HVAC/R & Regulation · June 2026
Illegal HFC trade is not only a border-control issue. It also reflects the gap between regulatory compression, unresolved service demand and the market's capacity to convert the installed base.
By Michele Cadoni · European Market Entry & Distribution Strategy Partner
The European HFC phase-down is entering a more difficult stage.
From 2027, the quota reduction becomes much more severe. This step can represent an important milestone in the effectiveness of the F-Gas framework, but it also opens a more sensitive market question.
What happens when legal supply is reduced sharply while a significant installed base still needs servicing?
This is where the discussion around illegal HFC trade becomes more complex.
The issue is often reduced to two visible layers: border control and the circulation of illegal product once it has entered the EU market.
Both are essential.
Border control determines whether non-compliant product can enter.
Internal market control determines whether that product can be diluted through traders, online channels, mixed stocks, relabelling or apparently normal invoices.
But these two layers are not sufficient to describe the full problem.
What the market seems to show is a deeper structural issue:
regulatory compression is moving faster than physical market conversion.
This does not mean that quota reductions are wrong.
The reduction of high-GWP refrigerants is necessary. It is part of the transition required by climate policy, new equipment design and the progressive move toward lower-impact solutions.
The risk is different.
If legal supply is reduced faster than the installed base can realistically convert, the market may create space for illegal or grey-market supply.
That is the central tension.
The quota system acts on the volume of HFCs that can be legally placed on the EU market.
It is a regulatory mechanism.
It can reduce available supply by law.
But the installed base follows another logic.
Existing refrigeration, air-conditioning and heat-pump systems do not disappear because the quota curve moves downward.
They remain in supermarkets, cold rooms, industrial sites, hospitality, commercial buildings, residential applications and technical installations.
Many of these systems still require servicing.
Some can be replaced.
Some can be retrofitted.
Some can reduce leakage.
Some can move to lower-GWP alternatives.
But all of this takes time.
It requires investment, technical assessment, installer capacity, availability of alternatives, customer decisions and, in many cases, operational planning.
This is where the mismatch appears, especially when the broader economic environment is already affected by uncertainty, investment caution and cost pressure.
Legal supply can be compressed by regulation. Physical demand can only be reduced by market conversion.
These two curves are not moving at the same speed.
Illegal HFC trade should not be seen only as a customs failure.
Of course, border control matters.
If illegal product enters the EU through false declarations, incorrect product descriptions, misuse of transit routes or weak customs checks, enforcement must respond.
But illegal product does not survive only because it enters.
It survives because there is demand able to absorb it.
That demand is created by several conditions:
When legal refrigerant becomes scarce or expensive, the economic attraction of non-compliant supply increases.
The illegal product then finds space not because the market wants illegality, but because part of the market is not yet structurally ready to operate without that refrigerant demand.
This is the uncomfortable point.
A phase-down can be environmentally correct and still create market pressure if the conversion system around it is not strong enough.
Border enforcement remains fundamental.
Without strong controls, illegal HFCs can enter the EU through ports, road transport, transit routes, warehouses and mixed consignments.
Authorities need customs intelligence, product verification, cylinder checks, digital declarations, cooperation between Member States and stronger penalties for deliberate non-compliance.
But border control answers only one question:
How does illegal product enter?
It does not fully answer another question:
Why does the market still absorb it?
Once illegal product has crossed the border, the issue changes nature.
It becomes a distribution problem.
Illegal refrigerant can be diluted through small traders, online resale, informal channels, mixed stocks, relabelling and apparently normal invoices.
At this stage, the product is no longer visible as an import problem.
It becomes part of the commercial fabric.
This is why a purely border-based approach is not enough.
The internal market requires another layer of control: chain-of-custody traceability.
The EU single market is efficient for legitimate trade.
But the same fluidity can make illegal product harder to isolate once it has entered.
A cylinder can move across borders.
A batch can be split.
Product can be resold through several intermediaries.
An end user may not understand whether the refrigerant has entered the market legally or not.
A small contractor may focus mainly on price and availability.
A distributor may face unfair competition from product that does not carry the same compliance costs.
This is why internal dilution is not a marginal issue.
It is the point where illegal trade becomes difficult to control.
The solution cannot be limited to the importer level.
Traceability should follow the product further into the chain.
That means identifying:
Without this level of discipline, illegal product can continue to appear as ordinary market supply.
The most important question is not only how to stop illegal trade.
The more strategic question is how to reduce the space in which illegal trade becomes economically attractive.
This requires a conversion architecture.
Not only regulation.
Not only enforcement.
A conversion architecture should include at least five elements.
Authorities and market actors need to understand where service demand will remain, which refrigerants are involved, which sectors are most exposed, and where retrofit or replacement is technically and economically realistic.
Without this information, quota reduction remains a macro-policy tool applied to a market whose physical needs are only partially visible.
Every kilogram of refrigerant properly recovered, reclaimed and reintroduced legally into the market reduces pressure on virgin quota and reduces the economic space for illegal product.
Reclamation should not be treated as a secondary waste-management activity.
It should be treated as part of the legal supply infrastructure during the transition.
The objective should not be to preserve obsolete systems indefinitely.
But operators with critical installations and documented conversion plans should not be pushed into unmanaged scarcity.
A structured approach could connect legal access to service gas with leak-control records, retrofit planning, use of reclaimed gas where available, and certified maintenance.
The refrigerant transition is not only a product issue.
It is a channel issue.
Distributors handling sensitive refrigerants need documentation discipline, cylinder control, customer qualification, technical competence and refusal of grey-market sourcing.
In this context, distribution architecture becomes part of environmental enforcement.
Technicians, installers and maintenance companies need training on lower-GWP alternatives, A2L refrigerants, CO₂, hydrocarbons, ammonia, safety procedures, retrofit assessment and system optimisation.
A regulation can reduce quotas.
But only a competent technical chain can convert installations.
Recent policy discussions in the UK and the US should not be used to argue that HFC phase-down policies are wrong.
That would be too simplistic.
They should be read differently.
They suggest that when the transition creates implementation tension, authorities may need corrective mechanisms.
The issue is not whether to reduce HFCs.
The issue is whether the reduction path is supported by enough conversion capacity.
If regulation compresses supply faster than the market can adapt, pressure appears in several forms:
This is the lesson.
Not that the phase-down should be abandoned.
But that the phase-down needs a stronger implementation architecture.
The debate should not be framed as strict regulation versus weak regulation.
That is the wrong opposition.
The better question is:
How can the EU maintain the phase-down objective while reducing the mismatch between regulatory compression and physical market conversion?
This is where the anti-illegal-trade strategy should evolve.
More border controls are necessary.
More enforcement is necessary.
More penalties are necessary.
But they will not be sufficient if the market continues to face a structural gap between legal supply and unresolved service demand.
The priority should be to close that gap.
This means:
The illegal HFC market does not grow only because illegal actors exist.
It grows when the legal market leaves enough economic space for them.
Illegal HFC trade in Europe is not only a border problem.
It is not only a question of criminal importers or weak customs controls.
It is also a symptom of a transition gap.
The quota path reduces legal supply.
But the installed base, the service market, the reclamation system, the distributor network and the technical workforce must convert fast enough to absorb that reduction.
If they do not, illegal trade may not only continue.
It may find new economic space.
The objective should not be to weaken the HFC phase-down.
The objective should be to make the phase-down operationally absorbable.
That requires a controlled conversion architecture.
Because in this market, the real risk is not regulation itself.
The real risk is regulation moving faster than the market structure needed to implement it.