24. July 2020 | Trends

Safe and Better for Humans and the Environment: Bid Farewell to Illegal Refrigerant Trading

Illegal trading of greenhouse gases from precarious sources endangers both humans and the environment. As such, it doesn’t merely threaten the success of the F-Gas Regulation and global climate protection goals. Since the start of the F-gas phase-down, synthetic refrigerants have been a highly sought-after commodity, as legislators are deliberately making them more scarce. As a result, they are expected to disappear completely from the market little by little.

And with good reason: common refrigerants such as FCs and HFCs pose a serious threat to the environment and humans. Since they’re usually combined with outdated refrigeration technology lacking energy efficiency, they have become a major contributor to climate change.

In this blog post, we explain how the current peak in illegal trade of conventional refrigerants has come about, why it is immensely distorting the refrigerant market, how it is challenging legislators and what the ways out are.

The Trigger: Quota System Drives Up Prices for Refrigerants and Stimulates Illegal Trade

The problem of illegal refrigerant trade is an ironic turn of events for the EU – as ultimately it’s a symptom of its successful policy. The European Union has an ambitious plan to reduce the use of harmful fluorinated gases and thus promote the switch to natural refrigerants. From 2015 to 2030, the amount of F-gases in circulation in the EU is set to reduce by 80% CO2 equivalent. Many common refrigerants will disappear from the market entirely.

 

Fluorocarbons (FCs) are artificially produced, highly potent greenhouse gases that remain in the atmosphere for decades. The most common FCs are between 675 and 3,922 times more harmful for the climate than CO2.

 

However, this is not set to be achieved through bans, but rather by a gradual phase-down. This way, the refrigeration industry should have plenty of time to adapt its technologies and products to the new world. The phase-down will make synthetic refrigerants more scarce and more costly in successive phases, making them increasingly expensive and unavailable in the long term.

How Will the F-Gas Phase-Down Change the Refrigeration Industry?

In our blog post about the F-Gas Regulation, you can read more about the F-gas phase-down and its impact on the refrigerant market.

Learn more

To this end, each company is allocated a quota, which is exhausted quickly. This quota system ensures that fewer and fewer harmful F-gases are available. In 2017, this resulted in panic buying of synthetic refrigerants, which are sold at high prices on the market today.

The same quota system is also fuelling illegal imports of synthetic refrigerants, as refrigeration is needed everywhere. As a result, prices in the refrigeration industry have soared since 2015. Although they have fallen since then, they are still up to 900% higher than 2014 prices, which is a welcome incentive for producers and consumers to switch to climate-friendly, natural refrigerants. In the short term, however, it is also leading to an increasing demand for cheap, illegally imported goods from non-European countries and a smuggling of F-gases, which is currently more lucrative than dealing drugs.

Price Development of Common Refrigerants

Alarming: 20-30% of Refrigerants in the EU Are Illegal

The situation is serious. Illegally imported refrigerants are mostly untested mixtures that pose a danger to both humans and the environment. The market is also completely distorted due to the continuing illegal import of refrigerants. Manufacturers of synthetic refrigerants estimate that the share of illegally imported refrigerants accounts for a whopping 20-30% of the total market.

According to the Doors Wide Open report provided by the NGO EIA, around 117.5 Mt CO2 equivalent of HFCs were placed on the market in 2018 due to illegal mass imports. This is about 16.3 million tonnes CO2 equivalent above the available quota and more than 16% above the permitted quota. In a number of countries, there was a worrying trend of increased imports between 2016 and 2018, although the HFC quota in 2018 was cut significantly by 37% from its initial level. More than 80% of companies claim to be aware of the illegal trade of F-gases, with 72% having already received offers for refrigerants in illegal disposable bottles.

Although the European Commission finds it difficult to estimate the extent of this due to inconsistent data, it does continue to consider the phase-down to be successful. At the same time, however, it has confirmed the high import rates of HFCs.

An Industry in Upheaval: Why Nothing in the Refrigeration Industry Will Remain the Same

Did you know that from 2030 even refrigerants with a low global warming potential (GWP) will no longer be legal? Read more about these and other challenges of the refrigeration industry in this blog post!

