03 June 2021
A-Gas managing director John Ormerod highlights how the new refrigerant quota system operates in Great Britain and where the challenges lie.
Our departure from the European Union on January 1 has changed how the cooling industry operates in Great Britain. England, Scotland and Wales are now outside the EU and equipped with the power to set their own agenda to meet the low carbon challenge.
But within this framework, we are still following the latest F-Gas Regulation protocol which began in 2015 and continues until 2030. Our mission to reduce the use of high global warming HFC refrigerants is still very much at the forefront of our thinking.
UK refrigerant quota
Since the beginning of the year, a quota system has been in place to govern the import and export of HFC refrigerants between Great Britain and the rest of the world, including the EU. This system controls the amount of virgin refrigerant passing between us and the outside world and ensures that we keep to the rules laid down by the F-Gas Regulation.
Virgin HFC refrigerants feature in the quotas, but reclaimed gases are unaffected. This means the more we can reclaim, the more we can sell outside the quota system and, in turn, make available to the market.
The Department for Environment, Food and Rural Affairs (DEFRA) now governs what we do in Great Britain regarding the F-Gas Regulation. Before we left the EU, DEFRA investigated refrigerant supply into the UK and allocated quotas to companies based on their historical trading.
Eleven per cent of the allocation was set aside for new entrants to allow for flexibility in the system. This has led to a more fragmented market and it can be complex to understand. HFOs are not part of the quota system, but HFO blends are if they have an HFC component in them – N40 (R448A) is an example.
Initial disruption and problems with pre-charged
That aside, it is early days, and because the industry had ample time to prepare for the changes, disruption in England, Scotland, and Wales has been kept to a minimum. Of course, it hasn’t helped that we’ve been off work and in lockdown for more than a year.
There’s been some disruption at the ports. This cannot be blamed on the quota system, but more our departure from the EU at a multi-layered level, and the transportation of gases has been slowed as a result.
The big question is will we have enough virgin refrigerant for our home market? In all, 7.3 million tonnes of CO2e gases have been allocated to the cooling industry, but is this pitched at the right level to meet demand in Great Britain? For many of us, that’s the great unknown. No industry likes uncertainty, and clearly, only time will tell.
We have also lost the advantage of being part of the free movement of refrigerants within the EU. Although there was no tracking of the amount passing between the United Kingdom and the continent, historically, this would have undoubtedly contributed to the overall refrigerant pot available to the UK.
The good news is that there has been no shortage of refrigerants so far, but there has been a slight increase in price due to this year’s F-Gas step-downs leading to a cut of 29 per cent in the availability of the virgin product.
One area of difficulty relates to the import of cooling equipment containing refrigerant into Great Britain. Traders have to account for the refrigerant in the pre-charged equipment they are importing. Many of these businesses buy from Asia and then export to the EU. With free movement of goods within the EU gone, they now have to pay twice for the privilege of crossing borders.
This is making them less competitive, and unsurprisingly these businesses are not happy with the current situation.
Simplifying the process
Looking at the market in general, some supply chains have lengthened, and it may be taking a week or two longer for goods to arrive. At A-Gas, we are limiting the movements of refrigerants between our sites on the Continent and Great Britain because of the complexities of the quota system. They are operating as separate entities. We do this to maintain the smooth running of the business.
The Northern Ireland protocol has created some difficulties too. Northern Ireland stayed within the EU F-Gas Regulation system, but we have customers in the province that we have historically supplied from mainland Great Britain. Under the new system, we would need an EU quota to service customers in Northern Ireland, which increases the complexity of the whole operation. We have chosen to service Northern Ireland from our German site to keep it within the EU quota system and simplify the process.
A further complication is the repatriation of used refrigerants classified as waste. Historically it was never an issue to bring these gases back to mainland Great Britain but now it requires an import quota to move them across the Irish Sea. This again is a tricky issue, so we have decided that waste from Northern Ireland should be sent to our reclamation site in the Netherlands to keep it within the same F-Gas quota system.
More change could also be on the way. Later in the year, the F-Gas Regulation will go out for consultation for further amendment in 2023. This review will happen on both sides of the English Channel, and who knows, we could end up with the two F-Gas systems going in differing directions.
At A-Gas, there’s no doubt that our exit from the EU and the pandemic has changed the way we operate, but I’m happy to say business continues as usual. The pandemic has affected our ability to travel as a lockdown would, but I am grateful to our employees for showing great flexibility in these difficult times. Working from home has become the norm for some.
With their help and the assistance of everyone who has stayed on-site or on the road, a seamless supply chain has been maintained. With the vaccination programme in the UK making good progress, we are more positive in our outlook than we were at the beginning of the year.