An Update On The AIM Act

Did you miss the United States House of Representatives hearing titled the “American Innovation and Jobs: Legislation to Phase Down Hydrofluorocarbons”? If you did, you can check out the recorded version here.

As a reminder, this is the House version of the Senate’s AIM Act (S. 2754), which was introduced in October and is currently in committee. The AIM Act establishes a 15 year HFC phasedown schedule, while also giving the EPA the authority it needs to enforce the phasedown. Both bills have bipartisan congressional support as well as HVACR industry and environmental group support. In addition, Dynatemp Refrigerants was among thirty-two HVACR industry CEO’s to sign a letter of support for a federally mandated HFC phasedown. In the absence one, we will continue to see a patchwork of state by state phasedown legislation as we have seen with California, Vermont, Washington, and now New Jersey.

What are the next steps? Both the Senate bill and the House bill are in committee, you can track their progress through congress.gov. Senate Bill S.2754 and House Bill H.R.5544

If you haven’t already, use HARDI’s tool to email your Representatives and ask them to support a federally mandated HFC phasedown to give the HVACR industry the clarity it needs to plan for the next generation of refrigerants.

Additional Sources:

https://www.epw.senate.gov/public/index.cfm/2019/11/carper-and-kennedy-introduce-bill-to-phasedown-use-of-hfcs

 

Summer 2019 Refrigerant Industry Update

Tariffs, trade wars, anti-dumping, Kigali, international regulations, and climate change. These are just a few of the factors affecting the current refrigerant industry to some extent. Note that none of them include weather, which has traditionally been the driving force behind refrigerant demand and price volatility. Over the last several years, we have seen each of these factors impact refrigerants in various ways, and to varying degrees. In looking ahead to Summer ‘19, we will look at each of these factors and their potential impacts. Please note that these are opinions, and should be taken into consideration as such.

As we move past the halfway point of the Trump Administration’s first term, we have seen the focus shift to trade and international sanctions lately. For the refrigerant industry, this has meant increased prices on steel cylinders imported from China, as well as the looming threat of tariffs on the remaining products produced in China and imported to the US, including component refrigerants. Put together with the current anti-dumping duties already in place for packaged HFC’s from China, there is potential for a major disruption in the market this year. Component refrigerants (R125, R32, etc) that were originally excluded from the previous round of anti-dumping duties are now on the list of potentially tariffed products if the trade war with China continues to escalate. As you know, the vast majority of the global supply of HFC’s originates in China. This would result in increased cost of refrigerant(s) from the PRC, whether imported in bulk to be packaged in the US, or brought in already packaged. As we have seen in the past, China is willing to manipulate the yuan to mitigate some of the effects of the tariffs, but a 25% proposed tariff would likely be too great to offset.

As the ripple effects of the US backing out of the 2016 Paris Agreement are still becoming clear, what has become clear is the intent of the rest of the world (184 States, plus the EU have signed on, with over 70 countries ratifying Kigali already). While the HFC phaseout schedule outlined in Kigali is more gradual than the HCFC phasedown schedule, the global desire for climate change regulation is growing. In fact, for the second year in a row, the 2019 HARDI Congressional Fly-In focused on HFC regulations and the entire industry’s support of the measure. From OEM’s to wholesale distributors, the vast majority of US businesses approve of, and are lobbying for, the ratification of Kigali.

In the meantime, the California Air Resources Board (CARB) has proposed legislation that would take the HFC phasedown from Kigali, and add more aggressive targets in order to meet climate change targets. A coalition of other states have joined forces with California, which would make implementation a messy affair, to say the least. Without clear Federal guidelines, a patchwork of regulations governing acceptable refrigerants and equipment will paralyze the industry. In addition to meeting global climate change goals, the Kigali Amendment (and CARB regulations) have been projected to have a net positive effect on the overall economy and jobs market of over $10B and 33,000, respectively. It will be important to monitor the movement of legislation, and the potential ratification of Kigali as the season wears on.

Finally, on to weather and climate. While two very different things, both obviously have an effect on the refrigerant industry. Firstly, weather. In the short term, predictive models from NOAA and the National Weather Service show increased chances for hotter-than-normal temperatures and normal to less-than-normal rainfall across much of the perimeter of the country this summer. While it looks like a continuation of the wet Spring for the MidWest, the rest of the country could experience a hot, dry summer. Generally, we would expect this to lead to a rise in refrigerant prices as demand ramps up.

As this relates to climate change, we can see clear trends in the overall average temperatures rising across the globe. While environmentalists have been sounding the alarm for years, what we’re witnessing now is a confluence of industry and activism that is driving major changes across the globe. In the medium-long term, these concerns are going to create rifts between countries/economies that have embraced reform, and those that have not. Low-GWP alternatives to current refrigerants will become more and more popular, as will natural refrigerants, which boast 0 GWP. Standards and regulations are coming into focus for mildly flammable (A2L) and flammable (R600, R290, etc.) refrigerants. As global pressure to make a change mounts, medium-term replacements are going to experience a surge in popularity until extremely low GWP refrigerants are widely available.