Learn more

The End of Illegal F-Gas Trading Is In Sight – But With Fatal Consequences

Although the legislators have kept a low profile for a long time, they have now clearly recognised the seriousness of the situation. In Germany, the F-Gas Regulation has been implemented in the Chemicals Climate Protection Ordinance, which requires operators and specialist companies to report on the refrigerants they use. The results are published by the German Federal Statistical Office, but illegal refrigerant levels do not appear here. This means that German operators and specialist companies are liable to prosecution under the Chemicals Climate Protection Ordinance and may lose their operating license.

Measures are now being adopted throughout Europe. The EU is working with the EFCTC, short for European Fluoro Carbons Technical Committee, an association of the largest producers of synthetic refrigerants, in the areas of implementation, sanctions, investigations, trade issues and fiscal implications. Recently, the Committee even set up an anonymous hotline for reporting illegal F-gas products and suspected illegal F-gas trading.

There undoubtedly has to be increased awareness of the fatal consequences the black market has on the climate and environment. Illegal trade of HFCs not only undermines the F-Gas Regulation; it also considerably reduces the government’s tax revenue. Did you also know that the widely used refrigerant R134a heats up the atmosphere 1,430 times more than the equivalent amount of CO2? For this reason, even a comparatively small amount of smuggled HFC greenhouse gases can have an extremely detrimental effect on the environment and climate.

 

Did you know that the widely used refrigerant R134a is 1,430 times more harmful than CO2?

 

However, an abrupt end will come to pass once the improved monitoring processes take effect. In concrete terms, this means that if the controls work, about a quarter of the synthetic refrigerants will no longer be used because they are imported illegally. Within a very short period of time, this will lead to an extreme shortage of F-gases and drive up prices even further. Users will then have to find emergency solutions and pay high prices during the switch to climate-friendly refrigerants.

Although this would be bad enough for companies, the real danger lies in the overall availability. Many users will very soon have to ask themselves whether the refrigerant they need is still available. The risk of business interruptions with unforeseeable consequences is getting dangerously close.

To date, illegal trading together with the accumulation of FC stockpiles in 2017 and the false promise of so-called low GWP, had created a false sense of security among companies regarding the availability of FCs despite the phase-down. The reality, however, is that future quota reductions will be difficult to achieve unless the transition to genuine alternatives in the form of natural refrigerants rapidly accelerates. This is now being confirmed even by the large manufacturers of low GWP refrigerants who are desperately, yet unsuccessfully looking for new alternatives.

The Sustainable Solution: Water Puts a Natural End to the Demand for Illegal Refrigerants

In accordance with the F-Gas Regulation, the complete switch to natural refrigerants is unavoidable in the long term. The smuggling of synthetic refrigerants will be stopped immediately. Companies that use water as a refrigerant are totally unaffected by the F-gas phase-down with a refrigerant that is harmless in every respect and are neither dependent on suppliers nor the market situation.

As a refrigerant, water is climate-neutral and available everywhere, protects the environment, poses no danger to humans and is always in conformity with any regulations. The changeover is categorically worth it – let’s bid farewell to illegal trading in order to ensure sustainability as well as protect our economy and climate.

Water as a refrigerant

Unlike in other industries, sustainability is not even difficult to implement in the refrigeration industry. In contrast to CO2, FCs are not a by-product generated by traffic, industry or households. F-gases are produced specifically for certain applications and can therefore be avoided or replaced in a targeted manner.

 

Unlike in other industries, sustainability is not even difficult to implement.

 

The successful reduction of F-gas emissions can be achieved immediately with natural refrigerants. This could cut annual CO2 emissions by 1.25 billion tons and thus reduce global warming by up to 0.5 degrees celsius by 2100. This would be a significant contribution to achieving the internationally agreed climate protection targets and constitute a major achievement for our planet.

Sustainable Investing Is not a Good
Option; It’s the Only Option.

    Yes, I agree to the processing of my data and accept the privacy policy.