The costs and benefits of the use of dichlorvos

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The costs and benefits of the use of dichlorvos

NZIER report to Environmental Protection Authority March 2015

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About NZIER

NZIER is a specialist consulting firm that uses applied economic research and analysis to provide a wide range of strategic advice to clients in the public and private sectors, throughout New Zealand and Australia, and further afield.

NZIER is also known for its long-established Quarterly Survey of Business Opinion and Quarterly Predictions.

Our aim is to be the premier centre of applied economic research in New Zealand.

We pride ourselves on our reputation for independence and delivering quality analysis in the right form, and at the right time, for our clients. We ensure quality through teamwork on individual projects, critical review at internal seminars, and by peer review at various stages through a project by a senior staff member otherwise not involved in the project.

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NZIER was established in 1958.

Authorship

This paper was prepared at NZIER by Chris Nixon It was quality approved by Mike Hensen.

The assistance of Sarah Spring is gratefully acknowledged.

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Key points

Objective

This report provides indicative estimates of the costs and benefits of the use of dichlorvos - a highly toxic but effective and cheap organophosphate insecticide used to control a wide variety of insects. Dichlorvos is used in agricultural, horticultural, biosecurity, public health, and home settings.¹

The estimate of the costs and benefits of dichlorvos use informs a reassessment of this insecticide by the Environmental Protection Agency (EPA). The reassessment covers dichlorvos and five dichlorvos-containing formulations, and considers concerns about safety and well-being of those working with dichlorvos, bystanders, and impacts on the environment.

Main findings

Organophosphates are highly toxic substances; therefore scrutiny of their use is required to ensure removal of substances where adverse impacts outweigh positive effects.

This scrutiny creates a dynamic and durable regulatory regime which is responsive to both domestic conditions and the regulatory approaches of competitors/trading partners.

The main costs of withdrawal of dichlorvos are associated with users switching product from one chemistry to other low cost or higher priced (and more specific) chemistry. These costs could be substantial since in some cases the use of dichlorvos is the only registered product that can control an insect infestation just prior to picking and still meet strict exporting requirements in markets such as Australia and Japan. Of particular concern, is controlling for insects such as thrips.

The benefits of the partial withdrawal of dichlorvos from the market include:

 reduced risk of acute poisoning and a reduction in the long term impacts of acute poisoning. The EPA risk assessment shows that exposure to operators working with dichlorvos is above acceptable levels

 a reduction in possible chronic poisoning

 an environmental benefit, particularly by preventing contamination of aquatic environments. The risk assessment conducted by the EPA suggests that the risks to the environment (particularly to birds and bees) is very large

 ‘non-use’² benefits for the general public knowing that potentially dangerous pesticides are being proactively considered for withdrawal through a “precautionary” reassessment process.

For this reassessment scenario, the costs of withdrawal that can be quantified outweigh the benefits, although there are a number of benefits that cannot be

1 The focus of this report is on agricultural and horticultural industries. While mentioned, no data is available on the use of dichlorvos in the home and public health.

2 By ‘non-use’ values we mean values that cannot be bought and sold in a market. Typically these are environmental, social and cultural values.

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quantified. These benefits include the potential reduction of the long term impacts of acute and chronic poisoning, environmental impacts other non-use benefits.

Our results are sensitive to assumptions because of the partial data on the costs of alternative insecticides and cost and number of acute poisoning cases.

Therefore, we have produced lower and upper bound order of magnitude estimates that indicate the range of the quantified incremental cost. For the benefits we only have partial information. What we can say is that for costs and benefits to equate for human health outcomes, three people would have to be at risk of dying each year over the next twenty years.

The following table summarises the estimated impacts. These costs and benefits are relative to the baseline (or counterfactual) -continued use of the dichlorvos.

Summary of costs and benefits

PV 8% over 20 years

Impact Costs Benefits

Farmers

Switching to other substances and impact on vegetable/fruit sales if dichlorvos was not available

Potentially large, between $152 million and

$333 million

Manufacturers Switching to other substances

Negligible cost

Impact on smaller companies

Greater flexibility is expected to mitigate switching cost Health impacts

Reduced acute poisoning hospital costs

Small between $25,000 and $500,000

Reduced long term impact of acute poisoning

Uncertain, but beneficial impact

Chronic poisoning impact

Non-use values Uncertain, but beneficial impact

Environmental, existence,¹ and other non-use values²

Trends in other jurisdictions Very small benefit.

Overall impact Large quantified loss of between $152 million and $333 million

Small quantified benefit (between

$0.025 million and $0.5 million) and a range of unquantified benefits Note (1) Benefit to the New Zealand public knowing that dichlorvos use is being managed appropriately. (2) For example, bequest value for the general public. Knowledge that a regulatory framework dynamically adjusts over time and for future generations i.e. it reflects current scientific knowledge and balances the costs and benefits.

Source: NZIER

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The precautionary nature of the Hazardous Substances and New Organisms (HSNO) Act means that decision makers do not have to fully establish cause and effect before withdrawing a product. Section 7 of the Act stipulates that decision makers:

“shall take into account the need for caution in managing adverse effects where there is scientific and technical uncertainty about those effects”.

The precautionary nature of legislation requires consideration. The dichlorvos exposure modelling conducted by the EPA in New Zealand indicates that workers and bystanders potential exposure exceeds acceptable risk levels. Further the environmental risk assessment shows significant harm to exposed flora and fauna.

