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Doors Wide Open. Part 1

April 10, 2019

Today the Environmental Investigation Agency releases a new Climate report and wants to give you first sight of its findings.

Doors Wide Open

Doors Wide Open is the first comprehensive look at the illegal trade of hydrofluorocarbon (HFC) refrigerants occurring in the European Union.

HFCs are super greenhouse gases hundreds to thousands of times more potent than carbon dioxide used in cooling systems worldwide. The EU F-Gas Regulation came into force in 2014, aiming to phase down HFCs.

Analysis of customs data along with surveys of industry stakeholders and EU Member States show rapidly increasing levels of illegal trade of HFCs are threatening the success of the F-gas Regulation and Europe’s climate goals.

These refrigerants appear to be entering the EU through the Eastern borders from Russia, Turkey, Ukraine and directly from China. Key EU entry points and hotspots for illegal trade are thought to be Bulgaria, Croatia, Denmark, Greece, Italy, Latvia, Malta and Poland.

Loopholes within the EU Regulation are being exploited and criminals are capitalising on the lack of enforcement and weak penalties.

Illegal trade of HFCs undermines the F-gas Regulation, results in additional HFC emissions that fuel global warming and significantly reduces government income and the profits of legitimate businesses. 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.

2018 Customs Data Analysis

Customs data for 2018 indicates significant over-supply of HFCs to the European market. Bulk HFC imports fell in 2018 compared to 2017 but increased compared to 2016.

Through a detailed analysis of European import and export data, EIA estimates that as much as 117.5 MtCO2e of HFCs were placed on the market in 2018 through bulk imports. This is some 16.3 MtCO2e above the available quota of 101.2 MtCO2e, more than 16% over the allowable quota.

There is a worrying trend of significantly increased imports over 2016-2018 in a number of countries, despite the significant cut in HFC quota in 2018 of 37% from the baseline. This could indicate illegal trade hotspots. For example, imports of HFCs in 2018 were more than 100% higher than 2016 imports in Austria, Belgium, Denmark, Greece, Ireland, Latvia, Malta, Poland, Portugal, Romania and Sweden.

Comparison of customs data with reported data

EIA’s analysis indicates a discrepancy between European customs data and data reported by companies to the HFC Registry.

According to European customs data 2016 bulk imports were lower than those reported to the HFC Registry by 2,557 tonnes, while in 2017 the imports according to the European customs data are higher by 728 tonnes. However, if the CO2e of the imports are calculated, based on the GWPs of the reported CN codes, the discrepancy between the two sets of data is much higher in 2017 than in 2016. Calculated on a CO2e basis, in 2017 European customs data indicates HFC imports of 166.58 MtCO2e, 12.1 MtCO2e higher than the HFC Registry data.

Taking the import and export data together, the European customs data indicates that a significantly higher amount of HFCs (5,527 tonnes) was placed on the European market in 2017 than reported to the HFC Registry. In CO2e terms, the discrepancy is 14.8 MtCO2e, equivalent to 8.7% of the total quota.

It is clear from the data that significant stockpiling took place in 2017 in preparation for the 2018 cut.

Given that reports to the HFC Registry are self-declared and there is limited or no cross-checking with customs data, there is great potential for manipulation of HFC Registry reported data.

HFC prices

HFC prices in Europe began seriously rising in 2017 in anticipation of the 2018 HFC quota cut. By the second quarter of 2018, the price of HFC-410A was 859% higher for Original Equipment Manufacturers (OEMs) and 833% higher for service companies than in 2014. Similar prices hikes have been seen for other HFCs, with the highest price increases for those with the highest GWP.

According to the latest Öko-Recherche report, prices in 2018 have flattened out to a large extent and demand for refrigerants, despite the large quota cut, was said to be low. Potential reasons for this include stockpiling in previous quarters (i.e. in 2017), increased care in handling refrigerants, reduced demand due to transitions to lower GWP technologies and possible illegal trade.

EIA Industry Survey

In September and October 2018, we sent a questionnaire to a range of heating, ventilation, air-conditioning and refrigeration (HVACR) representatives, including industry associations, refrigerant suppliers and contractor associations.

The survey requested information on refrigerant prices, the scale and severity of illegal HFC use, potential drivers of illegal trade, awareness of current penalty regimes in member states and recommendations for improving enforcement of the F-gas Regulation. Responses were received from 18 companies, primarily refrigerant suppliers and industry associations, in 11 EU member states.

Question Yes, % No, %
Have you experienced any refrigerant supply problems in the last 12* months? 67 33
Have any of your members/clients expressed concern about refrigerant price the last 12* months?* 94 6
Have any of your members/clients expressed concern about refrigerant supply the last 12* months? 17 83
Are you aware of or suspect ongoing illegal HFC use? 83 17
Are your clients/members aware that the use of disposable cylinders is illegal in Europe? 94 6
Have you seen or been offered refrigerants in disposable cylinders? 72 28
Is there an adequate supply of affordable low-GWP alternatives in your area/sector? 47 53
Are you aware of any actions your national government is taking to tackle illegal trade of HFCs? 17 83

 * September 2017 to September 2018

In response to “Have you or your clients directly experienced HFC theft?” the following data were received:

  • heard about it anecdotally, 17%,
  • offered suspect HFCs, 22%,
  • direct experience, 22%,
  • none, 39%.

In response to “In your view, are your clients/members adequately aware of the impact of the 2018 reduction step under the HFC phase-down, as well as the other measures under the EU F-Gas Regulation?” the answers were:

  • some/most of industry are aware, 24%,
  • yes, 59%,
  • no, 17%.

Part 2 can be found here.

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