Illegal HFC trade: EIA calls for the implementation of a fully functional licensing system

EIA’s analysis of 2018 customs data suggests that as much as 16.3 million tonnes of CO2 equivalent of bulk HFCs were illegally placed on the market in 2018.

As stressed in the March 2019 issue of the IIR Newsletter1, numerous air-conditioning and refrigeration industry stakeholders expressed concerns over the past months, alleging that “substantial amounts” of HFCs were being imported illegally into the EU. The report “Doors wide open - Europe’s flourishing illegal trade in hydrofluorocarbons (HFCs)”2 published in April 2019 by the Environmental Investigation Agency (EIA), corporate member of the IIR, provides additional information on this hot topic through two surveys.

EIA reports that more than 80% of companies surveyed were aware of, or suspected illegal HFC trade and 72% had seen or been offered refrigerants in illegal disposable cylinders. EIA’s analysis of European customs data indicates that bulk HFC imports in 2018 were too high for compliance with the 2018 quota. If EU-based HFC production and equipment authorisations are assumed to be at 2017 levels, the amount of HFCs placed on the market in 2018 would be 117.5 MtCO2e, some 16.3 MtCO2e above the available quota of 101.2 MtCO2e.

This could be characterised as open smuggling of HFCs (i.e. imports openly shipped through customs without quota). In addition, there is clearly some level of cross-border smuggling of HFCs, which is under the radar of customs authorities. EIA’s analysis also indicates a discrepancy between European customs data and HFC Registry data of at least 14.8 MtCO2e in 2017, equivalent to 8.7% of the 2017 quota. HFCs are being illegally imported in large and small containers, including in illegal disposable cylinders, and are sold on the market through various channels including web-based platforms.

Given the availability of cheap HFCs outside the EU, it is not surprising that much of the illegal trade is reported to be occurring at EU border countries. The current HFC reporting system does not allow customs authorities to determine whether HFC shipments are within quota or not, and a number of loopholes in the system allow unscrupulous traders to reap quick profits, exploiting a demand for cheap HFCs with little risk of punitive measures.

EIA concludes that continued availability of HFCs outside the HFC phase-down schedule will hinder the uptake of climate-friendly technologies and ultimately threaten the success of the EU F-gas Regulation and the EU’s climate goals. Furthermore, it significantly reduces government income and the profits of legitimate businesses. Future quota cuts will be difficult to meet unless the transition to low-GWP alternatives is accelerated.

EIA recommendations to tackle the illegal trade for HFCs include improving reporting and monitoring of HFCs from exporting countries, as well as introducing a revised and fully functional licensing system for customs officials to determine the legality of any shipments of such products.

Changes to legislation that would prohibit use of disposable cylinders and the establishment of a system to compare official EU F-Gas data with international customs information is also backed by the EIA.