Caveats

Dichlorvos is a toxic substance, therefore understanding the human impact and the extent of environmental harm needs careful consideration. In New Zealand we have some data on hospitalisation associated with organophosphate poisonings.

New Zealand data that connects dichlorvos to human harm is limited. It draws on self-reporting organophosphate poisoning in hospitals. Therefore, we have little information on the type of organophosphates that commonly cause patient harm.

We also have limited data on other potential benefits such as avoidance of sick days/time off school or emotional harm. We do not have any information on long term health effects of poisonings in New Zealand or any data from New Zealand conditions that allow us to assess environmental harm. However, EPA’s risk assessment is that most current uses of dichlorvos lead to unacceptable exposures of people and the environment.

This brings considerable uncertainty about the baseline, likely impacts, assumptions and the extent to which costs and benefits found internationally can be translated to New Zealand.

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1. Introduction

The Environmental Protection Authority (EPA) has asked NZIER to examine the costs and benefits of withdrawing the organophosphate, dichlorvos, from the market. This is part of a wider reassessment of the role of organophosphate use in New Zealand.

Dichlorvos is a broad spectrum insecticide used in a large range of areas including agricultural, horticultural, biosecurity, public health, and domestic settings³.

The rationale for the reassessment of dichlorvos includes:

 its high toxicity and acute human poisoning potential (including long term effects of acute poisoning)

 potential chronic poisoning impacts on humans

 potential environmental damage

 non-market issues such as confidence in the regulatory regime

 potential regulatory actions in other jurisdictions (either competitors or markets for New Zealand produce)

 information on the effects of dichlorvos was not available at the time dichlorvos was transferred in the HSNO Act.

Organophosphates are a widely used principally because they are cheap and effective. However, their acute and chronic toxicity causes potential hazards for both professional and amateur users. They may also cause some environmental damage, particularly in aquatic environments.

Over the past six years, the EPA has reassessed a number of organophosphates. The reassessment of dichlorvos is part of this process. A ruling on dichlorvos will give greater clarity and certainty for industry about the insect control tools available to them in future.

The reassessment allows the EPA to check that dichlorvos is being used appropriately. Part of the reassessment is to evaluate the costs and benefits to ensure that effective and efficient insect control tools (relative to other options) are available while providing adequate health and safety protection and mitigation of environmental damage.

Specifically, we are estimating the costs and benefits of the use of dichlorvos and this includes:

 setting out the costs of total market withdrawal of dichlorvos

 further understanding the potential costs associated with dichlorvos use.

This includes assessing the evidence that may link dichlorvos use with adverse health and environmental outcomes given the human health and environmental risk assessment carried out by the EPA

 understanding other issues that may need to be considered when determining the continued use or otherwise of dichlorvos.

3 In this report analysis is conducted on agricultural and horticultural industries. While mentioned no data is available use in the home and public health.

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The purpose of this report is to provide a partial cost benefit analysis (CBA) that helps decision makers further understand the pluses and minuses of withdrawing dichlorvos from the New Zealand market.

There have been no studies of dichlorvos conducted in New Zealand. Therefore we have drawn on foreign studies, stances taken in other jurisdictions, perceptions of those involved in the market, previous work commissioned by the EPA on specific substances, and other stakeholder sources. To elicit this information we:

 conducted a limited number of interviews, Two organisations were contacted Market Access Solutionz and Plant and Food Research Ltd.

 reviewed pertinent scientific literature.

The analysis is intended to give policymakers an indication of the likely costs and benefits in an area where there is only limited information.

There remain a number of important uncertainties around the benefits of withdrawing dichlorvos, for example, the uncertain linkages between organophosphate use and chronic health conditions. As such, the depth of the CBA reflects a snap-shot of current knowledge.

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2. Current situation

2.1. Organophosphates

Organophosphates have been available for sale in the post-World War Two era. They were first recognised in 1854 but their toxicity was not established until the 1930s.

Organophosphates are derived from phosphoric acid. They are acutely toxic to vertebrate animals. They are relatively unstable and break down quickly in the environment. There are approximately 100 organophosphates in use in various forms around the world.

The advantage of the organophosphate dichlorvos is that it gives rapid knockdown and with its broad-spectrum activity is used to control sucking and chewing insects and spider mites on a wide range of crops (BCPC 2012 and pers. comm. Plant and Food Research, 27^th February 2015). Its mode of action is by contact and ingestion.

An important advantage is that it decomposes rapidly so can be applied close to harvest (pers. comm. Plant and Food Research, 27^th February, 2015).

Other factors considered when applying dichlorvos depends on factors such as:

 use of integrated pest management programmes (IPM)

 insecticide resistance management including its use as an alternative mode of action (MoA) in an insecticide resistance management rotation (IRM)

 method of application

 impact on plant growth (phytotoxicity)

 product registrations in New Zealand

 MRL levels in export markets.

In New Zealand, the most up-to-date information on pesticide use comes from Manktelow et al (2005) and is set out in Table 1. While these figures are dated it does suggest the use of pesticides (including organophosphates such as dichlorvos) is concentrated in relatively small areas and focused on horticulture. The analysis therefore focuses on horticultural industries since this is where the major costs and benefits will likely fall.

