Rose Pengelly
Global chemicals companies with operations in the UK are
stepping up pressure on politicians to clarify regulations
covering the use of mineral-based chemicals in the country,
once it leaves the European Union (EU).
As Brexit negotiations resume in earnest following the summer
recess in Brussels, firms including Mexico-based
fluorochemicals manufacturer Mexichem SA are understood to be
seeking to lobby the governments in the UK and Brussels for
clear guidance on how British legislation will look after the
UK’s existing relationship with the EU changes.
Currently, the use of fluorinated gases (F-gases), including
hydrofluorocarbons (HFCs) which are mainly used in refrigerants
and aerosols, is tightly controlled in the UK by EU legislation
(see box).
In a paper published in July 2016, Refcom, the UK body that
registers F-gases, suggested that the UK’s
decision to leave the EU could force a rethink of the
timeline for phasing out HFC refrigerants. At present, the UK
is tied into a scheme aimed at reducing HFC usage to just 63%
of 2014 levels by the end of this year.
However, Refcom’s comments were based on the
assumption that the UK’s disengagement from the EU
would be well advanced by late 2017, when in fact progress on
negotiations has so far been limited.
Signals from the UK’s Department for
Environment, Food and Rural Affairs (Defra) indicate that
amending legislation covering the use of chemicals in the UK is
not a priority.
In a statement on HFCs delivered in October 2016, UK
Conservative MP Therese Coffey, who was appointed Parliamentary
Under Secretary of State at Defra the previous July, implied
that the UK remains committed to complying with global
agreements on phasing out F-gases.
"[At] the recent United Nations Montreal Protocol
negotiations in Rwanda (…) I am very pleased to report
that a deal was agreed amongst the 197 Parties to the
Protocol to phase down hydrofluorocarbon greenhouse gases,"
she said.
"The Montreal Protocol, agreed in 1987, is already seen as
one of the most successful environmental treaties ever agreed,
having phased out 98% of the ozone depleting substances,
(…) including chlorofluorocarbons (CFCs) and
hydrochloro-fluorocarbons (HCFCs)."
Coffey added that HFC alternatives are becoming increasingly
available and that the UK had already committed to cutting
its use of the chemicals by 80% by 2030, one of the most
ambitious phase-out programmes in the world.
Fazed by phase out
The UK’s so-called 'Great Repeal
Bill’, recently rebranded as 'The EU Withdrawal
Bill’, has been touted as the government
mechanism for rewriting thousands of European laws into
British statute books.
But legal commentators, including independent think tank The
Institute for Government, have warned that the UK is facing a
"legal black hole" as there is not enough time to redraft all
the laws before the Brexit deadline of March 2019 and
suggestions of a period of continuity under EU legislation have
met with fierce resistance.
EU regulations on F-gas aim to phase the chemicals out
through quotas limiting the amount of HFCs that can be sold in
EU member states. Once the UK relinquishes membership of the
union, it will no longer be subject to these quotas.
The UK’s exit from this process will also
potentially affect other EU member states as the bloc may
retain its overall quota but with a smaller number of
countries, meaning that the amount of HFCs permitted to be sold
would be proportionately larger for each remaining member. This
would, in theory, allow EU members to extend the phase-out
process.
Companies like Mexichem want to know whether the UK will
implement its own quota system and whether it will still be
allowed to trade quota allocations with other European
countries, as is currently permissible under EU law. It is
also unclear how companies’ ability to place
HFCs manufactured in the UK on other EU markets will be
affected post-Brexit.
Most F-gas manufacturers have expressed a preference for the
continuation of pan-European fluorochemcial trade and quota
swaps, which will presumably require free trade agreements
(FTAs) or quota recognition deals to be put in place.
Early indications from Brussels, however, are that FTA
negotiations cannot even begin until after the UK has left the
EU, dashing hopes of a smooth transition. Defra officials are
understood to be working on the assumption that the UK will
have a UK-specific HFC quota system in place.
Mexichem, which is one of the most significant suppliers of
F-gases globally and has eight production sites and two R&D
centres in the UK, said in its second-quarter earnings, that it
was evaluating the situation but did not expect Brexit to have
a significant impact on its business.
However, Mexichem’s subsequent requests for
lobbying assistance suggest that the company may have some
specific concerns about the post-Brexit situation for its
business. Mexichem did not respond to a request for comment by
IM.
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Existing regulatory regime covering EU
fluorochemicals trade
EU legislation controls the use of F-gas in member
states via two legislative acts:
- The MAC Directive on air-conditioning systems in
small motor vehicles
- Prohibits use of F-gases with global-warming
potential more than 150 times greater than CO2 in all
new cars and vans produced from 2017
- F-gas Regulation
- Sets quotas designed to phase down the volume of
HFCs placed on the EU market from 2015, with the aim
of limiting the amount of HFCs sold in the block to
one fifth of 2014 sales by 2030.
- Quotas are allocated annually for the import and
production of bulk HFCs and are based on a
declaration of additional anticipated needs.
- Since 1 January 2015, a quota has been required for
producers and importers placing at least 100 tonnes
of CO2-equivalent of HFCs on the market in a calendar
year.
- The European Commission allocates quotas in
accordance with Article 16, as well as Annexes V and
VI of the Regulation.
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