Over the last decade, we have seen accelerated change in the refrigerant landscape and markets. This volatile market and unclear future will continue until many of the above issues are resolved. Do your part today by becoming involved in decision-making and policy proposals. Ask your refrigerant distributor about their plans for reclamation and alternative refrigerants. Talk to OEM’s about equipment changes and plan for the future. The status quo is not holding anymore, and if you want to thrive in these uncertain times, learn as much as you can and make your voice heard. As always, for more information or to ask questions, please let us know at
info@dynatempintl.com.

Sincerely,
Will Gresham
Executive Vice President
Dynatemp Refrigerants

2019 Kigali Amendment Status Update

Last year we kept you informed on the status of the Kigali Amendment to the Montreal Protocol, a global phase-down of HFC refrigerants. As we head into 2019 we wanted to provide you with a quick recap and update on the progress of the amendment.

  •  The Kigali Amendment to the Montreal Protocol is an agreement between the original members of the Montreal Protocol to phase-down HFC refrigerants by more than 80% over the next 30 years. If fully adopted the amendment has the potential to avoid up to 0.5ºC of warming by 2100.
  • In order for the Kigali Amendment to enter into force, 20 members of the Montreal Protocol had to ratify it by 1/1/19. That was successfully done with over 20 members and now the amendment has officially begun.
  •  Of the over 170 members of the Montreal Protocol who originally agreed on the amendment, to date, only 69 countries have ratified it. This could be because the two largest consumers and producers of HFC’s, the United States and China, have not said whether they will move forward with ratification or not. Without their participation, the amendment cannot reach it’s global phase-down goals and will be much less effective. This uncertainty hurts the HVACR industry. Numerous organizations, senators, and CEO’s of major companies in the HVACR industry have asked the administration to send the Kigali Amendment to the Senate for a vote in order to increase jobs, solidify global trade access, and provide certainty for research and development. See the full economic impact of what ratifying the Kigali Amendment would do for the U.S. economy here.
  • While there has been no indication that the United States will ratify Kigali under the current administration, if China ratifies the amendment, and U.S. does not, it could have huge trade implications for the United States. Beginning in 2033, those who have ratified the Kigali Amendment are banned from trading with those who have not. Consider if China moved forward with ratification, they would have the access to trade with Europe, Japan, Mexico, Canada, and many other major and developing countries and the U.S. would be isolated from trading with these countries.
  • Besides climate change and global trade implications, another major consequence of the United States not ratifying the Kigali Amendment is a state by state phase-down of HFCs that will confuse and complicate the marketplace. California has already implemented their own legislation to ban high GWP HFC’s in supermarket applications and starting in 2020 will ban R404A and R507a for new medium-temperature stand-alone units with a compressor capacity of 2,200 BTU/hr or greater, and containing a flooded evaporator, as well as for all new low-temperature stand-alone units. Following California’s lead, Washington state, New Jersey, and Massachusetts have legislation planned to phase-down HFC refrigerants and more states have indicated they will follow suit. It could become very hard for those in the HVACR industry to accommodate differing selling restrictions and phase-down plans on a state by state basis.
  • Interestingly, the absence of Kigali ratification has created more time for the natural refrigerant market to create guidelines and increase charge limit values, which the market needed in order to be widely adopted.
  • If Kigali is ratified we will need a replacement for HFC’s. Currently the best options are HFO’s and/or natural refrigerants. However, if the industry had certainty that the phase-down of HFC’s would be mandated through the Kigali Amendment there could be other HFC alternatives created through research and development.

 

 

Sources:

http://multimedia.3m.com/mws/media/1365924O/unep-fact-sheet-kigali-amendment-to-mp.pdf

http://r744.com/articles/8767/next_series_bans_on_hfcs_in_supermarkets_begin_in_california

https://ec.europa.eu/clima/sites/clima/files/faq_kigali_amendment_en.pdf

https://ozone.unep.org/node/101549

https://www.epa.gov/ozone-layer-protection/recent-international-developments-under-montreal-protocol

 

Many Oppose the EPA’s Proposed Revisions to Section 608 Refrigerant Management Rules

In our last post we discussed the EPA’s recent proposed revisions to the Section 608 Refrigerant Management Rules. These revisions would eliminate requirements for leak repair maintenance in stationary refrigerants and air conditioning equipment containing HFCs. The EPA accepted public comments on these proposed revisions and other possible rule revisions through November 15th, 2018. In total, there were 285 comments submitted through the EPA’s regulations.gov site. Dynatemp International submitted comments asking that the EPA not revise their leak repair provisions or the other possible revisions. A quote from our comments regarding HFC Certification rescission:

 Speaking with many HVAC wholesalers, the HFC certification rescission may have negative impacts on their liability and business. The benefit of certification is that wholesalers are able to sell refrigerants to a technician which has sufficient background and understanding of their liability of the Clean Air Act. Without EPA’s direct enforcement, requiring the wholesaler to verify certification acts as a local check on bad actors willing to buy refrigerants.

You can find our full comments here.

In addition to Dynatemp International’s opposition to the rule revisions, 15 US state Attorney Generals and the District of Columbia sent a letter to the EPA “strongly opposing” it’s proposed rule.

At the HARDI conference, Jeremy Arling, Lead Environmental Protection Specialist at US EPA, indicated that the EPA would release their decision on their proposed rule revisions around the beginning of 2019.  We will keep you informed as new information becomes available.