Table 1 Use of pesticides by primary sectors in New Zealand

Total Area (millions of hectares)

Area (%) of agricultural land

Mean pesticide loading kgs per hectare

Total use (%)

Pastoral farming 7.65 79.3 0.17 35.90

Arable 0.14 1.5 2.43 9.66

Forestry 1.74 18.0 0.27 13.00

Horticulture 0.11 1.2 13.19 41.44

Source: Manktelow et al 2005 Table 6

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There is little specific information on market dynamics or data on dichlorvos, which is tightly held by the firms involved.⁴ This is because these firms regard this information as commercially sensitive (Pfeffer and Heath (2010) p9.

3. The reassessment of dichlorvos

Dichlorvos is an organophosphorus insecticide with fumigant and penetrant action.⁵ Like many organophosphates it was introduced to New Zealand in the 1960s. It kills insects by interference with the enzyme in the nervous system, resulting in muscle paralysis.

Table 2 contains a list of products being reassessed.

Table 2 List of dichlorvos substances covered by the assessment

HSNO approval number

Substance name Known trade name

Use pattern

EPA proposal

HSR002838 Dichlorvos - Retain approval

HSR000212 Aerosol containing 50 g/kg dichlorvos

Insectigas ArmourCrop Insecticide

(1) Retain approval with significant

restrictions HSR000211 Emulsifiable

concentrate (EC) containing 1000 g/L dichlorvos

Nuvos (1) Retain approval with significant

restrictions

HSR000213 Emulsifiable concentrate (EC) containing 1140 g/L dichlorvos

Divap (1) Retain approval with significant

restrictions

HSR000207 Flammable aerosol containing 3.1 g/L dichlorvos and 8.7 g/L propoxur

BV2 Surface Insecticide

(2) Revoke approval

HSR000209 Ready to use liquid containing 4.4 g/L dichlorvos and 9.6 g/L propoxur

BV2 Surface Insecticide bulk

(2) Revoke approval

Notes (1) Used in agricultural, horticultural (indoor and outdoor), fumigation, public areas and biosecurity and post-harvest treatment. (2) Domestic use.

Source: EPA

4 Because of the tight timeframes and resources available we have not contacted companies involved in the chemical trade.

Instead we have relied on recent work describing the chemical market in New Zealand e.g. (Pfeffer and Heath (2010) p9.

5 A penetrant chemical causes a plant to absorb the poison in a more effective manner and so succumbs more readily.

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3.1. Specific proposal

Under the Hazardous Substances and New Organisms (HSNO) Act the EPA is required to regulate hazardous substances (chemicals and chemical mixtures) that are imported, manufactured or used in New Zealand.

The proposal is to:

 retain approval for dichlorvos (HSR002838)

 allow products with HSNO Approval numbers HSR000211, HSR000213, and HSR000212 to be used for biosecurity uses and small volume post-harvest use on horticultural produce

 revoke approval for HSR000207 and HSR000209.

Reassessing dichlorvos will further assist the EPA in:

 identifying those products that have been withdrawn from the market

 understanding the characteristics of specific products

 understanding the costs of withdrawing selected products

 understanding the linkages between dichlorvos and human health

 identifying other issues that have a bearing on withdrawing dichlorvos (e.g.

the role under the HSNO Act of the regulator.

The fundamental gain from partially withdrawing dichlorvos is a reduction in the risk to human health and a reduction in environmental harm.

In the ‘without’ reassessment situation the level of dichlorvos use would remain the same in New Zealand with high levels of exposure for humans and the environment.

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4. Approach

Cost benefit analysis has been used to examine the costs, benefits, and risks of the total withdrawal of dichlorvos from use in New Zealand.

CBA is a long-established technique intended to identify the economic efficiency of a proposed project or policy change (see Nixon and Yeabsley, 2014). We think of efficiency as maximising a set of outputs obtained from available inputs. Components of efficiency include:

 technical efficiency (scale) refers to the most cost-effective way of reducing dichlorvos poisoning and improving environmental outcomes. For instance, reducing the volume of dichlorvos on the market and/or imposing further use restrictions could reduce the amount of money spent on poison related accidents per person

 allocative efficiency (matching) refers to the ease with which resources can move across economy to their most productive uses. For instance,

improved health and safety outcomes by withdrawing dichlorvos may reduce health spending associated with accidental poisoning and increase resources for other parts of the health system

 dynamic efficiency (innovation) changes to insecticide use or the introduction to new chemistry over time.

If hospital poisoning case costs can be reduced by the withdrawal of dichlorvos then it will improve technical efficiency. To the extent that it shifts health and environmental resources from one less productive activity to a more productive activity, it also improves the allocative efficiency of resource use. If it also allows new, more efficient ways to control/improve delivery of insecticides it also improves dynamic efficiency over time.

A cost benefit analysis proceeds by comparing effects and outcomes associated with the withdrawal of dichlorvos against what would have occurred without the proposed change (a counterfactual). This can be described as a projection of the status quo into the future as supply and demand conditions change.

4.1. Counterfactual

We need to establish a base line to measure what would happen without the reassessment (the counterfactual). This involves examining in detail the current status quo. It includes a commentary on what exists on the ground at the moment i.e. the existing use of dichlorvos in New Zealand.

The counterfactual also includes examining the likely future policy developments.

While this can be speculative, we have focused on examining recent policy changes and any expectations for future developments. The aim is to identify how policies are likely to change over the next 20 years, to establish a realistic baseline for dichlorvos use in New Zealand.

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The counterfactual used here is the regulatory settings prior to any organophosphate reassessment plus any likely regulatory advances that could occur.⁶ This will be used as a baseline to measure the potential costs and benefits associated with the withdrawal of dichlorvos.

