following table. The applicant estimates the total costs of these past investments to be in the region of ''''' '''#D''''''''. Under the “Non-use” Scenario, residual value from these investments would be lost on the sunset date.
Table 3-12: Summary of recent investments to the phthalimide line Year Main measures of applicant’s upgrade 2013 - Combination of all EDC containing waste gas streams of the AER production and separation from the general exhaust gas system. Discharge of the contaminated exhaust gas via brine cooled heat exchanger into the waste gas incineration 2014 - Replacement of product pumps with types owning double axial face seals - Discharging all EDC containing waste water in a separated sewer system inside the plant and passing this waste water into the separated sewer system for contaminated waste water of the production site 2014-2015 Replacement of the glass fibre reinforced plastic nutsche filters with alloy filters 2015 - Improvement of inlet filter of the SAC neutralisation vessel to enable back-flushing - Replacement of polymer beads-scale with a sealed and nitrogen flushed model - Installation of dry-break coupling for unloading of EDC raw material '' ''''''''''''''''''''''' '''' ''''''''''''''''''' ''''''''''''''' '''' '''''''' '''' '''''''''' '''''''''''' ''''''''''''''''''' '''' '''''' ''''''''''' ''''''''''' '''''''''''''' ''''''' ''''''' ''''''''''''''''''''''' ''' #E''''''' ''''''''''' ''''''''''''' '''''''''''''''' '''' ''' '''''''''''''''''' '''' ''''''' '''''''' ''''''''''''''' '''''''''''' '''''' '''''''''''' '''''''''''' '''' ''''''' ''''''''''' '''''''''''' ''''''''''' '''''''''''''''''''' ''''''''''
Decommissioning costs
In the “Non-use” Scenario, in addition to the loss of sales turnover and profits described above, the applicant would also incur one-off decommissioning and site remediation costs associated with the closure of the ''' '''''''#D ''''''''''' lines at Leverkusen.
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 52
The applicant estimates the cost of dismantling and deconstructing the phthalimide production line ''''''#B''''''''' to be approximately ''''''''' #D''''''''''.
“Non-use” Scenario - Summary
A summary of cumulative turnover and profit figures under the “Non-use” Scenario is provided in the following table.
Table 3-13: Summary of cumulative turnover and profit figures under the “Non-use” Scenario Assessment Present value of Present value of Activity period discounted turnover discounted profits Production of EDC-based SAC ERs at Leverkusen 4 years Additional production of EDC- based SAC ERs at Jhagadia Total (Use 1) #D Production of EDC-based AERs/CRs Production of substitute 12 years AERs/CRs Production of AER/CR tie-in IERs Total (Use 2) Overall Total
3.3.2 Impacts along the supply chain
Upstream supply chain
A refused Authorisation would also lead to a decrease in sales for companies supplying various raw materials to LANXESS, for use in their IER production activities. The magnitude of impacts associated with this decrease in sales would not be evenly distributed.
For instance, as discussed in Section 2.1.6, IER manufacturers only account for a small fraction of the total EDC consumption. Therefore, although impacts on LANXESS’ '''''''''''''''#C '''''''''''''''' may be noticeable, it is unlikely that they would be significant. In other instances, upstream suppliers may have a significant proportion of their sales linked to LANXESS (e.g. LANXESS’ purchases of divinylbenzene associated with the applied for uses are equivalent to '''#C ''' of its suppliers’ total capacity).
The following table presents the potential differences in sales for the applicant’s upstream suppliers between the “Applied for Use” and “Non-use” Scenarios, over the relevant assessment periods for each use. Losses of raw materials associated with ‘tie-in’ sales have not been taken into account due to the very diverse range of raw materials associated with various bundled products (in many instances associated losses would be too small to be significant).
It should be highlighted that the overall figures and values below are intended to serve as indicative only. LANXESS Deutschland GmbH does not have any knowledge of the profit margins of suppliers, thus only turnover losses can be presented for those stakeholders. It is also assumed that the sales lost from Lanxess will not be mitigated by additional sales from the suppliers to other companies. In addition, the applicant does not have available information to estimate any increase in the supply of raw materials to Jhagadia as a result of a refused Authorisation (and the transfer of some higher
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 53
margin SAC ER products to this site). Given the modest overall production volume increases (as highlighted in Table 2-11) it is not believed that additional use of raw materials at the site would be particularly significant. Also, given the site’s location, its increase in the use of raw materials is more likely to benefit non-EU suppliers.
Impacts on the upstream supply chain have not been taken into consideration when calculating the balance of benefits to costs associated with a granted Authorisation.
