On October 1, 2026, the U.S. Environmental Protection Agency (U.S. EPA) signed its Notice of 2027 Allowance Allocations for Production and Consumption of Regulated Substances, which stated the intended quantity of hydrofluorocarbon (HFC) production and consumption allowances to be allocated to companies for calendar year 2027. This action implements the American Innovation and Manufacturing (AIM) Act of 2020, which directs U.S. EPA to phase down domestic HFC production and consumption to 15% of baseline levels by 2036. Although this notice is a pre-publication, this action from U.S. EPA gives affected industries a clear view of how allowances will be administered until the next phasedown benchmark is reached.
While the allowances issued for 2027 are consistent with the phasedown requirements mandated by the AIM Act for the 2024–2028 phasedown period, facilities that are dependent on HFCs should begin preparing now for the more substantial reductions in future phasedown periods. Constraints on the production and consumption of virgin HFCs are expected to tighten the available supply, which would increase the cost of HFC refrigerants, particularly for higher-global warming potential (GWP) products. These market pressures are expected to accelerate the industry’s transition toward lower-GWP alternatives and reclaimed refrigerants, making early planning increasingly important for facilities seeking to manage service, cost, and supply risks.
HFCs are synthetic chemical compounds that are frequently used in a variety of applications such as refrigeration, air conditioning, aerosols, fire suppression, and foam blowing. HFCs are recognized as potent greenhouse gases (GHGs) with high GWPs and as a class of volatile organic compounds (VOC). The use of HFCs has been growing globally as traditional ozone-depleting substances (ODS) are phased out and the use of refrigeration and air-conditioning equipment continues to grow.
HFC Allowance Issuance
On October 1 of each year, U.S. EPA allocates allowances for the following calendar year which authorizes companies to produce or import bulk HFCs in the U.S. The overall size of the allowance pool is established based on the phasedown schedule defined within the AIM Act, which progressively reduces allowable HFC production and consumption levels. Allowances are allocated based primarily on companies’ historical HFC production and import activity, while also accounting for specialized allowances, new entrants, transfers, and administrative consequences. For calendar year 2027, U.S. EPA is continuing to allocate HFC allowances at 60% of the statutory baseline, which is consistent with regulations outlined by the AIM Act for the 2024–2028 phasedown period. U.S. EPA’s 2027 HFC allowance allocations are largely consistent with those for 2026, and should give affected industries a clear understanding of how allowances will be allocated through the rest of the phasedown period.
Upcoming Phasedown Benchmarks and Changes to the Industry
When the next phasedown period begins on January 1, 2029, HFC allowances will be allocated at 30% of the statutory baseline. Because allowances are denominated in exchange value, which tracks GWP, the step-down will fall the hardest on facilities that produce or consume high-GWP HFCs. In response to these upcoming regulatory changes, many industries have already begun repositioning around lower-GWP refrigerants. For example, many residential and light-commercial equipment manufacturers have transitioned product lines from using high-GWP HFCs, such as R-410A, to alternatives like R-32 and R-454B, which are lower-GWP HFCs by comparison. While alternatives like these are advantageous with regard to the HFC allowances, certain safety precautions for using alternative refrigerants will require redesigned equipment, new safety systems, and updated technician practices.
As allowances tighten, reclamation is becoming a critical practice for supplying refrigerant for existing HFC-containing equipment and appliances. This is because reclaimed material is not considered a new supply, which falls outside the scope of the HFC Allowance Allocation Program. Likewise, the definition of “production” under 40 CFR § 84.3 expressly excludes the reclamation, reuse, or recycling of a regulated substance, and “reclaim” is defined as reprocessing to the purity specifications outlined in Appendix A to 40 CFR Part 82, Subpart F, which are based on Air-Conditioning, Heating, and Refrigeration Institute (AHRI) Standard 700. Based on these definitions, it is implied that reclaimed refrigerant can be resold at virgin-equivalent quality without expending production or consumption allowances.
It is important to note that U.S. EPA has not yet promulgated the methodology that will be used when allocating HFC allowances in the next phasedown period. On July 28, 2026, a notice of data availability was issued by U.S. EPA to alert stakeholders of information on the HFC Allowance Allocation Program and to solicit input on allowance usage, production and import trends, reclamation, and projected HFC demand. Because the AIM Act requires U.S. EPA to issue each year’s allowances by October 1 of the preceding year, the first 2029 allowances must be issued by October 1, 2028. Therefore, it is expected that U.S. EPA will promulgate rulemaking which establishes the allocation methodology for this phasedown period well before this deadline.
What Should Affected Facilities be Considering?
For producers and importers, allowance holdings will become a scarcer asset, and each allowance should be directed toward the products with the strongest demand and the lowest exchange value per unit sold. With the allocation cap halving in the next phasedown period, affected facilities should model quantities (in tons) of each HFC their expected allowances can support, because high-GWP products consume several times as many allowances per ton as lower-GWP alternatives.
For consumers, it is important to note that the next HFC phasedown period will not require existing HFC-containing equipment or appliances to be shut down or replaced. Existing equipment can be serviced for its full life, but affected facilities should treat the upcoming allocation cap halving as a service, cost, and supply risk. With high-GWP HFCs being phased out of production, prices for the 2029 market will depend on the availability of both virgin product and reclaimed refrigerant for that year.
How Can ALL4 Help?
ALL4 is closely following U.S. EPA’s updates to the HFC Allowance Allocation Program and its potential impacts on heating, ventilation, air conditioning, and refrigeration services and industries. ALL4 can help affected facilities develop HFC inventories, evaluate compliance risks, and establish the safety measures and technician practices needed to transition to lower-GWP refrigerants.
For questions about U.S. EPA’s notice or how the upcoming HFC phasedown benchmarks may affect your facility, please contact Daniel Hickey at dhickey@all4inc.com or reach out to your ALL4 project manager.