Setting up the counterfactual is difficult because there is:

 limited baseline data from which to measure any change i.e. the lack of information on volumes being used, where it is being used and its human and environmental impacts

 uncertainty about what initiatives could be trialled in the absence of the reassessment process

 the unusual nature of the pesticides markets around the world given the:

 stances taken by regulatory authorities

 the difficulty in identifying reliable harm estimates

 political environment that can provide unanticipated regulatory outcomes.

Therefore, there are potentially a number of credible counterfactuals. The one we assume here is open to question, and should be treated as ‘work in progress’.

4.2. Stakeholders

This is a ‘partial’ cost benefit analysis in the sense that some effects will be too difficult to reliably quantify. For instance, it may well be that there is a benefit to society from the withdrawal of organophosphates.

While we can identify these societal benefits (i.e. improved environmental outcomes) as a welfare gain, it is not feasible to value them in economic terms, given time and resources. For practical reasons this analysis has concentrated on effects that are readily quantified and valued, and we have described qualitatively the effects that cannot be readily quantified or valued.

From the feedback from various stakeholders, the experience of the private sector, reports to government departments, and other published material we have identified a number of costs and benefits that need to be considered in the CBA, whether they can be quantified or not. A number of groups are considered to be important:

 users of dichlorvos. A potential benefit to this group is fewer incidents of poisoning. There is also a large potential cost because there are few alternatives that can be used for pre-harvest pest control

 producers of dichlorvos. A small cost to producers as they switch to another substance

 general public. A benefit to the general public from knowing that they may be less exposed to organophosphates and that regulatory agencies are being proactive in safeguarding public health

 the environment. Less dichlorvos will have an uncertain but beneficial impact on environmental outcomes.

6 The counterfactual would consider other regulatory policies that have a bearing on pesticide regulation other than further reassessments of organophosphates.

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5. Costs and benefits

We have focused on the costs and benefits associated with the withdrawal of dichlorvos from the market. This will give stakeholders a ‘big picture’ view of the likely costs and benefits whether or not they are quantified or unquantified.

The frame of the CBA includes a:

 twenty-year range to cover the foreseeable future

 discount rate⁷ of 8%, in line with standard Treasury guidance.

5.1. Costs

The cost estimates have been developed by examining the literature and talking with market participants. Information is scarce and market share information is tightly held (see for example, Pfeffer and Heath, 2010).

A number of assumptions have been made to assist with the development of the costs. Of particular importance is that the number of substitutes in the market in many cases is limited.⁸ The following table sets out or view of the substitutes.

The removal of dichlorvos will mean that these relatively small industries incur costs in the short term to medium term. In most cases dichlorvos is infrequently used in persimmon and field vegetable crops as a pre-harvest treatment as a risk management tool when pest control has failed or there is a phytosanitary need to be met on an export crop.

7 The discount rates reflects the time value of money i.e. $1 today is worth more than a $1 next year. The discount rate reflects the time value of public money and is currently set at 8%.

8 We have not factored in the use of off-label use since the extent of off-label use is unknown.

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Table 3 Requirements and assumptions on substitute products

Activity Requirements Substitute

chemicals¹

Comments

Outdoor vegetables Deals with aphids, caterpillars, cockroaches, leaf miners and thrips

Some chemicals available, typically more expensive and deal with specific issues

Dichlorvos is used occasionally. Other chemicals can partly mitigate the impact of a sudden incursion

Squash Can be used close

to harvest

Some chemicals available that could be partially effective

When an issue is identified dichlorvos is applied Persimmon Can be used close

to harvest

None, although some off-label products can be used

Dichlorvos is applied through air blasting

Greenhouse use Used as a fumigant Some chemicals available, typically more expensive and deals with specific issues

When a problem is identified dichlorvos is used

Asparagus Post-harvest use to deal with thrips

None Specifically used on

exports to Australia Mushrooms Used to control

sciarid flies

Alternatives available

Dichlorvos is only used occasionally Ornamental flowers

(both indoor and outdoor)

Occasionally used in cut flowers, mainly for orchards

Some chemicals available, typically more expensive and deals with specific issues

Dichlorvos is used occasionally. Other chemicals can partly mitigate the impact of a sudden incursion Grain storage Treatment for grain

and sprayed on surrounding areas to protect against weevils and other alternatives

One alternative available (actellic dust)

Dichlorvos used extensively in grain storage

Note (1) Appendix C sets out some of the alternatives to dichlorvos (2) Market Access Solutionz advises that Tamarillo, Berryfruit, Clover Seed, Strawberry, Kumara and Onion no longer support continued use of dichlorvos.

Source: NZIER, Market Access Solutionz and Plant and Food Research

Dichlorvos is more extensively used in covered crops such as glasshouse vegetable and cymbidium orchid production.

Japan has banned the use of dichlorvos as a postharvest fumigant for New Zealand export asparagus (pers. comm. Geoff Lewis, Chairman of the Asparagus Product Group, Horticulture New Zealand). The Japanese action means that it is more than likely that other export markets will ban dichlorvos use in the short to medium term.

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It also suggests that asparagus growers have found alternative ways of dealing with postharvest pests.

The following table sets out the claims by industry of cost increases (set out in the Market Access Solutionz submission), our assessment of those claims with advice from Plant and Food Research, and reasons for our assessment. Specifically our assessments are based on:

 our own knowledge of the industries and testing with commercial growers

 advice from Plant and Food Research Ltd.

 making conservative assessments of the costs to ensure to provide credible loss estimates.

