A possible new EU directive on the VOC content of decorative coatings

For some time the European Commission has been considering whether to introduce a directive that would limit the volatile organic compounds (VOCs) contained in paints and varnishes as a means of reducing the emission of VOCs into the atmosphere. The Commission is currently holding discussions with EU Member States and stakeholders, and a firm proposal has yet to be made. Industry players are keen to understand the potential implications of a directive to inform their discussions. In March 2001 the European Solvent Industry Group (ESIG) asked Frontier (London) to help it understand the economic impact of one of the options considered by the Commission: a directive that would involve a stringent restriction on the VOC content of most decorative paints and a ban on solvent-based paints for some applications. Frontier's work for ESIG, carried out last summer, presents an initial assessment of this regulatory option. Frontier's report - now published on ESIG's website - identifies and, where possible, quantifies the potential impact of the option described on the whole chain of production: solvent producers, resin manufacturers, paint manufacturers and professional painters. Our analysis suggests that for solvent producers and alkyd resin manufacturers the most likely outcome would be a fall in sector revenues of approximately 30% and 50%, respectively. We suggest that a switch in production to products that are permitted under the proposed directive would be unlikely to be economic for either. It is likely, however, that there would be an expansion in production for acrylic resin manufacturers, whose product is used in water-borne paints, the use of which would be expected to increase. As acrylic resins are more expensive to produce and research and development would be required in the development of new paints, costs could rise for paint manufacturers by around 15%, and for professional painters by between 4% and 7%. It is likely that research and development costs, in particular, could be more difficult for small and medium sized paint manufacturers to absorb, with the likely result of some consolidation and potential employment losses in this sector.