Table 3-14: Discounted impacts on applicant’s upstream supply chain IER production in Leverkusen (via sulphonation process) Material sourced upstream Discounted impact Notes (difference in sales) Styrene ''''' '''''#D '''''''''''''' No impact on supplier Divinylbenzene Lanxess demand represents '''' '''''#D ''''''''''' approximately ''#C'' of suppliers capacity Sulphuric acid No significant impact on Lanxess internal ''''' ''''#D ''''''''''' production, but noticeable Oleum 65 % No significant impact on Lanxess internal '''' ''''#D '''''''''' production, but noticeable Sodium hydroxide '''' ''''#D '''''''''' No impact on supplier Total (taking into account the 4 year assessment period associated with '''' ''''''#D ''''''''''' - Use 1) IER production in Leverkusen (via phthalimidomethylation process) Styrene No significant impact on supplier, but '''' '''''#D '''''''''''' noticeable Divinylbenzene Lanxess demand represents approx. '#C '''' ''''''#D ''''''''''' of suppliers capacity Phthalimide Noticeable impact on Lanxess internal '''' ''''''''#D '''''''''''''' Phthalimide production Formaldehyde solution 30% '''' ''''''#D ''''''''''' No impact on supplier Sulphuric acid No significant impact on Lanxess internal ''''' ''''''#D ''''''''''' production, but noticeable Oleum 65 % No significant impact on Lanxess internal '''' ''''#D '''''''''' production, but noticeable Formic acid No significant impact on supplier, but '''' ''''''#D ''''''''''' noticeable Methyl chloride No significant impact on supplier, but '''' '''''''#D '''''''''''' noticeable Chloroacetic acid No significant impact on supplier, but '''' '''''#D '''''''''''' noticeable Dimethylphosphite Noticeable impact on Lanxess internal ''''' ''''''#D '''''''''''' dimethylphosphite production Sodium hydroxide No significant impact on supplier, but '''' ''''''#D '''''''''''' noticeable for electrolysis plant in Leverkusen Total (taking into account the 12 year - assessment period associated with ''' ''''''''#D '''''''''''' Use 2)
Downstream supply chain
The “Non-use” Scenario would lead to a number of impacts on downstream sectors and users. Across most sectors there would be a reduced availability of IERs with regards to the quantity and quality required. The applicant has stated that these impacts would be most substantial on
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 54
downstream users in the catalysis and chloro alkali sectors. For instance, in the chloro alkali sector downstream users would not have access to the high performance IER types currently supplied by LANXESS and would have to switch to suppliers providing resins with lower performance capabilities.
Impacts in the power, sugar/sweetener and other sectors (such as pharmaceuticals and specialised water) could also be significant. In the power sector, a non-availability of IERs for condensate polishing in industrial water treatment would lead to the import of IERs from outside of the EU. With a loss of production in the EU, it is likely that non-EU suppliers would be able to raise prices for IERs sold in the EU market thus imposing additional costs on downstream users. Furthermore, downstream users may incur increased logistical costs and plan to mitigate the risks associated with importing from outside the EU (e.g. reduced reliability of supply).
It is also important to reiterate that significant qualification and certification requirements must be fulfilled for many of the applicant’s IER products. These will differ substantially depending on product sector and end-use. Furthermore, as Leverkusen is a global IER supply point, these requirements will also extend to customers outside the EU. Indeed, as highlighted in the corresponding AoA (Table 2-2 and Annex 4) many of the applicants IER products require qualification and certification to particular standards. For example, IERs used for drinking water applications will need qualifications in accordance with NSF (see http://www.nsf.org/about-nsf/) whereas those used in the treatment of food may be obliged to conform to the Council of Europe Resolution RESAP(2004)3 regarding ion exchange resins that can be safely used in food processing, and attain FDA compliance (21 CFR 173.25) as well as kosher and/or halal certification. Some of the applicant’s customers may also require ISO certificates and production audits or separate approvals (e.g. for nuclear power plants) and IERs manufactured may also need to attain standards necessary to meet the national registers of some countries (such as South Korea, Australia and Japan). As a consequence, a refused Authorisation could cause significant impacts to downstream users who may be required to obtain alternative products requiring fresh qualifications and certifications (which are often associated with significant timeframes).
An overview of the impacts on the downstream supply chain is presented in the following table. A short summary of potential impacts on consumers is also presented in Table 3-16.
Table 3-15: Overview of impacts on the applicant’s downstream supply chain Impacts resulting under Sector Customer group Magnitude of impact “Non-use” Scenario Reduced availability of IER catalysts Catalysis BPA/ MTBE Very substantial Switch to non-EU suppliers where possible High performance types unavailable (availability of chelating resins will be a big Removal of Ca and other Chloro Alkali problem and downstream Very substantial salts users will have to switch to other suppliers with lower performance resins) Chroma. Fructose/ glucose Reduced availability of Substantial Separation separation chromatographic resins Reduced availability of Mining Precious metal separation Substantial mining resins Reduced availability of Power Industrial water treatment resins for condensate Substantial polishing
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 55
Table 3-15: Overview of impacts on the applicant’s downstream supply chain Sector Customer group Impacts resulting under Magnitude of impact Sugar/ Decolorisation, purification Reduced“Non-use” availability Scenario of Substantial Sweetener of sugar syrup, etc. resins for food processing Reduced availability of Pharmaceutical industry, Others specialised resins electronic industry (pharmaceutical, (downstream users will (microprocessors and flat Substantial specialised have to switch to other panels manufacturing), water) suppliers with lower galvanic industry, etc performance resins)
Table 3-16: Overview of impacts on consumers from a refused Authorisation Impacts resulting under “Non-use” Scenario Sector Customer group
Increased production costs for e.g. BPA will be passed to Catalysis BPA/ MTBE the consumers who will experience higher prices of polycarbonate based products Increased production costs for chlorine will be passed to Removal of Ca and other Chloro Alkali the consumers who will experience higher prices of e.g. salts PVC and polyurethane based products Chroma. Fructose/ glucose No substantial impact expected Separation separation Mining Precious metal separation No substantial impact expected Power Industrial water treatment Increase of kWh price in some countries Sugar/ Decolorisation, purification Shortage of suited IER resins can lead to price increases in Sweetener of sugar syrup, etc. sweetener products and soft drinks Pharmaceutical industry, Others electronic industry (pharmaceutical, (microprocessors and flat Difficult to estimate specialised panels manufacturing), water) galvanic industry, etc 3.4 Social impacts
3.4.1 Employment impacts
Under the “Non-use” Scenario, as discussed, the phthalimidomethylation production lines in Leverkusen, Germany will close and sulphonation activities will be restructured and partially relocated. The applicant has therefore specified that there will be an associated loss of employment at their Leverkusen facility.
