HCFC phase-out at risk from illegal trade

LONDON: The phase-out of hydrochlorofluoro- carbons (HCFCs) under the Montreal Protocol could be undermined by black market trade unless enforcement agencies are prepared, a new report warns.

The report Risk Assessment of Illegal Trade in HCFCs, jointly produced by the London-based Environmental Investigation Agency (EIA) and United Nations Environment Programme (UNEP), was released today on the occasion of the UN’s International Day for the Preservation of the Ozone Layer.

And although it confirms that illegal trade in HCFCs already exists and has the potential for huge growth if left unchecked, it stresses there is also a clear opportunity to learn the lessons of the past and effectively counter criminal profiteering in its early stages.

During the global phase-out of chlorofluorocarbons (CFCs) under the Montreal Protocol, HCFCs were seen as transition or ‘stepping stone’ chemicals but ultimately became the global refrigerant of choice, dominating many international markets as they were widely adopted by both developed and developing countries.

Although HCFCs have a relatively low ozone-depleting potential (ODP) compared to CFCs, they are major contributors to climate change, with global warming potentials hundreds and thousands of times that of carbon dioxide (CO₂). In response to rampant growth in HCFC use, the Parties to the Montreal Protocol therefore agreed in 2007 to accelerate their phase-out.

The EIA/UNEP report explains that many of the techniques used for smuggling CFCs have already been, or are likely to be, adopted by those involved in the illegal trade in HCFCs; these include:

• false labelling of HCFCs as legal substances;

• mis-declaration by using the names and/or customs codes of similar but legal chemicals;

• selling fake recycled or reclaimed materials, since trade in these substances is less closely regulated than for virgin materials;

• concealment, with HCFCs simply hidden in ships, cars, or trucks and moved across borders;

• trans-shipment fraud, in which consignments of HCFCs ostensibly destined for legitimate end markets are diverted onto black markets;

• Double layering, with illegal materials hidden behind a layer of legal product.

“Given the booming production of, and demand for, HCFCs in developing countries, combined with on-going demand and limited supply due to the restrictions in place in developed countries, the market conditions appear to be in place for a possible repeat of the wide scale smuggling seen during the CFC phase-out,” said EIA Campaigns Director and report co-author Julian Newman.

The situation in Europe illustrates how illegal trade can arise as a result of a phase-out. As of January 2010, demand for HCFCs within the EU must be met by using either reclaimed or recycled chemicals; however, demand for HCFCs for Refrigeration & Air Conditioning (RAC) servicing remains higher than legal supplies can satisfy.

“In Europe, there’s a risk that such demand could undermine the ban on importation and use of virgin HCFCs which came into force at the beginning of 2010; with the cost of HCFC-22 in the EU ranging from €18-30 per kilo and the chemical available from developing countries at about €2 per kilo, excluding shipping, the incentive for smugglers to step in to meet the demand is clear,” said Newman.

Over the past three years seizures of HCFCs have increased, with illicit consignments being intercepted in the US, Asia and Europe. In the US, a spate of HCFC seizures indicates the existence of an already large black market with the potential to rival that seen for CFCs.

The report concludes that the potential threat of the problem escalating during the next decade depends on the degree to which effective policies to counter HCFC smuggling are implemented, and the effectiveness of HCFC phase-out management in reducing demand in developing countries, coupled with decisive enforcement action to curb illicit HCFC trade.

“There’s little doubt that the emergence of a global black market in illegal HCFCs is a very real and significant threat,” added Newman. “What’s different this time around is that we have the prior experience gained in combating CFC smuggling. This report is intended to assist enforcement agencies in dealing with the HCFC risk.”

Among the recommendations in the report are national enforcement task forces, cross-border cooperation, training of customs officers, effective use of licensing systems to exchange intelligence, and demand reduction policies.

Interviews are available on request: please contact Campaigns Director Julian Newman, at [email protected] or telephone 020 7354 7960.

View the full report here

EDITORS’ NOTES

1. The Environmental Investigation Agency (EIA) investigates and campaigns against environmental crime and abuses.

2. The Montreal Protocol on Substances that Deplete the Ozone Layer has been regarded as the most successful international environmental agreement to date, having phased out the consumption of 98 per cent of chemicals under its control, including chlorofluorocarbons (CFCs), in order to restore the ozone layer.

3. Introduced as replacements to CFCs, hydrochlorofluorocarbons (HCFCs) became the global refrigerant of choice, dominating many international markets. In response to rampant growth in HCFC use, the Parties to the Montreal Protocol agreed in 2007 to accelerate their phase-out.

4. Although HCFCs have a relatively low ozone-depleting potential (ODP) compared to CFCs, these substances have a high global warming potential hundreds and thousands of times that of CO₂. The Accelerated HCFC Phase-out promises benefits not just for the ozone layer but also the climate system. The rapid rise in the production and use of HCFCs has presented a stern challenge to the Montreal Protocol in ensuring that its accelerated phase-out targets are met, and that the replacement compounds and technologies do not have similarly negative consequences for the global climate.

5. Under The Counter, EIA’s 2005 report on China’s trade in ozone-depleting substances, is here.

Environmental Investigation Agency
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www.eia-international.org
Tel: +44 207 354 7960
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