The Economist - USA (2022-02-26)

The Economist February 26th 2022 Europe 53

ofhisown.ThatleftVoxtobenefitfrom

widespreaddiscontentwithMrSánchez’s

handlingofthepandemicandtheslow­

nessoftheeconomicrecovery.Vox’ssup­

porthasclimbedto21%inthelatestpolls,

whichgivethepp22%.

MrFeijóoisa conciliatorycentrist.He

haswonfourconsecutiveabsolutemajor­

itiesinGalicia,keepingVoxoutofthere­

gionalparliament there. Many expected

himtostandfortheleadershipin2018,but

heapparentlyconsideredthepartytoodi­

vided. Spanish political leaders tendto

clingondespitedefeat.TheSocialistswent

through a similar bloodletting in 2016,

withMrSánchezbeingoustedandthen

winningbackhisjob.Buttherewillalmost

certainlybenowaybackforMrCasado.His

partinggifttothepphasbeentouniteit,

againsthimself.n

HFCSmuggling

Free as air

F

ora whileitlookedasifallwasgoing

to  plan.  In  a  move  cheered  by  climate

activists,  the  European  Union  began  in

2015 to restrict the production and import

of  gases  known  as  hydrofluorocarbons

(hfcs).  hfcs  are  widely  used  in  refrigera­

tion, air­conditioning and manufacturing,

but they are also potent greenhouse gases.

The  first  big  shortages  hit  in  early  2018.

Prices across Europe multiplied sixfold or

even more. The eu wanted to push hfc us­

ers  to  adopt  pricey,  climate­friendlier  al­

ternatives.  It  thought  that  the  engineered

shortage would do the trick.

But officials were soon scratching their

heads. The high prices unexpectedly plum­

meted. And even though the eutightened

caps  on  hfcs  again  a  year  ago,  prices  are

still  not  much  higher  than  before  the

crunch.  The  reason:  hfcs  were  being

smuggled  into  the  eu.  The  trafficking  is

still going on. The Environmental Investi­

gation  Agency,  a  watchdog  based  in  Lon­

don  that  has  dispatched  researchers  to

pose as buyers in Romania, estimates that

a  quarter  of  all  hfcs  in  the  eu are  contra­

band. A body formed by chemical compa­

nies, the European FluoroCarbons Techni­

cal  Committee  (efctc),  says  the  propor­

tion may be as high as a third.

Such estimates are rough. But they have

not been plucked from thin air. Much can

be inferred, for example, by examining of­

ficially  registered  trade  flows.  Data  from

Turkish  sources  show  that  in  2020  more

than four times as much hfctonnage left

Turkey bound for the eu than the latter re­

ported  as  imported.  This  suggests  that

plenty of tanks and canisters holding hfcs

enter on the sly.

The smuggling has hit some firms par­

ticularly  hard.  To  supply  greener  alterna­

tives  to  hfcs,  Chemours,  an  American

firm,  spent  around  $500m  on  r&d and

production  facilities.  But  with  illegal  im­

ports continuing to hold down hfc prices,

demand for alternatives has been “stagnat­

ing”  and  even  declining,  laments  Murli

Sukhwani  of  Chemour’s  European  hq in

Geneva.  Mr  Sukhwani,  who  also  leads  the

efctc’s  investigation  into  the  black  mar­

ket, says climate­friendly alternative gases

cost  at  least  twice  as  much  as  the  com­

pounds they are supposed to replace. 

This has miffed America. In a report last

year on barriers to trade, Katherine Tai, the

American  trade  representative,  wrote  that

the  eu’s  “insufficient  oversight  and  en­

forcement”  of  its  hfc caps  is  hurting

American  chemical  firms,  not  to  mention

the  climate.  European  officials,  for  their

part,  point  to  the  difficulty  of  preventing

profitable  contraband  from  crossing  the

bloc’s long borders.

Consider  the  potential  earnings,  says

Marco  Buoni,  president  of  an  association

of  European  refrigeration  and  air­condi­

tioning  contractors  called  area.  When

prices first soared, a car boot could be filled

in Ukraine with canisters of an hfc blend

called  R404A  that  would  sell,  hours  later,

for  ten  times  as  much  in  Poland.  Margins

have since shrunk as legions have got in on

the action. But contraband hfcs are still so

valuable that canisters are sometimes giv­

en  space  on  boats  trafficking  migrants

from north Africa to Europe.

Some  trafficking  is  carried  out  by

moonlighters  who  make  border  runs  in

their  cars  or  hide  canisters  in  luggage

stowed  on  passenger  coaches.  But  the

black  market  is  now  dominated  by  crime

syndicates  that  move  large  volumes,  says

the  European  Anti­Fraud  Office  (olaf).

Most  of  the  contraband  seems  to  come

from China, Russia, Turkey and Ukraine.

One  trick  is  to  mislabel  with  stickers

that are later peeled off. To detect the prac­

tice, which became widespread in 2019, ex­

pensive gas­analysis equipment is needed,

says  an  olaf investigator.  Another  ap­

proach is to falsely declare that a shipment

of hfcs will be subsequently exported out

of the eu. These “transiting” goods are not

subject  to  eu limits  on  imports,  but  the

stuff  often  disappears,  the  investigator

says,  into  “a  very,  very  difficult  to  track”

succession  of  warehouses  across  Europe.

Trafficking has been exacerbated by gener­

ally light penalties. Fines of a few thousand

euros have been common. 

The efctc is trying to improve enforce­

ment. It has hired Kroll, an American firm,

to  gather  intelligence  on  potential  smug­

gling and pass it along to authorities. The

team, which is based in London, uses net­

work­analysis software to unearth hidden

relationships  between  entities  in  myriad

sources  of  data.  In  one  success,  the  soft­

ware drew attention to a lorry driver haul­

ing gas from Turkey into the eu. In a video

posted online, he unwisely mentioned his

“friends  at  the  border”.  He  was  later

nabbed. Recent months have seen “a lot of

arrests  and  a  lot  of  action”,  especially  in­

volving  Romania  and  Turkey,  says  Bene­

dict Hamilton, leader of the Kroll team. 

But  the  outlook  nonetheless  remains

grim, according to Marius Appenzeller, re­

frigerants  manager  at  Westfalen  Group,  a

gases  distributor  based  in  Münster,  Ger­

many.  The  firm  expects  trafficking  to  in­

crease  as  the  eu continues,  every  three

years  until  2030,  to  shrink  hfc quotas.  A

report in December from the European En­

vironment Agency acknowledged thathfc

use  had  begun  to  grow,  even  withouttak­

ing into account “alleged” smuggling.n

Controlling the flow of gases, even in

canisters, turns out to be tricky

Who knows where it came from?