Number of jobs affected
In total, 27 operator jobs will be lost through the closure and relocation of the production lines in Leverkusen. The applicant has stated that no other roles at the plant would be affected and around 30% of the affected jobs (8 individuals) could be relocated to other parts of the company. For the purposes of this analysis, it is therefore assumed that there would be a net loss of 19 jobs at the plant. Nonetheless, there could be knock on effects for employment at third party service providers (metal workers and electricians). Contracts with such providers, amounting to a total value of ''''''''#D'''''''', would be lost under the “Non-use” Scenario and this could lead to the loss of 3 additional jobs.
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 56
Impacts on unemployment
It is important to note that the closure and relocation of the lines could have further indirect employment impacts due to the inherent linkages with other sectors. It is difficult to precisely quantify the scale of such effects, but in general, reductions in employment at LANXESS can be expected to have wider implications for employment due to multiplier effects on the local and wider domestic economy (as well as more limited effects at the interregional level).
A recent report for DG Employment, Social Affairs and Inclusion (Stehrer & Ward, 2012) provides calculations of domestic and interregional employment multipliers for a range of countries and sectors. These multipliers provide an estimate of the number of additional jobs that are expected to be created in response to each job created in a particular sector, resulting from changes in demand and supply along supply chains and considering linkages between different sectors. The multipliers for the chemicals sector in Germany are estimated at 2.8 (domestic, i.e. within Germany) and 2.9 (interregional, i.e. in the rest of the EU and beyond) respectively.
Under the “Applied for Use” Scenario, all jobs (19) at LANXESS would be maintained. Applying the employment multipliers set out above, LANXESS is supporting a higher number of jobs in Germany and inter-regionally as set out in Table 3-17.
Table 3-17: Jobs at and dependent on operations at Leverkusen, “Applied for Use” Scenario Domestic Interregional No. Total Jobs multiplier multiplier Jobs at Leverkusen (at risk) 19 - - 19 Additional jobs in Germany - 2.8 - 53 Additional jobs outside Germany - - 2.9 55 Total 127 Source: Applicant’s information and calculations
Table 3-17 shows that some 127 jobs in Germany and further afield would therefore be maintained under the “Applied for Use” Scenario. In the event that no Authorisation is granted, under the “Non- use” Scenario, these 127 jobs would be lost, directly at Leverkusen and more widely in Germany and abroad as a result of decreased demand. It can be assumed that the 3 jobs lost at the external service providers would be included in the estimated 53 additional German jobs shown in the table.
Possibilities for re-employment and impacts on employees
Initially, the employees will incur the immediate impacts associated with unemployment such as a loss of income and the stress associated with the loss of a job. A number of studies, such as Beale & Nethercott (1985), have found that unemployment is associated with a significant increase in the number of times both men and women consult their doctors for stress related issues. Nevertheless, the magnitude of these impacts will depend on the duration of unemployment for each individual.
In the short term17, it can be argued that there are fewer opportunities for re-employment in Leverkusen and the surrounding locality compared with other regions in Germany. As stated above, the unemployment rate in Leverkusen is higher than the regional and national averages. Furthermore, the unemployment rate in Cologne (a city that sits on Leverkusen’s southern border) is
17 Short-term unemployment is typically defined as a period of joblessness that lasts less than one year
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 57
more than three percentage points higher than the national average at 9.8%18. This indicates that there is a large pool of available labour and thus strong competition for available vacancies within the locality. This is supported by data for the wider North Rhine-Westphalia region that states there were 7 unemployed applicants for each notified job vacancy during September 2014, compared with a national average of 5.419.
On the other hand, industry and the chemicals sector account for a large proportion of total employment within Leverkusen (see Figure 3-9) and all of the affected workers have expertise as chemical operators. It is therefore likely that they possess a number of skills that could be transferred to the production of other chemicals thus improving their chances of re-employment in the short term. However, the applicant has stated that chemicals companies in the surrounding region are reducing their demand for labour thus making re-employment in this sector very difficult.
Foodstuffs, drinks and tobacco, 237
Metal Trade, hotel and restaurant 701 industry, traffic, 12,520 Engine and vehicle construction, Health care and 871 welfare, Pharmaceutical & 7,898 Industry chemicals industry 20,040 plus rubber & Other industries, plastic 4,041 production, 14,190 Other services, 19,358
Figure 3-9: Employment by Sector in Leverkusen, 2012 Source: WFL Leverkusen, accessed at http://www.wfl-leverkusen.de/fileadmin/media/Wirtschaftsstandort/SV-Beschaeftigte_englisch.jpg on 20/10/14
Workers aged over 50 years (11 individuals) may find it particularly difficult to find a new job. Many of these workers are long term employees of the company meaning that their skills and experience are highly geared towards the chemical industry, thus decreasing their chances of finding re- employment in alternative sectors. In addition, older workers in the EU and Germany20 generally find it more difficult to regain employment once made unemployed (European Commission, 2014).
18 Statistik der Bundesagentur für Arbeit, April 2015, accessed at: http://statistik.arbeitsagentur.de/Navigation/Statistik/Statistik-nach-Regionen/Politische- Gebietsstruktur/Nordrhein-Westfalen/Leverkusen-Stadt-Nav.html?year_month=201504 on 20 May 2015. 19 EURES, Labour market information - Nordrhein-Westfalen, accessed at: https://ec.europa.eu/eures/main.jsp?catId=362&lmi=Y&acro=lmi&lang=en&recordLang=en&parentId=&co untryId=DE®ionId=DE0&nuts2Code=%20&nuts3Code=null&mode=shortages®ionName=Nordrhein- Westfalen on 20 May 2015. 20 Der Arbeitsmarkt in Deutschland, Bundesagentur für Arbeit, September 2013, accessed at https://statistik.arbeitsagentur.de/Statischer-Content/Arbeitsmarktberichte/Personengruppen/generische- Publikationen/Aeltere-amArbeitsmarkt-2012.pdf on 8 October 15.
