This is the hidden connection between smuggling and climate change

climate talks

(Markus Spiske, Unsplash)

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Daniel Martinez-Valle, Chief Executive Officer, Orbia Advance Corporation SAB de CV

  • Smuggled goods bypass climate regulations and threaten our goals.
  • A black market for HFC gases accounts for the same CO2 emissions as Slovenia.
  • Industries need to partner with authorities to stop smuggling.

Smuggling affects us all – it threatens domestic production, feeds organized crime and floods the market with hazardous products. Another little-known consequence of smuggling is on climate change, where illicit imports of products that are strictly controlled in Europe are jeopardizing our climate ambitions.

When it comes to fighting climate change, our vision for a greener future increasingly drives ambitious legislation, but at the same time the challenges of implementing these on the ground prevail. We must work together to stop smuggling by upholding the law and supporting those who are expected to enforce it.

Take the example of the 2014 EU F-Gas Regulation that bound industry to progressively reduce hydrofluorocarbons (HFCs) by nearly 80% by 2030, through a strict quota system. HFCs are gases commonly used for cooling across automotive, refrigeration and emergency sectors, among others.

While producers are committed to this phase-down, a black market for smuggled HFCs outside of the defined quota grew and these illegitimate products are now flooding the EU market.

According to the EIA, as much as 16.3 million tonnes of carbon dioxide equivalent (MtCO2e) of bulk HFCs were illegally smuggled into the market in 2018 – more than 16% over the allowable quota. That is roughly equivalent to the total annual CO2 emissions of the whole country of Slovenia or adding 3.5 million passenger cars to the EU fleet in one year. The EIA report published in April 2019 further claimed that “multiple industry sources reported that illegal refrigerants constituted 50-80% of the total market in Greece, Bulgaria and Romania.”

What’s the World Economic Forum doing about climate change?

Climate change poses an urgent threat demanding decisive action. Communities around the world are already experiencing increased climate impacts, from droughts to floods to rising seas. The World Economic Forum’s Global Risks Report continues to rank these environmental threats at the top of the list.

To limit global temperature rise to well below 2°C and as close as possible to 1.5°C above pre-industrial levels, it is essential that businesses, policy-makers, and civil society advance comprehensive near- and long-term climate actions in line with the goals of the Paris Agreement on climate change.

The World Economic Forum’s Climate Initiative supports the scaling and acceleration of global climate action through public and private-sector collaboration. The Initiative works across several workstreams to develop and implement inclusive and ambitious solutions.

This includes the Alliance of CEO Climate Leaders, a global network of business leaders from various industries developing cost-effective solutions to transitioning to a low-carbon, climate-resilient economy. CEOs use their position and influence with policy-makers and corporate partners to accelerate the transition and realize the economic benefits of delivering a safer climate.

It is a complex problem and the evidence is hard to track. However, the industry is asking itself how illegitimate HFCs can so easily and abundantly enter the EU. And why, in this age of data connectivity and instant communication, smuggling cannot be stopped.

Clearly EU border controls are not seizing out-of-quota HFCs. Customs jobs are complex and there are much more obvious targets such as drugs, arms and exotic animals. Resources are tight and many do not know what to look for.

Moreover, complex shipping routes and reseller markets make it difficult to understand the scope of the problem and to identify which holes need to be filled. An HFC canister produced in one place may be sold through one, two or more intermediaries before it is imported across an EU border. The volume of legitimate quota-compliant products that have already entered the market is also only reported retroactively. Together, these impede efforts to track and trace products and find solutions that will stop organized crime.

As an industry, we believe we need open partnerships to help authorities and our supply chain combat smuggling. Working collaboratively through the EFCTC, a committee representing European fluorocarbons manufacturers, we are formulating strategies to tackle this complex issue. An example of this is the development of new monitoring systems that will help ensure that quotas are easier to uphold.

It’s 2020 and the public is as engaged as ever, demanding the highest levels of transparency and effective governance. We must all deliver.

Orbia’s company Koura Global is a member of the European Fluorocarbons Technical Committee (EFCTC), a sector group of CEFIC. In addition to providing resources and information about the industry, the committee works to ensure correct and effective implementation of current legislation in all EU Member States.

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