8 March 2022

Misguided EU policies have created a black market in environmental ‘atomic bombs’

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They are described by some as ‘Greta Thunberg’s nightmare’. Hydrofluorocarbons (HFCs) – man-made organic compounds, commonly used in refrigerators and air conditioning – can be upwards of 12,000 times more harmful to the environment than carbon dioxide. If you’re struggling to conceptualise that, think of the difference between a garden-variety firework and an atomic bomb.

That basic rationale explains the EU’s decision back in 2015 to restrict production of HFCs with the aim of phasing out 85% of consumption. As The Economist notes, the first part of the plan to pressure consumers into choosing costlier, more environmentally friendly alternatives, was successful ‘[HFC] prices across Europe multiplied sixfold or even more’. Narrowing the price differential was a sure-fire way of reducing demand. However, an unusual thing started to happen: the prices began to plummet.

The technocrats behind the policy forgot a simple rule: the further the state’s hand extends, the more malign the market becomes. In the case of HFCs, the result of the crackdown has been a boom in smuggling, with some estimates suggesting that up to a third of total HFCs in Europe are now contraband.

Whether mislabelled as a different substance or hidden in a car boot, the many elaborate ways smugglers deceive law enforcement have one thing in common: obscuring a once transparent market. The ballooning black market is impossible to regulate, placing consumers at the mercy of the crime syndicates that run smuggling rings. One alarming BBC video published late last year depicted a criminal smuggler caught dealing canisters of HFCs from his car boot.

Such situations often occur in all sorts of markets where the boot of government stamps too firmly. With ‘zero-tolerance’ crackdowns on drugs, users are at significantly greater risk from adulterated substances and under-estimating dosage. The same is true for global restrictions on alcohol. The Turkish government’s aversion towards booze is so strong that taxation has raised prices by several hundred percent. This has led to a wave of cheap, counterfeit alternatives flooding the market. Unsurprisingly this has given way to a severe crisis of alcohol poisoning, with 67 deaths in October 2020 alone. A similar phenomenon can be seen in response to the stringent alcohol laws in India, with almost 100 people dying after drinking tainted liquor at an event in 2019.

Instead of heavy-handed measures to tackle climate change, we could install a ‘Carbon Tax’ that increases with consumption – a market-based alternative with proven success in British Columbia, where emissions have reduced by 14% per capita since its introduction.

The HFC crackdown is yet another example of how government intervention can make a problem worse. These are a dangerous chemical that need to be closely supervised, not pushed into the hands of unscrupulous criminals. So let’s not manipulate markets, but harness their vast power to achieve our environmental goals.

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Charles Bromley Davenport is a Research Associate at the Adam Smith Institute.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.