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 58
Eichhorst et al. (2014) states that it is widely observed phenomenon that companies tend to have a large proportion of older workers but do not actively hire them. In many instances, older workers are widely perceived as less able than younger workers to adapt to technological and organisational changes (ibid). Furthermore, their wages increase faster than their productivity thus making them more costly to potential employers (ibid). Issues surrounding bad health and working conditions, such as long working hours, also play a part (ibid).
3.4.2 Impacts on the local community
Aside from the employment impacts, the closure and relocation of the lines at the Leverkusen plant could have knock on effects for services in the local community used by the affected workers. These services include shops and restaurants located within the vicinity of plant and public transport services (e.g. KVR, DB). While the magnitude of these impacts are difficult to estimate it should be noted that the combined annual wage bill of the affected employees is €0.95 million21, a proportion of which is currently spent within the local area would be lost in the event of a refused Authorisation22.
3.4.3 Worker protection outside the EU
The applicant has indicated that a refused Authorisation for the continued use of EDC would involve a shift of the production of SAC ERs to the Jhagadia site in India. Whilst this would be a positive outcome for worker protection and health impacts within the EU, it would also mean an increased usage and possibly increased worker exposure to EDC at this plant. Such an increase must however be taken in context. The LANXESS site in Jhagadia is a key manufacturing base for company which has been built to world class specifications. The production facilities as well as the utility services at the site ensure safe and environmentally responsible operations, with German level standards in place.
3.4.4 Redundancy payments
Redundancy payments associated with the loss of 19 jobs are estimated to be '''''' '''#D'''''''''. 3.5 Wider economic impacts
3.5.1 Effects on competition and competitiveness
Intra EU
Competitiveness is a relative, not an absolute measure. Thus if costs arise for everyone there is no overall impact on competition. Bearing this in mind, the impacts of the “Non-use” Scenario on intra- EU competition will be dependent on the outcomes of AoAs for other competitors using EDC to manufacture IERs. If an Authorisation is refused for all IER manufacturers using EDC then the “Non- use” Scenario could potentially have no major impacts on overall intra-EU competition. On the other hand, there could be reductions in competitiveness if some manufacturers of EDC-based IERs are granted an Authorisation while others are not. In the latter situation, there may be knock on effects for downstream users as reduced competition and supply would put upward pressure on prices.
21 Applicant’s information 22 Assuming employees find it difficult to regain employment in the short term.
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 59
There are also some competitors that use the chloromethylation process to produce AERs. For these manufacturers, a refused Authorisation for EDC would have no impact on their ability to supply the market thus giving them a competitive advantage vis-à-vis manufacturers of EDC-based IERs. Again, this could lead to a more concentrated IER market with a smaller number of firms supplying consumers within and outside the EU. This combination of reduced IER availability and lower levels of competition could place upward pressure on prices thus impacting downstream users.
Furthermore, the SAC ER market in the EU is not homogenous, with multiple grades of SAC ERs being produced for a number of different purposes (as has been extensively identified throughout this document). The applicant produces a very wide range of IER products and in the event of the removal of this supply, whilst there may be additional capacity in the EU for some grades, other, more specialist grades may end up being in short supply.
Again, where this means that LANXESS’ customers for such specific IER products are unable to source an alternative supply at an economically feasible price, their operation may be under significant pressure, leading to potential reduction in competition in the EU market.
Extra-EU
A full assessment of the impacts on competition and competitiveness should take into account the global market. As discussed in Section 2.1.6, significant IER production capacities exist in North America and Asia. As these manufacturers would not be affected by a refused Authorisation, the “Non-use” Scenario will put European manufacturers of EDC-based IERs at a significant disadvantage vis-à-vis non-EU suppliers.
It is believed that non-EU suppliers, especially those based in China and India, would have the ability to replace IER market shortages resulting from a refused Authorisation for EDC. This could lead to impacts on the overall EU trade balance through subsequent changes in trade flows i.e. downstream users located in the EU would have to rely on imports of IERs from non-EU suppliers and exports of EDC-based IERs from European manufacturers would cease.
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 60
4 Combined Assessment of Impacts
4.1 Comparison of impacts
Table 4-1 provides a summary of the most important benefits and costs that would arise for LANXESS Deutschland GmbH and a range of stakeholders under the “Applied for Use” Scenario, when compared to the “Non-use” Scenario.
Table 4-1: Summary of benefits from a granted Authorisation for the applied for uses of EDC Monetised economic benefits and Impact Stakeholder Benefits (B) and costs (C) of a costs of a granted Authorisation category group granted Authorisation (Present Value) (C) Use 1: 4.75E-04 statistical excess cancer cases predicted (C) Use 1: €1046 (PV) Human health Workers and EU impacts citizens (C) Use 2: 1.43E-03 statistical (C) Use 2: €2704 (PV) excess cancer cases predicted (C) Both uses: very low Environmental (C) Both uses: Higher use of Germany environmental damage from impacts environmental resources in the EU releases to air and water (B) Use 1 ''''''''''''#D '''''''''''''' Suppliers to (B) Contracts with LANXESS (PV potential sales turnover losses) LANXESS Deutschland GmbH are Deutschland maintained (B) Use 2: '''''''''''''''#D ''''''''''''' GmbH (PV potential sales turnover losses) (B) Supply and revenues from (B) Use 1: ''''''''''' ''''#D ''''''''' '''''''' relevant IER sales are (additional profits only) maintained. (B) Use 2: '''''''''''''' ''''#D ''''''''' '''''''' LANXESS (B) Past investment is not (additional profits, as well as related Deutschland Economic forfeited before the end of its ancillary operations) GmbH impacts envisaged lifetime; redundancy costs avoided (NB. these are (B) Avoided loss of the recent financial rather than economic investments, value of capital and '#D impacts) '''' ''#D'''''''' of redundancy payments (B) The avoidance of reduced IER availability and lower levels of competition which could Downstream place upward pressure on (B) Business as usual users prices (potentially resulting in more specialist IER grades being in short supply) Social impacts Workers (B) German jobs protected (B) 127 EU jobs sustained (B) Avoided reduction in Wider Competition competition in the EU market economic and (B) Business as usual where downstream users may impacts competitiveness have to rely on Non-EU imports * ''''''''''''#D '''''''''''' (continued profit at Leverkusen associated with the use of EDC under the “Applied for Use” Scenario) minus ''''''''''''#D ' ''''''''''''' (additional profit at Jhagadia associated with the use of EDC under the Non- Use” Scenario)
Overall, it is clear the benefits of a granted Authorisation significantly outweigh the costs. The applicant has calculated benefit to cost ratios for the Present Value monetised economic benefits
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 61
and costs associated with each use. For Use 1, considering the avoided loss of profit of '''''''#D ''''''''''' for the applicant, and human health costs of €1046, the overall benefit to cost ratio associated with a granted Authorisation is ''''''#G'''''''' .
