As of June 1, 2007, the new European chemicals directive REACH came in effect, which set forth terms for the registration, evaluation and authorization of chemicals. With its networked structure and extensive product portfolio, BASF is one of the companies most heavily affected worldwide. BASF is aware of the demands and therefore started preparing for REACH in 2004. Under the terms of REACH, BASF will register several thousand substances. Upon the completion of the pre-registration phase on December 1, 2008, we submitted more than 40,000 pre-registrations to the ECHA (European Chemicals Agency) in Helsinki, Finland. We expect average annual costs of €50 million until completion of its implementation in 2018. Despite good preparation and planning, BASF and our European customers continue to face the risk of being placed at a disadvantage due to the cost intensive test and registration procedures in comparison to our non-European competitors.
Within the framework of E.U. emissions trading, the BASF Group was allocated emission certificates for the second trading period from 2008 to 2012. BASF does not currently expect any shortage of certificates for the European group in this second trading period.
The concrete design of the European emissions trading from 2013 is still unclear. Under the present E.U. resolutions, however, a large portion of the chemical industry will be included in the trading system. It is still largely unclear what proportion of the required certificates for the individual plants will need to be paid for. Chemical plants which are exceptionally efficient will probably receive allocation of certificates largely free of cost. Depending on the final design of the implementing regulation, BASF will be required to purchase several million certificates annually. The final design will, however, also impact the prices for CO2 certificates on the exchanges and thus affect our cost and global competitive situation.
In addition, an aggravation of geopolitical tensions and the destabilization of currently politically stable systems pose risks.
REGULATORY RISKS: REACH
- June 1, 2007: new European chemicals directive REACH; Terms for the registration, evaluation and authorization of chemical substances in the European Union.
- Submission of more than 40,000 pre-registrations with the European Chemicals Agency in Helsinki, Finland, by December 1, 2008
- Average annual costs of €50 million until the completion of implementation in 2018