Technical Briefing Reviews Proposed International Tax on 35 Basic Chemicals
By IISD’s SDG Knowledge Hub , February 10, 2021
The Strategic Alliance for International Chemicals Management (SAICM) convened a Technical Briefing on Financing the Sound Management of Chemicals and Waste Beyond 2020. Participants discussed a proposal for a tax or fee on chemicals, among other considerations for an integrated approach to financing chemicals management.
The technical briefings are part of the intersessional process leading up to the fifth session of the International Conference on Chemicals Management (ICCM5).
The tax would finance a global fund for chemical safety, and could raise approximately USD 11.5 billion per year.
During the briefing held on 9 November 2020, representatives from the International Pollutants Elimination Network (IPEN) and the Center for International Environmental Law (CIEL) presented their proposal for an international coordinated tax on 35 basic chemicals. They reported that chemical industry sales are expected to grow to approximately USD 11 trillion in 2030, up from USD 6 trillion in 2017, and chemicals management is severely underfunded, with a 43% budget shortfall and more than ten times the amount allocated by the seventh Global Environment Facility (GEF) replenishment needed for SAICM.
Highlighting industry's internalization of profits and externalization of costs to human health and the environment, the representatives explains that the IPEN/CIEL proposal entails applying a 0.5% tax or fee on the production value of 35 basic chemicals. The proceeds would go to a global fund for chemical safety for redistribution to governments and stakeholders to implement risk reduction measures on the ground and meet SAICM commitments. They said such a tax could raise approximately USD 11.5 billion, as annual sales of the 35 basic chemicals are around USD 2.3 trillion. More than 75% of these chemicals are produced in around ten countries.
The presentation also highlighted the benefits of international cost recovery instruments versus national ones. An international mechanism would raise more funds and level the playing field, since some countries would not be able to finance chemicals management because they are not chemical producers. In addition, an international instrument would give industry companies less incentive to relocate their business to another country, as the levy would be international.
During the question-and-answer session, participants discussed:
- that SAICM would be the best place to begin discussions on such an instrument, and discussions could then be extended to the UN Environment Assembly (UNEA), the Global Environment Facility (GEF), or the Conferences of the Parties (COPs) to chemicals conventions;
- the need to get the chemicals industry on board;
- issues with access to GEF financing for chemicals management due to competition with biodiversity and climate change, co-financing requirements, and difficulties with obtaining smaller amounts of money; and
- the success of SAICM's Quick Start Programme, which has minimal bureaucracy, no co-financing requirement, and a funding maximum of USD 250,000.
The International Council of Chemical Associations (ICCA) representative said industry recognizes the need for better financing of SAICM instruments, including the Secretariat, and expressed support for the integrated approach. She called attention to industry’s role in capacity-building efforts and the ICCA’s proposal for a capacity-building clearinghouse mechanism to help developing countries with chemicals management. While she expressed support for a fee-based chemicals management system, she said industry did not support an across-the-board fee.
A document outlining recommendations for shifting external costs of production, use, and disposal of chemicals from the public to the private sector will be presented at the fourth meeting of the intersessional process (IP4) considering the Strategic Approach and sound management of chemicals and waste beyond 2020, which is expected to convene ahead of ICCM 5.
In addition to the series of technical briefings held during the intersessional process, virtual working groups are also meeting to advance the Beyond 2020 process. [SDG Knowledge Hub Story on Virtual Intersessional Process] [Video of Technical Briefing] [Paying for the Damage: A Tax on Chemicals to Hold Producers Financially Accountable] [Financing the Sound Management of Chemicals Executive Summary] [Financing the Sound Management of Chemicals Full Report] [FAQ Sheet Regarding the Coordinated Tax or Fee on Basic Chemicals]