For Use 2, economic benefits to LANXESS Deutschland GmbH for avoided loss of profit (and associated ancillary operations) are ca. '''''''''''''''#D''''''''''''. Associated human health costs are €2704. Therefore, the overall benefit to cost ratio associated with a granted Authorisation is ''''''''#G'''''''''''.
These ratios do not take into account the loss of past capital investments or the calculated redundancy costs for LANXESS Deutschland GmbH, which are financial rather than economic costs. Note that the estimates also do not take into account the corporation taxes and tariffs that would be lost by central government under the “Non-use” Scenario. Decommissioning costs have also been excluded from the figures.
For both uses, the margin of the benefits over costs is notable, and reflects the tightly controlled use of EDC which minimises exposure of workers and humans via the environment under the “Applied for Use” Scenario. 4.2 Distributional impacts
4.2.1 Distributional impacts on government finances
The applicant’s Leverkusen product facility produces significant tax revenues for the German authorities which would continue and increase under the “Applied for Use” Scenario (at an assumed rate of '''#D '''' in line with IER sales and turnover).
Since the “Non-use” Scenario assumes that the phthalimide production lines at the Leverkusen plant would cease operation, and that the sulphonation activities would also decrease in volume and value, German authorities would lose significant tax revenues. In the following table the applicant has estimated these losses for the first year of the assessment period for each use applied for, as well as considering ‘tie-in’ sales.
Table 4-2: Changes to tax revenues for local and central governments from a refused Authorisation Taxes lost for the local Taxes lost for the central Activity government in 2018 (€/y) government in 2018 (€/y) IER production in Leverkusen (via sulphonation '''''''#D '''''''''' '''''''#D '''''''' process) IER production in Leverkusen (via ''''''''#D ''''''''' ''''''''''#D ''''''''' phthalimidomethylation process) ‘Tie-in’ sales of products being normally sold ''''''''#D ''''''' ''''''#D '''''''''' with EDC-based IERs '''''' '''''''''' ''''''''' '''''''' ''''''''''' ''''' '''''''''''' ''#D ''''' ''''' '''''''''''''''' ''''' '''''''''' '''' ''''' ''''''''''''''''''' '''''''
4.2.2 Winners and losers under the “Non-use” Scenario
Figure 4-1 provides an overview of the ‘winners’ and ‘losers’ from a refused Authorisation for the continued use of EDC in the “Applied for Use”.
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 62
LOSERS LANXESSS Deutschland GmbH at Leverkusen Local/regional service suppliers Germany-based workers/contractors losing their jobs German government losing tax receipts European suppliers
WINNERS Non-EU manufacturers of IERs and their non-EU suppliers Non-EU workers Non-EU governments increasing tax receipts
Figure 4-1: ‘Winners’ and ‘losers’ from a refused Authorisation for EDC Note: Human health benefits are minimal and are not included in this figure
4.3 Uncertainty analysis
The following table summarises the key areas of uncertainty in the above analysis. Given the very large margin between benefits and costs from a refused Authorisation, making different assumptions in an effort to address these uncertainties would not make a material difference to the final conclusion of this SEA analysis. Regardless, alternative calculations have been made, where practicable.
