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The Black Market Vs. The Ozone


Environment: CFCS

THE BLACK MARKET VS. THE OZONE

Despite global limits on CFC production, the traffic is brisk

Ten years ago, the world's nations signed a historic agreement to phase out chlorofluorocarbons (CFCs), chemicals used as coolants in refrigerators and air conditioners. The global cooperation was a response to evidence that CFCs had been eating a hole in the earth's protective ozone layer for decades. Industrial nations agreed under the Montreal Protocol to halt virtually all CFC production by 1996, with the developing nations given until 2010.

On the surface, the agreement has worked. Global production of CFCs, such as DuPont Co.'s popular Freon brand, dropped from 800,000 metric tons in 1987 to 156,000 last year. The world's chemical companies, working with car- and appliance makers, spent millions of dollars to produce replacement coolants.

Still, if you own a car built before 1994 and you've replaced the coolant this summer, there's a good chance you are using illegal CFCs. The U.S. prohibits making or importing CFCs but doesn't ban the sale or use of chemicals made before the 1996 ban. That loophole was to allow the 130 million older cars using CFCs to be serviced. But the loophole also allows a thriving black market.

CFCs from factories in China, India, Mexico, and Russia--countries still allowed to make the chemical for domestic use--are wending their way to Europe, the U.S., and Canada. The smugglers pass them off to repair shops as recycled CFCs--which are still legal--or claim they are part of grandfathered stockpiles. Drivers of older cars aren't likely to ask questions. It can cost as much as $1,200 to retrofit a car's air-conditioning system for a CFC alternative. Recharging with CFC costs about $80.

DEADLY RAYS. The price differential creates a great market for smugglers, who brought an estimated $500 million worth of the chemicals into the U.S. last year, according to the U.S. Customs Service. Worldwide, the U.N. estimates that some 30,000 metric tons of CFCs were smuggled into industrialized countries in 1996, one-fifth of the total production. The U.S. Justice Dept. estimates that the CFC-smuggling racket is larger in value than the trade in illegal guns. It may also be more damaging. Ozone, a natural atmospheric gas, protects the earth from the sun's deadly ultraviolet rays, which unshielded can cause skin cancer and destroy sea life.

The black market has hurt DuPont and Imperial Chemical Industries PLC. Each spent some $500 million developing CFC alternatives. In 1991, when DuPont started shipping HCFC 134a, a more environmentally sound coolant, there was a significant stockpile of CFCs. "The illegal imports deferred the use of that stockpile by at least a year," says John Bray, DuPont's global manager for refrigerants. It also dampened interest in retrofitting cars and "gave users a false sense of security that [CFCs] are readily available," says Bray.

Such complacency has done the atmosphere no good. This spring, the World Meteorological Organization (WMO) reported that the ozone layer over the North Pole is the thinnest it has been since scientists started taking measurements in the early 1970s. Over Antarctica, where the layer has always been thinnest, observations last October "show a continuous ozone depletion of unprecedented magnitude, with complete annihilation...during a few consecutive weeks," says the WMO.

Part of the problem is the ease with which CFCs can be smuggled. A study of the black market issued last year by the Washington-based environmental group Ozone Action found that illegal CFC canisters may be mislabeled as "propane" or hidden inside larger canisters of another chemical. Or they are legally brought into U.S. ports for shipment to Latin America, then diverted to the domestic market.

Customs officials stepped up enforcement in 1995, convicting eight people in Miami of diverting more than 4,000 tons of CFCs from India. Ozone Action estimates that some 10,000 tons of suspect CFCs came into U.S. ports in 1995, with Russian supplies going to the East Coast and Chinese and Indian to the West. In 1996, the trade shifted to harder-to-monitor land routes across the Mexican and Canadian borders.

Mexico's border is a popular entry point. Much of the contraband comes from a CFC factory just 200 miles from Texas. Last year, after seizing about 1,000 pounds per month at the border, the Customs Service decided to crack down. It formed a special task force with investigators from other government agencies called Operation Frio Tejas ("frozen Texas"). "We think of it as one of the top problems facing Customs," says Steven W. Hooper, deputy special agent of the Houston Customs office. "The damage that these things can do to the environment is tremendous."

CASH INCENTIVE. In Western Europe, illegal CFCs have a Russian flavor. Although Russia was to halt CFC production last year, Moscow insisted it would be too costly to produce replacements. The U.N. reports that Russia's seven CFC factories produced 18,000 metric tons in 1996, some 10,000 of which entered the European Union illegally. In a report on compliance with the Montreal Protocol issued last year, London's Royal Institute of International Affairs declared: "All the evidence suggests that Russia is a significant source of most of the illegally traded material.... Individual plants may simply produce above their official quota and sell the surplus on the black market."

The World Bank figures that the easiest way to stop the illegal trade is to pay Russia $30 million to shut down the plants. The bank has come up with half the sum and urged the Group of Seven industrialized nations to cough up the rest. Environmentalists want the World Bank's solution more widely applied: Shut down all CFC plants now, not in 2010. "There is plenty of that stuff floating around in cars that could be recaptured and reused," says James Vallette, executive director of the International Trade Information Service, a Washington-based environmental group. It's absurd, Vallette says, to give the developing nations more time to phase out the chemical. "The majority of CFCs go into car air conditioners. People who own cars are not people in poverty."

Poor or not, drivers who won't retrofit air conditioners might heed a 1996 report out of the Netherlands. It estimates that up to 1.5 million cases of skin cancer could be averted each year in the U.S. if the CFC ban is enforced.By Catherine Arnst in New York, with Gary McWilliams in HoustonReturn to top


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