Phasing Down Hydrofluorocarbons

On October 20, 2022, the EPA announced additional actions, including a proposed rule, for the phasedown of hydrofluorocarbons (HFCs), which, according to an Agency news release, are a “crucial component of President Biden’s ambitious agenda to combat the climate crisis while advancing American manufacturing and innovation.”

The proposed rule sets a 40% reduction for 2024 in the production and consumption of HFCs below historic levels.

HFCs are greenhouse gases (GHGs) used in air conditioning, refrigeration, aerosols, fire suppressants, and other foam products. Their climate impact is estimated to be hundreds to thousands of times more harmful than the same amount of carbon dioxide (CO₂).

“Super pollutants, like HFCs and methane, are the low-hanging fruit in the fight to slow climate change,” said Congressman Scott Peters (D-CA-52) in the EPA news release. “Two years ago, Congress passed bipartisan legislation to phase down the production and consumption of HFCs by 85% by 2036. [This EPA action] will ensure we reduce these dangerous pollutants and protecting communities across the globe from climate change-fueled disasters.”

Since January 1, 2022, companies have needed allowances for producing or importing HFCs.

Kigali Amendment

The EPA announcement follows recent Senate approval for the United States to ratify the Kigali Amendment to the Montreal Protocol, which is a global agreement to phase down HFCs.

On October 15, 2016, 197 countries adopted an amendment to phase down HFCs under the Montreal Protocol in Kigali, Rwanda. Under the amendment, countries committed to cut the production and consumption of HFCs by more than 80% over the next 30 years. This schedule avoids more than 80 billion metric tons of CO₂ equivalent emissions by 2050, which prevents up to 0.5° Celsius warming by the end of the century.

Under the amendment, developed countries began reducing HFC consumption in 2019. Most developing countries will freeze consumption in 2024, with a small number of developing countries with unique circumstances freezing consumption in 2028.

Signing the agreement commits participating countries to a legally binding agreement that creates rights and obligations under international law.

“Ratifying the Kigali Amendment will allow us to lead the clean technology markets of the future, by innovating and manufacturing those technologies here in America,” says a statement written by President Joe Biden. “Ratification will spur the growth of manufacturing jobs, strengthen U.S. competitiveness, and advance the global effort to combat the climate crisis. … [It] will help our nation unlock an estimated 33,000 new domestic manufacturing jobs, $4.8 billion each year in increased exports, and $12.5 billion each year in increased economic output.”

HFC production and consumption allowances

Enacted by Congress on December 27, 2020, the American Innovation and Manufacturing (AIM) Act directs the EPA to address HFCs by:

• Phasing down production and consumption
• Maximizing reclamation
• Minimizing releases from equipment
• Facilitating the transition to next-generation technologies through sector-based restrictions

The EPA-proposed regulation establishes a methodology for allocating HFC production and consumption allowances for 2024 and later years similar to the methodology used for issuing allowances in 2022 and 2023—an initial step to achieve 10% of this phasedown. Now, the number of available allowances in 2024 will be reduced significantly to 40% below historic levels.

To achieve the HFC phasedown, the EPA must:

• Establish baselines for U.S. production and consumption from which reductions must be made, according to the formulas provided in the AIM Act.
• Phase down the production and consumption of HFCs by 85% below their baseline levels in a stepwise manner by 2036, starting with the 2022 10% reduction.
• Issue allowances by October 1 each year so companies may produce or import HFCs in the following calendar year.
• Establish a mechanism whereby allowances can be traded and sold, with an offset that results in a greater reduction of HFC production or consumption.
• Ensure that sufficient allowances are available to meet the estimated needs in six types of uses listed in the AIM Act.

Defining allowance units

An allowance is the unit of measure that the EPA uses to control production and consumption. An HFC allowance is equal to 1 metric ton of exchange value equivalent (i.e., 1 metric ton CO₂ equivalent). HFCs with higher global warming potentials (GWPs) require more allowances to produce or import than lower-GWP HFCs. The AIM Act specifies that an allowance allocated by the EPA is a limited authorization for the production or consumption of a regulated substance and does not constitute a property right.