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 63
Table 4-3: Key areas of uncertainty and sensitivity analysis possibilities Area of uncertainty Details and assumptions Alternative assumptions Sensitivity analysis Human health From RAC’s paper on the exposure-risk relationship, Clearly, this approach is more If breast cancer survival rate statistics had impacts: breast cancer was the most sensitive endpoint in the conservative than considering breast been used, the benefits to human health Split of fatal/non- rat study used to calculate the human exposure-risk cancer alone, as the latter has a high would reduce to ca. €621 for Use 1 and fatal cases estimate. However, as exposure is systemic, it is survival rate (ca. 77% in Germany), while €1607 for Use 2. possible that breast cancer would not be the endpoint other cancers will have a much lower observed in exposed individuals. RAC have based their survivor rate. The human health impact The overall ratio of benefit to cost ratio carcinogenicity estimates on breast cancer in female costs could thus be overly conservative associated with a granted Authorisation rats in the Nagano et al. (2006) study, but cancers may would increase to ca. '''''#G''''''' to 1 for Use not be expected in the same location. The sex of 1 and ca. '''''#G''''''' to 1 for Use 2 animals would appear to be of some importance, as the applicant’s workforce primarily comprises male workers. The choice of cancer type is also of importance because use of breast cancer as an endpoint will tend to lower the mortality risks as there is a high level of survivorship. To address this complexity, this SEA adopts a more general approach, utilising overall cancer risk with overall mortality and morbidity statistics Economic impacts: The applicant has developed predictions on the future For additional conservatism, it could be If no increase in annual production and sales future sales and sales of relevant IERs under the “Applied for Use” assumed that under the “Applied for Use” of the relevant IERs is assumed (from 2020 revenues Scenario. For initial years (2018-2019), these are based Scenario, there would be no increase in onwards), the total benefits for the on LANXESS strategic and business planning. annual production/sales from 2020 applicant associated with Use 1 would However, for 2020 onwards a flat growth rate is onwards (i.e. from when the assumption reduce to '''''''''' #D'''''''''''''' and the overall applied and it is projected that production and sales of of a flat growth rate comes into play) benefit to cost ratio associated with a relevant IERs will increase by approximately '''#D''' per granted Authorisation would decrease to ca. annum with turnover and profit will rising by the same '''#G'''''' to 1. margin) Respective benefits for Use 2 would reduce to ''''''#D''''''''' million and the overall benefit to cost ratio associated with a granted Authorisation would decrease to ca. ''''''#G''''''' to 1
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 64
Table 4-3: Key areas of uncertainty and sensitivity analysis possibilities Area of uncertainty Details and assumptions Alternative assumptions Sensitivity analysis Economic impacts: LANXESS Deutschland GmbH does not have any No alterative assumption is made, as this None can be provided profit margins of knowledge of the profit margins of suppliers, thus only element is not taken into consideration stakeholders turnover losses can be presented for those when calculating the balance of costs and stakeholders benefits from a granted Authorisation Social impacts: The number of jobs lost within suppliers (108) is only No other realistic assumption can be None can be provided number of an estimate provided. This number does not play a contractor role in the calculation of the balance of employees losing costs and benefits from a granted their jobs Authorisation
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 65
5 Conclusions
5.1 Socio-economic benefits of continued use
This SEA makes a clear case as to the benefits of the continued use of EDC in the “Applied for Use”. The most critical benefits can be summarised as follows:
LANXESS Deutschland GmbH will be allowed to:
Continue manufacturing EDC-based SAC ERs, AERs and CRs at Leverkusen. Taking into account substitution volumes, sales are predicted to increase steadily with concomitant increases in turnover and profits during the review period; Recoup the cost of recent capital investments associated with improvements related to the phthalimide process; Maintain the profitability levels of other products manufactured in Leverkusen by continuing to share fixed costs across the different plants; Continue to supply the on-site '''''''''''' ''#B''''''''''''''''' plant with phthalate lye, avoiding the need to purchase the substance on the open market; Continue with its R&D plan towards the implementation of feasible alternative for EDC (which is planned to result in the total cessation of EDC’s use in 2029); and Avoid redundancies and relocation of some activities outside of the EU (to Jhagadia).
Customers of LANXESS Deutschland GmbH will benefit from the continued supply of qualified and high quality SAC ERs, AERs and CRs (and associated ‘tie-in’ sales)
Suppliers of raw materials and services will be able to:
Continue supplying (an increasing volume of) materials and services to LANXESS Deutschland GmbH; and Avoid (potential) job losses from loss of contracts associated with EDC-based SAC ER, AER and CR production operations in Leverkusen.
The German government will be able to: Continue to collect tax revenue associated with EDC-based SAC ER, AER and CR production operations in Leverkusen. 5.2 Residual risks to human health and the environment of continued use
Residual risks to human health and the environment are very low. With a focus on human health, the following need to be noted:
Low exposure levels: inhalation and dermal exposure levels for workers are very low as shown in the CSR. This is the result of the use of closed systems and appropriate Personal Protective Equipment;
Process improvements: recent / ongoing improvements are being undertaken which will further reduce worker exposure to EDC; and
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 66
Low number of exposed workers and exposure frequency: A small number of workers may be exposed to EDC during the operation of LANXESS’ manufacturing facility in Leverkusen. For some of the worker tasks described in the CSR, potential exposure takes place over only a few days each year.
For Use 1, the relevant calculations show that 1.35E-04 statistical excess fatal cancer cases and 1.72E-04 non-fatal cases are predicted from the continued use of EDC over 4 years (Use 1). The associated Present Value monetised health benefits from a refused Authorisation equate to ca. €675 over the 4 year assessment period.
In addition, the calculated statistical excess cancer cases amongst the general population due to exposure via the environment are 7.42E-05 fatal cancer cases and 9.42E-05 non-fatal cases, with the associated Present Value monetised health benefits from a refused Authorisation equating to ca. €371 over a 4 year period.
For phthalimidomethylation (Use 2), this SEA has also monetised the costs to human (worker) health from the continued use of EDC. The relevant calculations show that 4.06E-04 statistical excess fatal cancer cases and 5.15E-04 non-fatal cases are predicted from the continued use of EDC over 12 years. The associated Present Value monetised health benefits from a refused Authorisation equate to ca. €1,746 over the 12 year assessment period.
In addition, the calculated statistical excess cancer cases amongst the general population due to exposure via the environment are 2.23E-04 fatal cancer cases and 2.82E-04 non-fatal cases, with the associated Present Value monetised health benefits from a refused Authorisation equating to ca. €958 over a 12 year period.
This suggests that residual risks to public health would be extremely low during both assessment periods. Environmental impacts are not considered important in the context of this AfA, although it is noted that water and energy consumption in Germany would reduce as a result of the cessation of certain operations in Leverkusen. Overall, residual risks to human health (i.e. the human health impacts) from the continued use of EDC would be very low and would be far outweighed by benefits to LANXESS Deutschland GmbH and other stakeholders. 5.3 Factors concerning operating conditions, risk management measures and monitoring arrangements
No factors other than those presented in the AoA and CSR are considered relevant to this analysis. The controls on EDC releases and exposure will remain strict and in real terms will decrease as the alternatives are gradually implemented for each of the uses applied for. 5.4 Factors relating to the duration of the review period
As discussed in the corresponding AoA document, LANXESS Deutschland GmbH has selected separate preferred alternatives for each use of EDC. For Use 1, the applicant intends to implement the ‘solventless sulphonation technique’ and for Use 2 the applicant intends to implement the ‘'''''''''' #G'''''''''''''''''' technique’ (a technique incorporating an alternative substance).
