Why does the illegal trade in refrigerant gases matter to Europe’s energy security? – POLITICO
During a single week of joint inspections in 2021, over 4,200 cylinders of illegally-imported hydrofluorocarbons (HFCs), a class of refrigerant gases, entered the European market. The European Union is moving in the right direction on the prevention of the black market through its renewed proposal on fluorinated gases, or F-gases. However, Europe’s new priorities on ensuring affordable, secure and sustainable energy for its citizens may exacerbate the issue. The challenge for the EU will be to achieve its twin objectives on energy and climate, securing energy supplies while remaining on track for net-zero by 2050 by preventing illicit imports of F-gases, and transitioning to lower Global Warming Potential (GWP) refrigerants.
Ambitious and coherent policies for climate and energy
With the EU’s ambitious Fit for 55 climate package and the more recent RePowerEU proposal, the EU is aiming to increase the adoption of energy-efficient technologies in Europe, with targets aimed at solar panels, heat pumps and even electric vehicles.
These technologies have been recognized by the EU as vital applications to secure Europe’s energy sovereignty. They contribute to the ultimate goal of decarbonizing our economy, with heat pumps alone estimating to contribute to an annual reduction of over 9 million tons of CO2emissions in the EU, according to the European Heat Pump Association.
An increased demand for energy-efficient solutions will likely intensify demand for the refrigerant gases which are vital to their application. This could, in turn,significantly increase the already active illegal market for F-gases.
The continuing black market of HFCs
Illegal trading of HFCs is a major issue in the EU. Data from the European FluoroCarbons Technical Committee (EFCTC), a sector group of the European Chemical Industry Council Cefic, has shown that illegal imports in 2018 could have been up to a third of the EU legal market of F-gases (analysis of Oxera Consulting LLP database). Reports by the European Anti-Fraud Office (OLAF) have shown that more than 230 tons of illegally-imported F-gases were seized in multiple countries in 2021 alone.
Geographically, south-eastern Europe is particularly marked with illegal imports. In 2021, almost half of the infringing listings reported to the EFCTC Action Line, a tool for reporting illicit selling of F-gas products, were posted to online marketplaces operating in this area. A significant proportion were also highlighted in central and western Europe.
At present, south-eastern European routes are assumed to be obstructed, which could divert smuggling via other routes. This only increases the urgency of raising awareness of the issue so that customs officials can spot black market HFCs at a time of increased strain on border controls and opportunistic illegal trade. Despite some success against this smuggling, many EU member countries are struggling to keep up with the problem as criminal operations evolve. Illegal imports could further undermine the EU’s efforts to meet its 2050 climate goals as these illegal HFCs jeopardize the quota system put in place to gradually phase down the use of high Global Warming Potential F-gases.
Illegal imports not only impact the climate, but have economic repercussions for member countries’ tax revenues and for the economic viability of legitimate businesses who comply with EU rules. Improper storage, transportation and installation of illicit HFCs can put public health at risk due to unintentional leakage. Illegally-bought F-gases can also be low-quality mixes, meaning their efficacy in many applications can be greatly reduced.
Finding the right approach in light of the energy transition
The proposed revision of the F-gas regulation marks a crucial step towards improving its enforcement, with the inclusion of new provisions towards better enforcement and preventing illegal trade of HFCs. However, the challenge going forward will be to ensure the F-gas proposal revision does not undermine efforts set out in the RePowerEU framework and the wider EU Green Deal goals to improve energy efficiency. As it stands, an earlier and more severe phase-down of higher-GWP HFCs could prevent heat pumps and other energy-efficient technologies from being rolled out at scale across Europe.
Equally, new measures on illegal trade can be improved. Proper guidance and funding to member country authorities on how to dispose of confiscated gases can help strengthen the provisions. Banning sales of F-gases on online marketplaces or introducing mandatory certification for undertakings selling bulk F-gases online can help restore trust in consumers and supply chain actors for the F-gas market.
Furthermore, should a charge for quotas as in the European Commission’s proposal be agreed, part of the proceedings must be used to increase actions against illegal trade and to ensure the destruction of seized product. Increased enforcement must be in parallel with any charge for quotas or a faster phase-down of HFCs as these could further drive illegal trade. Coupled with strengthened enforcement at the national level, the EU can help enable member country readiness for the stricter requirements on illegal trade under the revised proposal, particularly for border countries.
We believe that setting minimum dissuasive penalties rather than maximum penalties can help further deter illegal trade.
F-gases can play a key role in Europe’s decarbonization goals through critical industries relying on heating and cooling technology. The revised F-gas regulation should facilitate this parallel objective, rather than undermine it. The European Commission must endeavor to strike the right balance between ensuring energy sovereignty alongside the ambitious phase down of high-GWP HFCs.
The HFCs black market continues to be a threat to public safety, European industry and our continent’s climate goals. It requires engagement from all actors, from policymakers, the supply chain, enforcement authorities and citizens, if we are to stop this criminal activity.
If you hear or see anything which you suspect may be illegal HFCs trade, report it immediately using our anonymous Action Line, or find out more about Europe’s HFCs black market on stopillegalcooling.eu.