What it is
The EU's CosIng database describes cetearyl alcohol as "Alcohols, C16-18", and gives its European Pharmacopoeia name as alcohol cetylicus et stearylicus: cetyl and stearyl alcohol.1 Cetyl Alcohol is hexadecan-1-ol, a chain of 16 carbon atoms, and Stearyl Alcohol is octadecan-1-ol, a chain of 18.23
What it does in a formula
CosIng lists seven functions for it: emollient, emulsifying, emulsion stabilising, foam boosting, opacifying, cleansing and viscosity controlling.1 In plain terms, it softens the skin's surface, helps oil and water stay mixed, makes a product less see-through and adjusts how thick it is.
Much of the thickening comes from structure. In a study of oil-in-water creams, what gave the cream its semisolid body was a gel network formed by cetyl alcohol, a non-ionic surfactant and water.4 In other words, a fatty alcohol thickens a cream together with the emulsifier and the water around it.
Do not confuse it with the ceteareths, such as Ceteareth-20. Those are polyethylene glycol (PEG) ethers made from cetearyl alcohol and used as surfactants: related, but different ingredients with their own names.5
Not the alcohol in "alcohol-free"
The US FDA explains that in cosmetic labelling the word "alcohol" on its own means ethyl alcohol. Products labelled "alcohol free" may still contain fatty alcohols such as cetyl, stearyl or cetearyl alcohol, and the effects of these on the skin are quite different from those of ethyl alcohol.6
On a label, ethanol appears as Alcohol, which CosIng describes as undenatured ethyl alcohol7, or as Alcohol Denat., the generic name for denatured alcohol introduced in Europe; US packs may say SD Alcohol followed by a number.6 Cetearyl Alcohol is none of these.
What sources say
Allergic contact dermatitis from cetearyl alcohol has been described in case reports, for example in two people who reacted to an ointment because of the cetearyl alcohol it contained.8 A case report shows that a reaction can happen; it does not show how often it does. If you have had a confirmed reaction to it, its name on the list is what to look for.
How it appears on a label
As Cetearyl Alcohol. Its relatives have their own names: Cetyl Alcohol and Stearyl Alcohol for the single alcohols, and Ceteareth followed by a number for the PEG ethers. An "alcohol-free" claim and Cetearyl Alcohol on the same pack are not a contradiction.6