To understand how allowances translate to quantities of various HFCs intended for production or import, see the EPA HFC Allowance Calculator.

The allowance program

Allowances are utilized to produce or import bulk HFCs. There are three types of HFC allowances:

1. Production
2. Consumption
3. Application-specific allowances

For industry producing HFCs, it is necessary to use both production and consumption allowances. The importation of HFCs only expends consumption allowances.

Under the EPA-established framework and criteria, for 2022 and 2023, the EPA is issuing allowances to:

• Companies that produced and/or imported bulk HFCs in 2020. They will receive allowances based on the three highest years (not necessarily consecutive) of production and/or import between 2011 and 2019.  Historical importers that were not active in 2020 will be given individualized consideration if they provided documentation during the comment period showing they were still active in 2020.
• Companies that use HFCs in one of five applications listed in the AIM Act.  These companies will receive application-specific allowances. The five applications are:
  • A propellant in metered dose inhalers
  • Defense sprays
  • Structural composite preformed polyurethane foam for marine use and trailer use
  • The etching of semiconductor material or wafers and the cleaning of chemical vapor deposition chambers within the semiconductor manufacturing sector
  • Onboard aerospace fire suppression
• The sixth application listed in the AIM Act, which is “[m]ission-critical military end uses, such as armored vehicle engine and shipboard fire suppression systems and systems used in deployable and expeditionary applications.” These allowances are issued directly to the Department of Defense.

The EPA issued allowances for 2022 on October 1, 2021. The EPA also set aside allowances for companies identified late and for new market entrants, which were issued by March 31, 2022.

On September 30, 2022, the EPA issued allowances to companies authorizing them to produce or import HFCs in 2023. The total allowances issued are at the same level as in 2022 per the phasedown schedule, although the number of entities receiving allowances for 2023 increased slightly.

Allowances are valid between January 1 and December 31 of a given year and cannot be banked or rolled over to the next year.

Illegal HFC production and importation

In March 2022, the EPA announced the Interagency Task Force on Illegal HFC Trade had prevented illegal HFC shipments equivalent to approximately 530,000 metric tons of CO₂ emissions over a 10-week period. This amount of HFC is the equivalent of the emissions generated from 100,000 homes over the course of a year.

As of September 30, 2022, the task force has prevented HFC shipments equivalent to 889,000 metric tons of CO₂.

The task force is co-chaired by the EPA and the Department of Homeland Security and includes Customs and Border Protection, the Department of Defense, the Department of Justice, and the Department of State.

To prevent illegal HFC trade, the main compliance and enforcement components of the final AIM Act rule include:

• Administrative consequences to deter noncompliance and create pathways to address the impacts of noncompliance;
• Requiring the use of refillable cylinders and container labeling;
• Prior EPA approval to import HFCs that do not require allowances (e.g., feedstocks);
• A comprehensive tracking system using Quick Response (QR) codes or similar digital technology to track the movement of HFCs through commerce;
• Requiring third-party auditing of companies’ recordkeeping and reporting; and
• Transparency of HFC production and consumption data for the general public and participants in the market and to support enforcement and compliance efforts.

Administrative consequences are issued for the following industry activities:

• Submitting false, inaccurate, or misleading information or data;
• Importing HFCs without expending the required number of allowances;
• Not disclosing financial conflicts of interest or familial relationships in certain circumstances; and
• Failing to provide required reports consistent with the regulatory requirements.

Administrative consequences include retiring, revoking, or withholding the allocation of allowances or banning an entity from receiving future allowances.

In September 2022, the EPA reported it had taken action against certain companies by notifying these entities that the Agency intends to retire some of their allowances due to misreporting data.

Examining HFCs in refrigeration more closely

HFCs were a replacement for earlier refrigerants called chlorofluorocarbons (CFCs). The problem with CFCs was that they were destroying the ozone layer.