Table 4 Estimated losses

Activity Loss claims (p.a.) First year costs^{1 2} Our assessment (present value expected range) over 20 years

Comment

Outdoor vegetables

$42.5 million Between $4.3 million and $21.3 million

$18.6 million and

$93.0 million

Alternatives available, however losses expected

Squash $5.4 million Between $2.7

million and $4.9 million

$11.8 million and

$21.2 million

Some partial mitigation likely but losses are significant for the industry

Persimmon $6.5 million Between $3.3 million and $5.9 million

$14.2 million and

$25.6 million

Some partial mitigation likely but losses are significant for the industry

Greenhouse use $1.0 million per 0.5 hectare of glasshouse

Between $23.5 million and $42.3 million

$102.9 million and $185.2 million

Some partial mitigation likely but losses are expected

Asparagus $3.75 million 0 0 Japan has banned dichlorvos on

New Zealand asparagus exports. Other markets likely to follow suit

Mushrooms Unknown, but likely to be small

0 0 Only occasionally used,

alternatives available Ornamental

flowers

$2.1 million Between $1.1 million and $1.9 million

$4.7 million and

$8.5 million

Used mainly on orchids. Partial mitigation likely but losses are expected

Grain storage Unknown Unknown Unknown Used extensively. The potential

damage to stored grain is unknown

Public health Unknown Unknown Unknown Used occasionally, unsure what

alternatives are available or the extent of the issue

Domestic use Unknown Unknown Unknown Users are likely to be the most

vulnerable to posionings Note (1) The costs reduce over time as growers find ways of substituting dichlorvos with other approaches. (2) Numbers rounded.

Source: Market Access Solutionz and NZIER

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The impact of the expected value calculations and the size of the various industries are set out in set out in Appendix B and are likely to be between $51 million and $153 million. The assumptions around these figures are:

 industry costs have been multiplied by the expected value in year 1

 between years 2 and 5, there will be a 3% reduction in costs per annum as growers start to develop alternatives to dichlorvos

 between years 6 and 10 costs will reduce by half each year as new techniques and possibly new chemistry are used that reduce costs

 costs are reduced to zero between years 10 and 20 as alternatives are found.

The removal of dichlorvos from the market will create substantial costs for a group of small industries. We expect these costs to remain over the short to medium term and reduce over time as industry finds other ways of dealing with these problems, particularly with difficult pests, such as thrips. Although the solutions to industry infestation problems are likely to be more expensive and could potentially impact on quality.

5.2. Benefits

Understanding the benefits of withdrawing dichlorvos from the market is fraught with difficulty. The data is poor⁹ and there is uncertainty over the human health impact of dichlorvos exposure.

The focus¹⁰ of our benefit estimate is on exposure of users, typically farm/orchards workers and the children of farm/orchard workers to dichlorvos.

Unfortunately, the information and data we have often does not distinguish between exposure to individual organophosphates. Where the data does distinguish between organophosphates, it is not consistent with other data we have (e.g. the Hazardous Substances Surveillance System data).

Studies of the potential impact of dichlorvos and regulatory reviews and updates are relatively frequent since the mid-1990s. So the spotlight on their use has not diminished. The health benefits may occur in a number of areas. These include reductions in:

 long and short term acute poisoning

 prolonged low level exposure

 detrimental environmental effects.

Below we set out what we know about the benefits of withdrawing dichlorvos from the market.

9 The Centre for Public Health Research (CPHR) at Massey University runs the Hazardous Substances Surveillance System (HSSS) on hospital data relating to hazardous substances. The data has only limited use since it does not identify the product that caused hospitalisation.

10 That is, the benefits of withdrawing organophosphates.

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5.2.1. Acute poisoning

The literature and expert opinion is unequivocal about the impact of acute poisoning to organophosphates,¹¹ such as dichlorvos, to the point where the World Health Organisation has developed a comprehensive code of conduct for diagnosis and treatment of pesticide poisoning.¹² For neuropsychological outcomes, peripheral neuropathy and psychiatric illness there is overwhelming evidence to show substantial harm can be caused by acute exposure to organophosphates.

Organophosphates kill an estimated 200,000 people each year from self-poisoning in the developing world. This is about 15% of the total numbers poisoned. The bulk of non-fatal cases exhibit neuropsychological outcomes, peripheral neuropathy and psychiatric illness.

Table 5 sets out the differences in information/expert opinion (if any) on acute poisoning. No disagreement exists between expert opinion and the scientific evidence. These products are designed to attack the nervous systems of insects and mammals. Acute exposure will cause a harmful reaction depending upon the degree of exposure in the short and long term.

Table 5 Amount of agreement on acute poisoning

Amount of evidence (number and quality of independent sources) Limited

evidence Medium evidence Much evidence

Level of agreement (on a particular finding)

High

agreement Na Na

Many papers setting out the impacts of acute poisoning e.g. COT (1999 &

2013), Eddleston et al (2008) and all expert opinion

Medium

agreement Na Na Na

Low

agreement Na Na Na

Source: NZIER

In New Zealand data is scarce. From CPHR data we only know how many people were poisoned by organophosphates. However, withdrawing dichlorvos will have some positive impact. To understand and estimate the magnitude of the impact we have:

 examined the number of organophosphate poisoning cases between 2006 and 2010 (70 according to CPHR HSSS data)

 taken out those to do with self-harm (approximately 20%). We assume that no access to dichlorvos is not a barrier to self-harm

 divided by 5 to get an average annual impact (11.2 poisonings a year)

11 See for example, http://emedicine.medscape.com/article/167726-overview,

http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2493390/ and http://www.bmj.com/content/334/7594/629

12 See http://www.who.int/whopes/recommendations/IPCSPesticide_ok.pdf

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 multiplied the average stay in hospital – typically one day ($4,648 per day)¹³ by the number of poisonings (11.2) equalling $52,000 per annum.

 assumed this benefit over the foreseeable future (20 years) and discounted by 8% equalling approximately $500,000 (present value).

