New Chemicals Regulation Under the Toxic Substances Control Act

The Toxic Substances Control Act (TSCA) mandates that the U.S. Environmental Protection Agency control health and environmental risks from new as well as existing chemicals. For many new chemicals, however, the agency lacks toxicological evidence. This Note uses economic models to evaluate priorities for applying test requirements to new chemicals and to compare effects of alternative forms of test rulings on chemical innovation. At present, the agency treats each new chemical as either hazardous or safe. The analysis of test priorities shows that the social value of a test lies in its ability to resolve uncertainty. Test priorities could be set to help society avoid the alternative errors of overregulating a safe chemical or underregulating a hazardous one. The analysis of innovation effects highlights two general properties of TSCA regulation. First, the fact that private firms bear test costs implies that efforts to obtain more test results will discourage innovations in the chemical categories targeted by the testing policy. Second, chemicals developed despite a stringent testing policy are less likely to be withdrawn when faced with a test rule than are chemicals developed in an environment of rare test requirements.