While HFCs are less harmful than CFCs in that they do not deplete the stratospheric ozone layer, they do trap heat that contributes to global warming.

Refrigeration units circulate a fluid that absorbs ambient heat. As the heat is absorbed, the fluid evaporates. That vapor is pumped back to the coils of the refrigeration unit, where the condenser turns it back into liquid that is recirculated throughout the unit. The absorbed heat is released into the room outside the refrigeration unit.

“While HFCs’ chemical reactivity prevents them from depleting the ozone layer, their molecular structure allows them to absorb a lot of thermal radiation, making them a greenhouse gas,” reports Phys.org. “Like carbon dioxide on steroids, HFCs are extremely good at capturing infrared photons emitted by the Earth. Some of this radiant energy warms the climate. … But a little bit goes a long way—each HFC molecule absorbs thousands of times as much heat as a carbon dioxide molecule, making them powerful climate pollutants. … Because they are so powerful and short-lived, stopping the production and use of HFCs can have a significant cooling effect on the climate over the next couple of decades, buying time as the world converts its energy supply from fossil fuels to cleaner sources.”

What will replace HFCs in refrigeration?

Refrigerants are measured in terms of how they heat the atmosphere. This potency is measured as GWP.

Some “natural” refrigerants are making a comeback due to the high GWP of synthetic refrigerants. These include CO₂, ammonia (NH₃), water vapor, and hydrocarbons (HCs) such as propane.

The California Air Resources Board (CARB) offers the following analysis of various low GWP refrigerants:

• “Ammonia has the benefit of being energy efficient and having zero impact on both climate change and the ozone layer – unfortunately it is toxic to humans, historically limiting its applications. However, new technologies that reduce system size, safer controls and improved understanding of its application are expanding its potential. Low-charge ammonia systems are available today for a wide array of applications with favorable initial reports.”
• “Carbon dioxide systems, particularly transcritical CO2 systems, are increasingly being used around the world, including in California. Most often used in supermarket applications in colder climates because of waste heat dissipation needs, in Europe, commercial carbon dioxide systems number in the thousands and North American market share is increasing rapidly. On both continents, these systems are also making gains in southern climates.”
• “Hydrocarbon systems include R-290 (propane), R-1270 (propene or propylene) and R-600a (isobutane). These refrigerants have very low GWPs and zero ozone depletion potential (ODP). In addition, they have been found to have substantial energy efficiency benefits as compared to HFCs in many applications. Because they are flammable, equipment must meet UL Standards. (UL Standards are used to assess products; test components, materials, systems and performance; and evaluate environmentally sustainable products, renewable energies, food and water products, recycling systems and other innovative technologies.) … Hydrocarbons have application in medium and low temperature applications for micro-distributed systems.”
• “Hydrofluoroolefins (HFOs) have very low GWPs due to their very short atmospheric lifetimes. Although there are low-level flammability issues with HFOs, some are already Significant New Alternatives Policy (SNAP) approved. For example, HFO-1234yf, with a 100-year GWP less than one (1) and similar operating properties to R-134a, is now approved for certain uses in some chillers. It is also a component of HFO-HFC blends such as R-448A and R-449A (GWPs close to 1,400) which were recently approved for retrofit of certain HFC systems. While these newly approved blends have lower GWPs than the HFC blends they replace, their use still requires great care and is already regulated under California law because they are still high-GWP refrigerants. Performance issues including energy efficiency are being evaluated.  In addition, there are unresolved environmental concerns regarding HFO refrigerants such as regarding trifluoroacetic acid (TFA) buildup in water bodies. TFA is a strong acid that may accumulate on soil, on plants, and in aquatic ecosystems over time and that may have the potential to adversely impact plants, animals, and ecosystems.”

Just as HFCs are a better alternative than prior ozone-depleting refrigerants, care must be taken in developing alternatives. As with HFCs, the use of inert chemicals can have far-reaching negative impacts on the environment and human health.