We have taken the present value figure ($500,000) calculated above and applied an expected value to the estimate to reflect our uncertainty about the benefit i.e. the reduction in exposures that require hospital treatment as a result of withdrawing dichlorvos. The expected value ranges between 5% and 100%. The actual value will be at the lower end of the scale because not all poisonings are associated with dichlorvos.

Since we are only able to monetise hospital stays we see this as a very conservative cost¹⁴ e.g. we have not included any estimate of the costs associated with the long term effects known to be a potential consequence of acute organophosphate poisoning.

We have no data on under-reporting in New Zealand, although the EPA has alluded to the problem of under reporting in previous reassessments.¹⁵ In the United States critics have been more forthcoming and suggest that official figures are unrealistic and under represent the actual number of poisonings. Farmers and farm workers are less likely to report harmful exposure unless they are gravely ill. Contributing to this problem is that doctors misdiagnose overexposures as stomach flu, bronchitis or asthma. Some critics even suggest that undiagnosed cases of farm-worker exposure may outnumber diagnosed cases (Busby and Eckstein, 2009).

No attempt has been made to estimate the benefits of withdrawing dichlorvos in reducing chronic health issues, as there are not sufficient data available to do this

5.2.2. Detrimental environmental effects

We have little information that can help us identify the national environmental benefit of removing dichlorvos. The EPA modelling shows likely impacts of specific activities. However, translating national impact requires further understanding of the:

 amount of dichlorvos being used (tightly held information by the firms involved)

 average likely impact (e.g. impact on aquatic invertebrates, birds and bees).

In the absence of data/information on the size of the environmental problem we can only describe the potential issue. What we can say is that the environmental impacts are localised (possibly around horticultural activities) and while dichlorvos remains toxic, there could be significant impacts in specific localised areas.

13 http://www.pharmac.health.nz/assets/pfpa-v2-1-cost-resource-manual.pdf Updated to 2014 dollars.

14 Other costs include emotional and physical harm unrelated to hospital stays, benefits of knowing organophosphates are being withdrawn from the market (existence values), and productivity losses (including ancillary costs of medical treatment e.g. travelling cost to and from hospital and the costs of raising taxes to fund public health.

15 EPA (2013) Decision. Application for the Reassessment of a Group of Hazardous Substances. 27^th June 2013

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6. Other issues to be considered

There are a number of other factors that need to be taken into account when assessing the risks, benefits and costs of reassessing dichlorvos. These are examined below.

6.1. Trade and trade policy issues

There is no discernible pattern by regulatory authorities that suggests that banning dichlorvos use will occur in the foreseeable future (see Appendix A for a discussion).

Although, in many jurisdictions, dichlorvos is being restricted in its use, particularly in home use and in broadacre agriculture (e.g. in Australia).

6.1.1. Practices undertaken by competitors

As New Zealand has invested heavily at being an ‘insider’ in world trade i.e. our rules and regulations conform to those in our (mainly industrialised nation) markets and competitors such as Australia. This has allowed New Zealand to trade in those often restricted markets despite the strict biosecurity, hygiene and other regulations within those markets. Many of New Zealand’s potential competitors cannot match this e.g.

Latin American beef suppliers are unable to get rid of foot and mouth disease.

However, if New Zealand is using chemicals that our competitors are banning or severely restricting the use of, New Zealand needs to take notice. We do not want our major competitors differentiating themselves in the market in a way that suggests they have a higher quality and safer product.

The picture in competitors’ jurisdictions and major markets is mixed. In Australia regulators are significantly restricting dichlorvos use, in Europe the product is not registered (but could be re-registered if required), while in the United States and Canada use by professionals in agricultural, industrial and storage is permitted.

6.1.2. Trends in dichlorvos use

A further consideration is trends in organophosphate use in major markets. This is a particular concern for older organophosphates such as dichlorvos.

The withdrawal of these organophosphates in the developed world could trigger regulatory authority or buyer action that disrupts the marketing efforts of fruit and vegetable sellers.

None of these issues are likely to be brought to bear in the next five years. However, New Zealand policy settings need to be aware of the micro steps occurring in our major markets and by competitors and adjust their settings accordingly.

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6.2. HSNO Act considerations

A key issue for decision makers is the degree of certainty required by the regulation before a substance is withdrawn. Where regulation is precautionary in nature then legislation may require regulatory action ( Busby and Eckstein, 2009).

In New Zealand the HSNO Act states:

“All persons exercising functions, powers, and duties under this Act, including but not limited to, functions, powers, and duties under sections 28A, 29, 32, 38, 45, and 48, shall take into account the need for caution in managing adverse effects where there is scientific and technical uncertainty about those effects”. Section 7: amended, on 31 December 2000, by Section 4 of the Hazardous Substances and New Organisms Amendment Act 2000 (2000 No 89).