It is critical to note that neither alternative is technically and economically feasible at present and both are currently the subject of extensive R&D campaigns, which began in ''''''''''#E '''''''''' (for Use 1) and '''''''''''''''#E''' '''''''''' (for Use 2). The corresponding AoA document also sets out, in detail, the practical steps required for the implementation of each alternative and the considerable barriers
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 67
must be overcome for the applicant to preserve the high quality of the '''#C'' separate EDC-based IER product grades that are currently produced and sold23. For Use 1, to implement the solventless sulphonation technique a minimum of 4 years from the 2017 Sunset Date will be required. For Use 2, to implement the '''''''''' ''''#H'''''''''''''''' technique a minimum of 12 years will be required.
23 ''#C'' of these product grades are associated with Use 1 and ''#C'''' are associated with Use 2.
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 68
6 References
Alberini & Scacny, 2014. Stated-preference study to examine the economic value of benefits of selected adverse human health due to exposure to chemicals in the European Union, Part III: Carcinogens, FD7, s.l.: s.n.
Bloomberg, 2010. Research and Markets: Ion Exchange Resins - Global Strategic, s.l.: s.n.
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Dow, 2013. Ion Exchange Resins, s.l.: s.n.
ECHA, 2011b. Guidance on the preparation of socio-economic analysis as part of an application for authorisation. [Online] Available at: http://echa.europa.eu/documents/10162/13643/sea_authorisation_en.pdf [Accessed 4 August 2014].
ECHA, 2011. Guidance on the preparation of an application for authorisation, s.l.: s.n.
ECHA, 2013. SETTING THE REVIEW PERIOD WHEN RAC AND SEAC GIVE OPINIONS ON AN APPLICATION FOR AUTHORISATION. [Online] Available at: http://echa.europa.eu/documents/10162/13580/seac_rac_review_period_authorisation_en.pdf [Accessed 28 July 2014].
ECHA, 2015. Application for authorisation: establishing a reference dose response relationship for carcinogenicity of 1,2-Dichloroethane, RAC/33/2015/09 rev 1 Final. [Online] Available at: http://echa.europa.eu/documents/10162/13641/rac_33_dose_response+_1_2dichloroethane_en.p df [Accessed 10 July 2015].
Eichhorst, W. et al., 2014. How to combine the entry of young people in the labour market with the retention of older workers?. IZA Journal of European Labor Studies, 3(19).
European Commission, 2014. “Draft Joint Employment Report from the Commission on the Annual Growth Survey”. Accompanying the Communication from the Commission on the Annual Growth Survey. 906 Final. EU Commission, Brussels, s.l.: s.n.
Inamuddin & Luqman, M., 2012. Ion Exchange Technology I: Theory and Materials. Dordrecht: Springer.
Lanxess, 2010. Ion Exchange Resins – Purified water for the world. s.l.:s.n.
Lanxess, 2010. Ion Exchange Resins – Purified water for the world. [Online] Available at: http://www.lanxess.com/en/media-download/ion-exchange-resins-purified-water-for- the-world_de/ [Accessed 7th May 2014].
Lenntech, undated. Mixed bed ion exchange resin for water treatment. s.l.:s.n.
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MarketsandMarkets, 2015. Ion Exchange Resins Market by Type and by Region - Global Trends & Forecasts to 2019, s.l.: s.n.
Nagano, K. et al., 2006. Carcinogenicity and chronic toxicity in rats and mice exposed by inhalation to 1,2-dichloroethane for two years. Journal of Occupational Health, Volume 48, pp. 424-436.
Pearce, D., 2000. Valuing Risks to Life and Health - Towards Consistent Transfer Estimates in the European Union and Accession States, Brussels: European Commission (DGXI).
PRWeb, 2010. Global Ion Exchange Resins Market to Exceed $535 Million by 2015, According to New Report by Global Industry Analysts, Inc., s.l.: s.n.
Ramaswamy, S., Huang, H. & Ramarao, B., 2013. Separation and Purification Technologies in Biorefineries. Chichester, West Sussex: John Wiley & Sons Ltd.
Schmidt-Traub, H., Schulte, M. & Seidel-Morgenstern, A., 2012. Preparative Chromatography - Second, Completely Revised and Enlarged Edition. Weinheim: Wiley.
Siemens, 2013. Industry Services - Ion Exchange Resin Products and Services, s.l.: s.n.
Stehrer, R. & Ward, T., 2012. Study on Monitoring of Sectoral Employment. [Online] Available at: http://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&frm=1&source=web&cd=1&cad=rja&uact=8& ved=0CDQQFjAA&url=http%3A%2F%2Fec.europa.eu%2Fsocial%2FBlobServlet%3FdocId%3D7418%2 6langId%3Den&ei=QWPGU8_OL9Sy7AaSj4DgCQ&usg=AFQjCNEhPoREnEVxSknIki0gFgwPfv33Yg&bv m=bv.7 [Accessed 16th July 2014].
ThomasNet, 2013. Growing Population, Tougher Pollution Laws Bolster Global Ion Exchange Market - See more at: http://www.thomasnet.com/journals/fluid-gas-flow/growing-population-tougher- pollution-laws-bolster-global-ion-exchange-market/#sthash.vmlzXZjW.dpuf, s.l.: s.n.
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 70
7 Annex 1: Economic valuation of excess cancer cases
The economic valuation of the health impacts takes into account two important welfare components, namely the costs associated with mortality and morbidity. The first component (costs of mortality) can be measured in two ways, either through the value of statistical life (VOSL) or the value of a life year lost. For this analysis, the value of statistical life is used. The ECHA SEA guidance provides two figures for the value of statistical life24, a central value of €1,052,000 (2003 prices) and a sensitivity value of € 2,258,000 (2003 prices). Converting these figures into 2014 prices using a GDP price index25 gives the values reported in Table 7-1.
