Uncertainties and the precautionary principle in cost-benefit environmental policies

The new European Union-wide regulation of chemicals, the REACH system, assesses, evaluates and authorizes potentially hazardous chemicals and therefore provides crucial information about chemicals to decision-makers, producers and consumers. While some chemical regulations have already been standardized at European level (such as the labelling of chemicals), procedures for assessing the characteristics of chemical substances, for instance, are regulated by national law. The REACH system builds up a standardized framework for assessing and authorizing chemicals and shifts the burden-of-proof from government authorities to producers and importers of chemicals who now have to verify the safety of chemicals. Implementing the REACH regulations in Europe may lead to substantial assessment and adaptation costs particularly in the chemical industries. However, the benefits of REACH, such as improvements in the work place, public health and safety, environmental health, and innovation effects, may significantly outweigh the costs. The current study presents the results of a cost-benefit analysis (CBA) of this environmental policy program taking the Austrian economy as a case study. Particular emphasis is laid on discussing the fundamental uncertainties and lack of knowledge (ignorance) for quantifying and monetizing (valuing) costs and benefits. It turns out that even in the case of such fundamental uncertainties, CBA results - complemented with the qualification of results and sensitivity analyses also in the sense of a 'post-normal science' - suggest that the REACH system leads to net benefits for the Austrian economy, and that policy-makers are advised to decide on a broader approach including key principles of environmental policy such as the precautionary principle to which European Union policy-makers have committed themselves. (C) 2007 Society for Policy Modeling. Published by Elsevier Inc. All rights reserved.