Caution in the use of organophosphates such as dichlorvos is required to protect human health and environmental outcomes. Cause and effect do not need to be firmly established before regulators can withdraw substances such as dichlorvos. To assist decision-makers two key pieces of information are provided:

 a quantitative risk assessment that has identified most current uses of dichlorvos result in unacceptable exposures of people and the environment

 a partial cost benefit analysis that quantifies the costs to industry and partially quantifies the benefits.

6.3. Distributional issues

In New Zealand, typically (although not in all cases) those marketing older chemistry are smaller New Zealand companies, while newer chemistry is marketed by much larger foreign owned multinationals.

The withdrawal of dichlorvos is more likely to impact on smaller New Zealand firms marketing the products. However, this issue is mitigated somewhat by the flexibility of New Zealand companies as they can easily move from marketing one product to another.

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7. Results

Section 5 discussed the basis on which the CBA has been developed. The results are summarised below. On the basis of our analysis the quantified analysis returns a net cost.

However, the robustness and representativeness of the analysis is influenced by:

 substantial gaps in the data

 any bias and errors in information provided by participants (employers, employees and government workers)¹⁶

 the potential magnitude of unquantified benefits, such as potential longer term acute health benefits.

7.1. Costs

Table 6 shows that there are significant costs for the industries involved. These are potentially in the region of $152 million and $333 million (present value over a twenty year time frame). In some instances the costs are larger because there no substitutes for dichlorvos. Dichlorvos is particularly effective in controlling thrips and is a cheap and effective fumigant.

The withdrawal of dichlorvos will impact more on smaller companies; however we expect these companies to adapt quickly and move to other activities or other chemicals.

The costs of removing dichlorvos is likely to have a substantial impact on the industries concerned (see Appendix B) although in terms of the whole economy the impact will be quite small.

7.2. Benefits

The quantified benefits stem from the avoided medical costs associated with poisonings. These are expected to be between $25,000 and $500,000 but at the lower end of this scale.

However, these quantified costs do not take into account other costs associated poisonings e.g. emotional and physical harm, unrelated to hospital stays, and productivity losses including ancillary costs of medical treatment e.g. travelling costs to and from hospital and the costs of raising taxes to fund public health. It also does not include the potential long term costs of acute and possible chronic poisonings.

There are also other costs associated with environmental damage and other non- market values such as existence values (i.e. the benefit of knowing that regulators acting responsibly).

16 To try and avoid bias and errors we asked a standard set of questions of each interviewee and where possible cross-checked answers with different sources.

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Table 6 Summary of costs and benefits

PV 8% over 20 years

Impact Costs Benefits

Farmers

Switching to other substances and impact on vegetable/fruit sales if dichlorvos was not available

Potentially large, between $152 million and

$333 million

Manufacturers Switching to other substances

Negligible cost

Impact on smaller companies

Greater flexibility is expected to mitigate switching cost Health impacts

Reduced acute poisoning hospital costs

Small between $25,000 and $500,000

Reduced long term impact of acute poisoning

Chronic poisoning impact

Non-use values Uncertan, but beneficial impact

Environmental, existence,¹ and other non-use values²

Uncertan, but beneficial impact

Trends in other jurisdictions Very small benefit.

Overall impact Large quantified loss of between $152 million and $333 million

Small quantified benefit (between

$0.025 million and $0.5 million) and a range of unquantified benefits Note (1) Benefit to the New Zealand public knowing that dichlorvos use is being managed appropriately. (2) For example, bequest value for the general public. Knowledge that a regulatory framework dynamically adjusts over time and for future generations i.e. it reflects current scientific knowledge and balances the costs and benefits.

Source: NZIER

One way of understanding the size of the benefits required is to use the Value of Statistical Life (VoSL). VoSL is used in transport cost benefit analysis.¹⁷ Currently the VOSL is $3.95 million per risk of death in a road accident. In this situation over 20 years 3 people would be have to be at risk of dying each year for the benefits to reach $193 million (at a discount rate of 2%).

This would roughly equate the costs and benefits (not including environmental benefits).

17 It is very important to realise that VOSL does not give a value for life – you cannot value life. What is shows is how much New Zealanders are prepared to pay to reduce the risk of an extra road death (i.e. straighten out roads, introduce traffic calming designs, and increased use of road furniture.

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8. Conclusions

Of the components that could be quantified, results suggest that costs outweigh the benefits.

The main losses are associated with the inability to export because of an infestation of insects such as thrips. This will cause substantial losses for individual growers.

The principal benefits include:

 avoidance of acute poisoning from dichlorvos

 possible avoidance of chronic poisoning from dichlorvos

 environmental benefits

 small non-use benefits for the general public knowing that potentially dangerous pesticides are being proactively managed and that the regulatory regime will assist in avoiding adverse health outcomes and environmental outcomes.

We must stress that there are limitations in the quantified analysis due to the lack of information available on the benefits. The robustness of the analysis is influenced by the potential bias in the information provided. However, it also excludes quantified information on some of the key benefits, such as the potential value of chronic dichlorvos poisoning and the long term effects of acute poisoning. What we can say is that for costs and benefits to equate three people would have to be at risk of dying from diclorvos poisoning each year over the next twenty years.

Of further importance is the precautionary nature of the HSNO Act. Cause and effect do not have to be established before decision makers act on reassessment. The HSNO Act requires caution in managing adverse effects.

The figures in this report should be regarded as an order of magnitude calculation rather than a definitive measure and the analysis can use improved information if it becomes available.

