EPA Proposes Rule for Global Phasedown of HFCs Starting in 2022

The U.S. Environmental Protection Agency (EPA) has proposed its first extensive climate change rule, aimed at phasing down global production and consumption of hydrofluorocarbons (“HFCs”). The proposed rule was issued as part of the American Innovation and Manufacturing (“AIM”) Act. It affords EPA the authority to set phasedown levels for 18 HFCs over the next 15 years. 

The proposed rule calls for a 10% reduction in production and consumption of HFCs by 2023, a 40% reduction by 2028, and an 85% reduction by 2036. EPA is developing a cap-and-trade program to allocate industry-specific allowances based on exchange value and warming potential. 

Curbing output at these levels is projected to avert up to 0.9-degree Fahrenheit of warming by the year 2100. 

“The phasedown of HFCs is widely supported by the business community, as it will help promote American leadership in innovation and manufacturing of new climate-safe products,” said EPA Administrator Michael Regan. “Put simply, this action is good for our planet and our economy.”

In conjunction with the phasedown rule, EPA has compiled a list of approved HFC alternatives. These HFC substitutes are categorized using comparative analysis to determine potential risk. Each substitute will be listed as follows: acceptable, acceptable but subject to use conditions, acceptable with narrowed use conditions or prohibited. 

Provisions in the AIM Act also authorize EPA to establish compliance requirements and subsequent enforcement systems, which would supersede any potential state regulations for five years. The agency remains steadfast in its determination to target companies not in compliance through civil and criminal action. 

Many industries will feel the impact. James Hogan, President and CEO of The ELAM Group, notes that one such industry, in particular, is already stressed. 

“The semiconductor manufacturing industry – an industry we all know is in very high demand at the moment – may feel the implications more than any. Very real scenarios could result in production quotas not being met as companies grapple with the proposed EPA measures in such a short period of time,” said James Hogan, President and CEO of The ELAM Group. 

This increased demand could result in higher end-user prices and an increase in claims as Hogan continued, “Restricting emissions of HFCs, especially so quickly, increases risk, and increased risk sometimes results in increased insurance claim activity and end-user price escalation.”

Through his committee involvement with ASTM International, Hogan and The ELAM Group offer insights on forecasting the impacts of new standards and the potential hurdles that lie ahead. 

EPA is seeking input from stakeholders until July 6. The deadline to submit its final rule to the Federal Register is September 23. 

Once implemented, enforcement could begin as early as January 1, 2022. 

The proposed phasedown rule is one of several climate action items included in the AIM Act and could set the precedent for future regulatory climate change action.