Fluorinated gases, used in refrigerators and air conditioners, have up to a thousand times more greenhouse gas impact than carbon dioxide that is emitted by vehicles, industry, and power plants.
In 1990, fluorinated gases were brought in to replace chlorofluorocarbons, banned under the Montreal Protocol, because they were implicated in the depletion of the Earth’s ozone layer.
The EU regulation, which took effect in 2015 and saw a strict import quota introduced in 2018, is designed to limit the use of these gases and encourage companies to switch to newer gases with lower global warming effects, according to Forbes.
What is legal to sell?
And herein lies the problem. There is a growing black market for counterfeit 1234yf refrigerant. RefrigerantHq.com explains the problem best:
The refrigerant, R-134a was phased out entirely in new vehicles within the European Union. While a new refrigerant wasn’t named to replace R-134a, most of the market zeroed in on a new HFO – known as R-1234yf. This was good news for Honeywell and Chemours (DuPont) because both companies hold patents on R-1234yf.
In all fairness, the German company Daimler has developed an alternative refrigerant called CO2/R-744, but the product is still in its infancy and not widely used yet.
As an aside, there are various patents that are held on 1234yf and they fall into two categories. The first is known as the process patent and the other is known as the application patent. For example, Honeywell owns the application patent on 1234fy for automotive applications.
The price of R-1234yf is a whole other story
In the good old days, a person could get a pound of R-134a for about three-dollars, so it wasn’t too bad a price to pay for repairing the air-conditioner. However, R-1234yf is another story. This product can go for fifty to 75 dollars a pound. That comes to a 2,000 percent increase in price to businesses and customers, alike.
Wilmington, Delaware-based Chemours (Du Pont) has been hit very hard by the illegal trade in the refrigerant, according to Delaware Online. The company says the sales of those illicit products bit into $125-million worth of cash flow it would have generated from sales of its “crown jewel” refrigerant, called Opteon.
In an earnings report on Friday last week, CEO Mark Vergnano reported revenue for the second quarter of 2019 was $1.4 billion, down from $1.8 billion the previous year. It also lowered its expected profits for the rest of the year. “The issues we face our temporary headwinds,” he said during the conference call.
Chemours, as well as Du Pont’s profits, have also been impacted by the uneasy global economy, shaken by the U.S/China trade war. “While we cannot control global politics or the broader economic cycle, we can and will continue to manage the things under our control,” Vergnano said in the call.
The illegal refrigerant market comes down to the price surge caused by the regulation taking effect. And it is a very lucrative business for smugglers bringing the illegal products into the E.U. Most of the smuggling is coming through the EU’s eastern borders.
There is also the problem of safety with these black market refrigerants. You can’t be sure of the quality and traceability of the products without specialized testing equipment, and in some cases, these illegal products are toxic or flammable.
