Europe’s nicotine policy dilemma: can tougher rules curb smoking without fuelling the illicit market?

Eight member states are reportedly calling on the EU to freeze the introduction of new products containing nicotine, putting the future of Europe’s fast-changing nicotine market firmly on the EU policy agenda.

According to reports, the Netherlands, Belgium, Finland, France, Hungary, Latvia, Slovenia and Spain have urged EU Health Commissioner Olivér Várhelyi to introduce a market freeze on new nicotine products.

The countries argue that restricting the availability of new products could help reduce nicotine consumption and support the EU’s ambition that fewer than 5 per cent of adults will be using tobacco by 2040 under the European Beating Cancer Plan.

Speaking of the letter, Dr Delon Human, leader of Smoke Free Sweden, said: “This is a dangerous and  misinformed attempt to export their own failures across Europe. Governments with substantially higher smoking rates are asking Brussels to restrict the options available to smokers in countries that have achieved far greater progress.”

But there is another question the EU may have to consider: what happens when consumers continue to demand products that regulation may restrict on the legal market?

A 2026 study by Fraunhofer IIS, examining the European market for e-cigarettes, describes an expanding “irregular” market for vaping products across Europe.

The findings come as the EU considers extending its tobacco-control framework to a wider range of nicotine products under the new Tobacco Products Directive.

Vaping’s illicit market is ballooning

For years, the illicit-trade debate in Brussels has largely focused on cigarettes.

The illicit trade remains a major problem. The European Court of Auditors, the EU’s financial watchdog, has estimated that around one in 10 cigarettes on the EU market is illegally produced or smuggled, with an estimated €13 billion in lost public revenue.

But the latest political debate is about something different.

The eight-country letter concerns new nicotine products, including products such as vapes and nicotine pouches. That, it is argued, makes evidence from these markets more relevant than headline figures on illicit cigarettes.

Fraunhofer reaches its estimate by comparing demand with official import and trade data. It treats the unexplained gap as an irregular market, which it then divides into grey and black-market segments.

The study also shows the scale of European supply chains. In 2024, more than 45,000 tonnes of nicotine liquids and e-cigarettes were reportedly imported into the EU from third countries, up from around 30,888 tonnes in 2022. China accounted for just over 91% of imports of nicotine liquids and electronic cigarettes from third countries, according to the study. The Netherlands, Germany and Belgium were among the EU’s largest importers.

In August, the European Anti-Fraud Office (OLAF) announced it had dismantled a counterfeit nicotine-pouch factory in Lithuania, where investigators reportedly found 330,000 boxes across 30 types of product.

A separate Joint Customs Operation targeting illicit vaping products resulted in the seizure of 1.9 million e-cigarettes, more than 1,500 pieces of e-cigarette liquid and almost 61,000 heated-tobacco products.

Are restrictions driving the black market?

How to regulate tobacco products is central to two files under discussion in Brussels.The first is the revision of the Tobacco Excise Directive (TED), which governs how tobacco products are taxed. The second is the revision of the TPD, which sets the rules for making, presenting and selling tobacco and related products.

Both what may some regard as excessive taxation as well as any out-right bans can, it has been further argued by some, have the consequence that customers choose to buy from illicit sources.

The Transnational Alliance to Combat Illicit Trade (TRACIT) is an independent, non-governmental, not-for-profit organisation, whose Deputy Director General Stefano Betti, a former Senior Counsel at INTERPOL, has previously spoken about an estimated €83 billion illicit economy operating across European markets and how counterfeit goods might fund organised crime while eroding tax revenues, jobs, and consumer protections that legitimate trade supports. He has argued in the past that when a framework restricts or bans the sale of certain goods, illicit parallel markets are likely to emerge.

Others share the same concern about what has been called “inappropriate” regulation.

It is suggested that when regulation and enforcement are not aligned, demand for highly sought-after consumer goods moves to the black market and once parallel illicit markets take root they tend to perpetuate themselves.

A recent event in Brussels which gathered 80 European media agencies about “illicit trade as an emerging security threat” was told that higher taxes often displace consumption into illicit channels rather than reducing smoking rates.

EU Commission revision continues

The EU Commission views the illicit trade in tobacco as a major global criminal phenomenon that, it says, costs the EU and its member states billions of euros annually in lost tax and customs revenues.

The illicit trade drains billions from public budgets and creates an unfair advantage that damages legitimate businesses and fuels the shadow economy, it says.

A spokesperson for the Commission’s taxation DG told this website, “The illicit trade in tobacco products undermines public health, deprives Member States of significant tax revenue and is often linked to organised crime.

“Overall, illicit tobacco trade is estimated to cost the EU around €13 billion each year in lost tax revenue. This underscores the importance of continuing to strengthen the current control of the tobacco supply chain.

“Therefore, in 2025, the Commission proposed bringing raw tobacco within the scope of the EU tobacco taxation framework, including extending the Excise Movement and Control System (EMCS) to raw tobacco. This would help Member States better detect and combat illicit trade. The negotiations in Council are ongoing. We will continue supporting the Council Presidency to find a good agreement on the Tobacco Taxation Directive swiftly.”

The spokesperson added, “Tackling illicit tobacco trade requires strong enforcement, cross-border cooperation and a robust EU regulatory framework. The Commission supports Member States through customs cooperation, monitoring measures and rules governing excise goods.”

The Commission says EU rules on tobacco control have contributed to a significant decline in smoking and tobacco-related deaths across the EU. At the same time, its current evaluation  on tobacco laws highlights, it adds, growing challenges linked to the rapid emergence of novel tobacco and nicotine products, particularly among young people.

Currently, the EU finds itself in the middle of a familiar policy balancing act.

On one side is the public-health objective: fewer smokers, less nicotine dependence and lower long term healthcare costs.

On the other are the enforcement and security implications of creating a larger regulatory gap between legal and illegal products.

The European Court of Auditors has already cautioned that the EU’s response to illicit tobacco currently lacks sufficient coordination. Europol and national authorities, meanwhile, continue to dismantle criminal networks involved in manufacturing and smuggling.

The two policy debates are therefore increasingly difficult to separate.

Some argue that if the EU wants to drive smoking rates below 5% by 2040, it will need more than restrictions on legal products. It will also need to ensure that the legal market, taxation policy and enforcement strategy work together.