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9. References

BCPC 2012. MacBean C (ed). A World compendium and pesticide manual. British Crop Protection Council, UK. P1439

Busby A and Eckstein G (2009) Organophosphates, friend and foe: The promise of medical monitoring for farm workers and their families. Journal of

Environmental Law Vol 27:39.

Committee on Toxicity of Chemicals in Food, Consumer Products and the Environment (2013). http://cot.food.gov.uk/cotreports

Eddleston M, Buckley NA, Eyer P, Dawson AH. (2008) Management of acute

organophosphorus pesticide poisoning. Lancet. 2008 Feb 16;371(9612):597-607.

EPA (2013) EPA (2013) Decision. Application for the Reassessment of a Group of Hazardous Substances. 27^th June 2013

Manktelow, D, Stevens, PJG, Walker, J, Gurnsey, S, Park, N, Zabkiewicz, J, Teulon, D, Rahman, A (2005). Trends in pesticide use in New Zealand: 2004. (p. 73).

Auckland, New Zealand: HortResearch

Nixon C and Yeabsley J (2014), Voyage of Discovery: How do we bring analytical techniques to state-driven behaviour change? In Frankel and Yeabsley eds Framing the commons: cross-cutting issues in regulation. Law Foundation 2014.

Pfeffer A and Heath A (2010) The use of diazinon as a veterinary medicine in New Zealand. A Report to ERMA New Zealand.

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Appendix A Regulation in other jurisdictions

A.1 European Union

In 2006, the EU decided not to include dichlorvos in the list of active constituents approved for use in the European Union. This followed a review which determined that it was not possible to define the technical specification for dichlorvos because of poor data package and dossier.¹⁸ If any registrant was interested, they could submit missing data and apply for inclusion on the list of active constituents for dichlorvos.

A.2 United States

The US EPA determined that it did have enough information on the human health and ecological effects of dichlorvos to make interim decisions. The EPA has continued to make dichlorvos eligible for re-registration.

It is used in agricultural and manufacturing sites to control pests. It can also be used in glasshouses, storage areas, mushroom houses, food manufacturing and food handling areas.

Most home related uses are banned except for pressurised aerosol spray cans, pet collars, and limited use of pest strips. Other domestic plant uses including various foggers, crack and crevice, lawn, turf and ornamental plant uses are no longer permitted. The uses of larger sized pest strips have also been phased out.

A.3 Canada

Canadian regulatory authorities have implemented similar regulatory measures as the United States.

A.4 Australia

The regulatory review on dichlorvos started in 1996 was completed in 2011 by the Australian Pesticides and Veterinary Medicines Authority (APVMA). As a result of this review, dichlorvos use has been severely restricted. Dichlorvos can only be used where the exposure of the operator is minimised either by automated application methods in enclosed spaces or uses in small volumes.

Dichlorvos cannot be applied in situations where re-entry of bystanders or workers occurs within 96 hours, effectively banning indoor domestic use. Prior to the effective ban 26% of all use occurred in domestic settings, according to the APVMA.

The main use of dichlorvos in Australia has been on pests that attack stored grain.

Over half (55%) of all dichlorvos used is used in grain storage in Australia (no longer approved). Most licences to use dichlorvos have been suspended.

18 The uncertainties also meant that it was also not possible to demonstrate that estimated worker, re-entry worker and bystander exposure is acceptable.

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The use of dichlorvos in glasshouses was retained only for ornamentals.

Outdoor use in Australia was also banned (only used in Australia on avocados) because of the dangers of spray drift i.e. the impracticability of 200 metre buffer zones).

Table 7 Impact on GDP of withdrawal of dichlorvos

2012 base year export and GDP estimates

Activity Alternatives to dichlorvos? Exports Estimates of domestic market/Contribution to GDP¹

Comment Passionfruit No alternatives to control

thrips

$0.3 million

Domestic market estimated at

$1.3 million. Contribution to the economy $0.55 million

Very small relative to the size of the economy Persimmon No alternatives for

transporting to market

$7.1millon Domestic market estimated at

Very small relative to the size of the economy Tamarillos Only chemical that can control

the tomato and potato psyllid

$0.2 million

Very small relative to the size of the economy Strawberries Useful option with late

harvest infestation

$4.8 million

Very small relative to the size of the economy Cut flowers and

ornamentals

Controls mites $56.0

million

$61 million. Contribution to the economy $57.9 million

Small in relation to the size of the economy Glasshouse

vegetable production

Used extensively as a fumigant. Fewer alternatives with the wide pest control spectrum and short pre- harvest use

$50.0 million

Domestic market estimated at 140.0 million. Contribution to the economy $69.0 million

Small in relation to the size of the economy

Field vegetables Occasionally used with bad infestations

$156.0 million

$156 million. Contribution to the economy $57 million

Small in relation to the size of the economy Asparagus Controls thrips. No alternative $3.2

million

$12.0 million. Contribution to the economy of $7.7 million

Small in relation to the size of the economy Squash Few options at close to

harvest

$65.0 million

$2.9 million. Contribution to the economy of $31.2 million

Small but steady contributor to the NZ economy Grain storage One or two other options $480

million

Farmgate market estimated at

$400.0 million. Important contributor to feed industry (pigs and poultry)

0.2% at the farmgate

Industrial and public health use

A number of different options unknown unknown small

Domestic use unknown unknown unknown unknown

Notes (1) GDP in 2012 was approximately $207 billion.

Source: Fresh Facts, FAR and NZIER estimates

The costs and benefits of the use of dichlorvos