05 August 2019
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Sarah Hughes, Europe, Middle East, Africa and India commercial director for Mexichem’s Fluor Business Group, discusses how to tackle the illegal trade in refrigerants.
The best way to make something appealing for the black market is to make it highly regulated. As fluorinated greenhouse gas (F-gas) regulations have restricted supply of higher global warming potential (GWP) refrigerants, we are seeing an increase in illegal imports. But how did we get here and what can the industry do about it? |
The landscape
The F-Gas Directive, introduced in 2006 and updated in 2014, aims to reduce environmental damage from commonly used gases. Within this directive, hydrofluorocarbons (HFCs) have come under particular scrutiny and the legislation has had a huge impact on the supply of these gases into the EU.
Current EU targets mean that the UK has committed to phase down HFCs by 79% by 2030. In the event of a no-deal Brexit, the UK has committed to regulating F-gas and ozone depleting substances (ODS) and the Environment Agency has also suggested that it will transfer most of the requirements of EU regulations into law. So now when the UK has left the EU, any business placing more than 100 tonnes of Co2 will need a UK HFC quota.
A 2018 report from the Environmental Investigation Agency (EIA), indicates that Europe is facing what it describes as “a substantial level of illegal use and trade in HFCs”.
According to the EIA, as much as 16.3 million tonnes of carbon dioxide equivalent (MtCO2e) of bulk HFCs were illegally placed on the market in 2018. This represents more than 16% of the 2018 quota and, says the report, doesn’t take into account illegal imports of HFC-containing equipment and illegal HFCs that are “undoubtedly” being smuggled under the radar of customs. In some cases, HFCs are being mixed with lower quality, counterfeit or illegally imported HFCs. A recent Environmental Audit Report, UK Progress on reducing F-gas Emissions, suggested that the government should ensure that adequate resources are allocated to monitoring illegal activities, especially online and that only qualified persons handle F-gases.
In April this year, German MEP Jo Leinen requested clarification from the EU Commission on steps being taken to tackle this illegal refrigerant trade. Leinen suggested that much of the trade is coming from Asia and asked that the EU work with its Asian counterparts to identify and track these illegal exports. And in 2018 Lithuanian MEP Rolandas Paksas told the EC it was making a “nonsense” of the F-gas quota system over its failure to tackle the issue of illegal F-gas imports. He also suggested the Commission should impose stricter controls at EU borders.
What’s the impact?
This illegal trade of HFCs is having a severe impact on EU emissions targets, government tax revenues and damaging legitimate businesses who are losing out to people offering illegally imported refrigerants. The EIA says: “We are concerned that the illegal trade along with stockpiling of HFCs in 2017 has produced a false sense of security in terms of availability of HFCs to meet the phase-down steps from 2018 onwards. Future quota cuts will be difficult to meet unless the transition to low-GWP alternatives is accelerated.”
At a micro-level, businesses who use these illegal refrigerants are putting their employees and customers at risk. Plus, if found to be using an illegal HFC product, businesses could face penalties such as fines, criminal prosecution, and a long-lasting impact on a company’s reputation.
What’s the solution?
European Commission actions so far have included customs controls workshops for custom and F-gas experts, which include dedicated custom codes for bulk gas and equipment and checks on the registrations of companies for HFC import and export. The EC is also creating an IT system – slated for 2020 – to allow for the tracking of all incoming related shipments. Several EU member states are working on tracking shipments, requiring written permission for import and creating databases for all relevant imports and working with the EC on how the data it collects can be used to support their own surveillance.
In addition, the EFCTC (The European Fluorocarbons Technical Committee) has sponsored an illegal trade action hotline allowing individuals to report alleged suspects offering suspect HFC.
The increase in illegal imports affects us all, therefore the whole industry must work together to ensure the right measures are put in place.
The F-Gas Directive, introduced in 2006 and updated in 2014, aims to reduce environmental damage from commonly used gases. Within this directive, hydrofluorocarbons (HFCs) have come under particular scrutiny and the legislation has had a huge impact on the supply of these gases into the EU.
Current EU targets mean that the UK has committed to phase down HFCs by 79% by 2030. In the event of a no-deal Brexit, the UK has committed to regulating F-gas and ozone depleting substances (ODS) and the Environment Agency has also suggested that it will transfer most of the requirements of EU regulations into law. So now when the UK has left the EU, any business placing more than 100 tonnes of Co2 will need a UK HFC quota.
A 2018 report from the Environmental Investigation Agency (EIA), indicates that Europe is facing what it describes as “a substantial level of illegal use and trade in HFCs”.
According to the EIA, as much as 16.3 million tonnes of carbon dioxide equivalent (MtCO2e) of bulk HFCs were illegally placed on the market in 2018. This represents more than 16% of the 2018 quota and, says the report, doesn’t take into account illegal imports of HFC-containing equipment and illegal HFCs that are “undoubtedly” being smuggled under the radar of customs. In some cases, HFCs are being mixed with lower quality, counterfeit or illegally imported HFCs. A recent Environmental Audit Report, UK Progress on reducing F-gas Emissions, suggested that the government should ensure that adequate resources are allocated to monitoring illegal activities, especially online and that only qualified persons handle F-gases.
In April this year, German MEP Jo Leinen requested clarification from the EU Commission on steps being taken to tackle this illegal refrigerant trade. Leinen suggested that much of the trade is coming from Asia and asked that the EU work with its Asian counterparts to identify and track these illegal exports. And in 2018 Lithuanian MEP Rolandas Paksas told the EC it was making a “nonsense” of the F-gas quota system over its failure to tackle the issue of illegal F-gas imports. He also suggested the Commission should impose stricter controls at EU borders.
What’s the impact?
This illegal trade of HFCs is having a severe impact on EU emissions targets, government tax revenues and damaging legitimate businesses who are losing out to people offering illegally imported refrigerants. The EIA says: “We are concerned that the illegal trade along with stockpiling of HFCs in 2017 has produced a false sense of security in terms of availability of HFCs to meet the phase-down steps from 2018 onwards. Future quota cuts will be difficult to meet unless the transition to low-GWP alternatives is accelerated.”
At a micro-level, businesses who use these illegal refrigerants are putting their employees and customers at risk. Plus, if found to be using an illegal HFC product, businesses could face penalties such as fines, criminal prosecution, and a long-lasting impact on a company’s reputation.
What’s the solution?
European Commission actions so far have included customs controls workshops for custom and F-gas experts, which include dedicated custom codes for bulk gas and equipment and checks on the registrations of companies for HFC import and export. The EC is also creating an IT system – slated for 2020 – to allow for the tracking of all incoming related shipments. Several EU member states are working on tracking shipments, requiring written permission for import and creating databases for all relevant imports and working with the EC on how the data it collects can be used to support their own surveillance.
In addition, the EFCTC (The European Fluorocarbons Technical Committee) has sponsored an illegal trade action hotline allowing individuals to report alleged suspects offering suspect HFC.
The increase in illegal imports affects us all, therefore the whole industry must work together to ensure the right measures are put in place.
- If you have become aware of incidents relating to smuggling, mislabelling, counterfeiting of F-Gas products or the use of illegal canisters, contact the EFCTC hotline.
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