Table 7-1: Reference values for chemicals related mortality (2014 prices) Central Value Sensitivity Value Value of a statistical life € 1,243,874 € 2,669,836 Source: based on mortality values in the ECHA guidance on Socio-Economic Analysis26
It is of note that the above values do not include any adjustment for the fact that people may be willing to pay more to reduce their risk of dying from cancer than to reduce their risk of dying from other illnesses, due to the fact that death from cancer may be preceded by a long period of ill health. For this reason, previous guidance from DG Environment27 recommended adding a “cancer premium” of 50%; the paper also recommended adjusting for age, as a cancer may affect populations of an average age (rather than older populations as associated with e.g. air pollution). The DG Environment guidance suggests the use of a multiplication factor of 1.43 to adjust for differences in ages between the model and the target population. It should be noted, however, that the Pearce (2000) paper was not conclusive on the need or the extent of adjustment of the WTP value due to the age of the affected population. According to the paper, most studies suggest a probable decline in WTP with age, but there have been other cases where an inverted ‘U’ shaped curve applies.
Nevertheless, in order to apply a more conservative approach in monetising the health impacts, the VOSLs reported above were adjusted for age, using the 1.43 factor suggested by the DG Environment guidance, and for a cancer premium. If these adjustments are made, the above values are increased to around €2.67 million for the central value and €5.732 million for the sensitivity value (2014 prices).
In addition, a recent study led by the Charles University in Prague (Alberini & Scacny, 2014) and undertaken for ECHA found a value of a statistical life for the avoidance of a death by cancer to be €5 million (2014 prices), which is significantly higher than the unadjusted figures presented in Table 7-1. Thus, for the purposes of this SEA (and as an upper bound), this value of €5,000,000 is used to provide estimates of the health damage costs associated with mortality due to cancer.
24 Based on environmental pollution willingness-to-pay values. 25 Price indices take from Eurostat website - “GDP and main components - Price indices [namq_gdp_p]”. Price index for 2014 extrapolated using data from 1995-2013. Final values calculated by multiplying the original amount (expressed in 2003 prices) by the ratio between the price index for 2003 and the extrapolated price index for 2014. Final GDP deflator value used is 1.182389937. 26 See ECHA Guidance document: http://echa.europa.eu/documents/10162/13641/sea_restrictions_en.pdf. 27 DG Environment (2000): Recommended Interim Values for the Value of Preventing a Fatality in DG Environment Cost-Benefit Analysis, available at: http://ec.europa.eu/environment/enveco/others/pdf/recommended_interim_values.pdf Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 71
The second component of the health impacts relates to non-fatal cancers and the potential willingness to pay of those who survive a case of cancer to avoid the pain and suffering experienced from the illness. Starting with willingness to pay studies (WTP), the available literature offers a broad range of estimates for the willingness to pay (WTP) to avoid a non-fatal cancer. Estimates range from a low of €16,000 (1999 prices) to a high of €1,950,000 (1999 prices) depending on the type of cancer (Pearce, 2000); across the endpoints considered in the DG Environment guidance, and adjusting for 2014 prices, a figure of around €550,000 is found. The ECHA SEA guidance reports a value of €400,000 (2003 prices) for calculating the costs associated with morbidity for non-fatal cancers, but the origin of this estimate is not referenced and no details on the figure are provided. The more recent WTP study (Alberini & Scacny, 2014) undertaken for ECHA found a figure of €396,000 (2014 prices). Although, recent discussion among SEA experts and practitioners have raised methodological concerns over this value, as it is the most up to date figure and there are methodological issues associated with all of the other values reported above, it has been used for the purposes of this SEA.
Important note: medical care costs have not been taken into consideration in the monetisation of human health impacts. Such costs would be far lower than the values assumed for mortality (€5 million) and morbidity (€0.396 million) and would make a very small difference to the calculations presented in the SEA and thus would not have an influence on the conclusions of the analysis.
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 72
8 Annex 2 – Justification for confidentiality claims
This document contains confidential business information and so cannot be made public as a whole. In particular, the publication of the submitted document must not cover items which were not made public by the Company, i.e. financial plans and financial forecasts, sales plans, and other relevant information that may have an impact on the share price of the Company.
The World Trade Organisation agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) requires signatory members (including EU-members) to maintain protection of undisclosed information, including company know-how that has been subject to reasonable steps to keep it secret (under Article 39.2). In addition, data on current production capabilities, manufacturing integration and raw material supply are commercially sensitive and must be considered confidential business information under the prevailing Competition Law (under Articles 101 and 102 of the Treaty on the Functioning of the European Union). Potential competitors may not obtain knowledge of the current and potential future manufacturing capabilities or capacities of the applicant. These are business secrets as defined by DG competition, and such information inherently has commercial value and is of particular value to the competition. Much of the information hereby claimed confidential falls under the protection of TRIPS or Competition Law and therefore its public disclosure must be prevented.
Particular care has been taken to minimise the presence of confidential information in the SEA document and thus the confidentiality claims made by the applicant. However, it is necessary to include some confidential information to provide the rapporteurs and Committees the necessary information to fully evaluate this AfA in more quantitative terms.
The justifications of confidentiality are given in the table below. These can be grouped in two categories:
1. Trade Secrets – Detailed information relating to manufacturing processes, e.g. quantity of EDC used per batch, etc.
2. Business Secrets – Financial Information e.g. project cost estimates, cost of EDC etc.
Note: In this public version of the SEA the table of justifications has been removed as they are also considered to be confidential.
Use numbers: 1 & 2 Legal name of the applicant: LANXESS Deutschland GmbH 73