Phasedown of Hydrofluorocarbons and Its Impacts

What are the impacts of an expanding population?

As industries continue to grow and expand to meet the needs of the growing population, more and more emissions are released into the atmosphere as a by-product of production processes in which provide the necessary products for human consumption. Greenhouse gases (GHGs) are included in these emissions, contributing to the warming of the planet as the gases absorb and trap the heat in the atmosphere. One group of greenhouse gases increasing in demand with the growing population is hydrofluorocarbons (HFCs). Recent regulations on HFCs have been introduced to reduce the impacts HFCs have on the planet.

What are hydrofluorocarbons?

HFCs are a group of synthetically made gases that are used to provide a heat transfer function in cooling and refrigeration systems. HFCs significantly impact global warming due to their high global warming potential (GWP). For example, R-125, is an HFC commonly used as a refrigerant. Chemical-125 has a GWP of 3,500. In other words, 1 ton of R-125 emissions is equivalent to 3,500 tons of CO₂ emissions.

What hydrofluorocarbon regulations have already been established?

The American Innovation and Manufacturing (AIM) Act of 2020 was enacted on December 27, 2020, to provide regulatory guidance and rules regarding hydrofluorocarbons (HFCs). The AIM Act provides the United States Environmental Protection Agency (U.S. EPA) with oversight authority to gradually phase down the production and use of listed HFCs, to manage these HFCs and their substitutes, and to use sector-based restrictions to facilitate a transition to cleaner technologies. This action strives to reach an 85% reduction in the production and use of HFCs by 2036, with a target to avoid a global temperature increase of 0.5⁰C by 2100. In October 2021, the final rule under the AIM Act was announced to establish a baseline which established an overall percent reductions of HFC production and consumption. In 2022, a 10% phasedown of HFCs consumption and production in the industry was announced by the U.S. EPA as part of the mandate from the AIM Act, requiring affected entities to reduce their total usage of HFCs and to find cleaner alternatives.

What changes have been made regarding hfc production and consumption?

On July 11, 2023, another mandate announced by the U.S. EPA called for a 40% reduction of all HFC chemicals within all industries below baseline levels, which was calculated using data from the Greenhouse Gas Reporting Program (GHGRP) and records from Customs and Border Protection (CBP). The CBP is a government law enforcement agency which has partnered with the U.S. EPA to develop automated methods of tracking HFC imports. The 40% reduction of HFCs will be implemented from 2024 to 2028. The new regulation for HFC limits will result in reduced production and use of these HFCs. On July 20, 2023, the U.S. EPA published a correction to the final 2022 rule in the Federal Register which revises the methodology used to calculate HFC production and consumption allowances for the time period of 2024 to 2028. It also amends the consumption baseline to reflect newer data received based on the current phasedown program of 10%. This amendment also clarifies the existing method of allowance expenditures related to imports, recordkeeping, reporting, and implementations.

What effects does the tighter regulation have on the industry?

This phasedown further tightens the current 10% phasedown of the regulation implemented in 2022. With the success of the original 10% phasedown, a similar method to calculate HFC allowances was established to provide regulatory guidelines to the various industries and stakeholders that are significantly affected. The 2024 HFC allowances will be distributed by September 29, 2023, to align with Kigali Amendment of the Montreal Protocol. All affected industries will need to comply with this new limit.

U.S. EPA also plans for two additional regulatory actions under the AIM Act. One rulemaking will place HFC usage restrictions in various sectors and will help mediate transitions of HFCs to alternatives that are safer and cleaner. This rule will be published in the Federal Register on December 15. A second rulemaking will provide regulatory requirements for managing HFCs, as well as their chemical substitutes, by the end of 2023. Affected entities include companies that are involved in the production, import, export, use, and general distribution of HFCs and those involved in the manufacture of products that use HFCs (e.g., refrigerators, air conditioning units, and foams).

What are the potential unintended consequences of the new regulation?

Although there is wide support for these actions, there could be unintended consequences of concern as observed historically with similar phasedown programs. With the reduced availability of these HFC chemicals, entities may choose to trade HFCs illegally, as well as stockpile HFCs to avoid recordkeeping of the HFC usage. To avoid unintended consequences resulting from a stricter rule, the HFC Phasedown Program created an enforcement mechanism. Since January of 2022, the Interagency Task Force on Illegal HFC Trade has prevented illegal imports of HFC, which were the equivalent of 1 million metric tons of carbon dioxide.

When a company is found to have misreported data on HFCs or have been found to have imported HFCs without the prescribed allowance, they will be subject to administrative consequences such as revocation and retirement of company HFC allowances and civil criminal enforcement action. In 2022 and 2023, companies found to have misreported data or imported unregistered HFCs, (without requisite number of allowances) have been forced to retire more than 6.5 million metric tons of CO₂e.

What are the next steps?

Complying with this new 40% phasedown regulation of HFC’s will require an understanding of how your facility may be impacted by the required 40% phasedown of HFC, as well as the new requirements for managing HFC and alternative chemicals. Keeping comprehensive equipment inventories, budgeted allowances, complete technical certificates, and accurate databases of HFCs and their alternatives you have on site will facilitate compliance.

ALL4 is here to help evaluate how these new rules may affect your operations and can help your company achieve compliance. If there are any questions about this new rule regarding HFCs or any other environmental issue, please reach out to me at bhsieh@all4inc.com or your ALL4 project manager for more information.