Audit, Compliance and Risk Blog

EPA finalizing HFC phase-down rules

Posted by Jon Elliott on Wed, Oct 06, 2021


On September 23, 2021, the US Environmental Protection Agency (EPA) announced final rules to phase down production and consumption of specified hydrochlorofluorocarbons (HFCs) (I wrote about the proposal HERE). These HFCs are used in refrigeration and air conditioning and fire suppression, and as foam blowing agents and solvents. These rules are consistent with directives included in the 2016 Kigali Amendment to the United Nations-sponsored Montreal Protocol on Substances that Deplete the Ozone Layer (which I wrote about HERE). The US finally enacted statutory support for Kigali-like requirements in the December 2020 coronavirus relief bill (American Innovation and Manufacturing Act of 2020 (AIM Act)), which included dozens of unrelated provisions within its 5,593 pages.

Why are HFCs being phased down, and how?

HFCs were developed primarily as substitutes for chlorofluorocarbons (CFCs), which are the principal ozone depleting substances (ODSs) targeted by the Montreal Protocol. HFCs have lower but non-zero ozone depleting potential, and also are greenhouse gases that contribute to climate change. Accordingly, nearly 30 years after the initial 1987 approval of the Montreal Protocol roughly 200 national and international parties negotiated HFC phase-downs. In the last months of the Obama administration, an agreement was initiated in Kigali, Rwanda which divided countries into three groups with different schedules and targets:

  • developed nations including the United States – cut consumption to 90% of 2011-2013 baseline of most HFCs (plus 15% of those already covered by the Protocol) by 2019, declining to 15% by 2036

  • most developing nations, including China and over 100 others - consumption to peak in 2024 at 100% of 2011-2013 baseline of most HFCs (plus 25% of those already covered by the Protocol), declining to 20% by 2045

  • 10 hot-climate developing countries (where air conditioning is particularly important), including India, Pakistan and some Gulf states - consumption to peak in 2028 at 100% of 2011-2013 baseline of most HFCs (plus 25% of those already covered by the Protocol), declining to 15% by 2047

However, after the Trump administration replaced the Obama administration, the US took no action on this agreement. During this period, however, other countries moved forward to ratify and work to meet their commitments.

What HFC-related provisions did the AIM Act enact?

The massive coronavirus relief bill includes Division S (“Innovation for the Environment”), with section 103 (“American Innovation and Manufacturing Act of 2020”). Without mentioning the Kigali Amendment, section 103 incorporates its requirements into US law:

  • the legislation lists 18 specific HFCs, and authorizes EPA to designate additional formulations

  • EPA is to calculate 2011-2013 production and consumption baselines for each, and to use these to calculate future phase-down levels ranging from 90% in 2020 to 15% in 2036 and thereafter

  • EPA is to issue regulations with 270 days (by 9/23/21) to set phase-down requirements, with associated procedural requirements including allowances associated with each baseline amount, and reclamation and destruction methods

What has EPA adopted?

EPA’s rulemaking does the following:

  • establishes HFC production and consumption baselines based on historical data (using methodology provided in the AIM Act);

  • establishes the allowance allocation program to phase down HFC production and consumption, to be set by October 1 for the following year, and determines total levels for 2022 and 2023 (including a “set-aside pool” for targeted entities);

  • determines an initial methodology for allocating allowances for 2022 and 2023, allowing for the transfer of those allowances, and commits to doing so by October 1, 2021;

  • provides for the international transfer of allowances;

  • provides for revocation or retirement of allowances as consequences for non-compliance;

  • establishes recordkeeping and reporting requirements;

  • releases certain data to provide transparency and support implementation of the program

  • provides for cooperation with other federal agencies, notably Customs and Border Protection; and

  • addresses certain other elements related to the effective implementation of AIM Act provisions.

What now?

The new rules take effect on November 4, 2021. Separate from this rulemaking, EPA is also initiating or re-invigorating other programs to support the phase-down of HFCs and their replacement by refrigerants that are less harmful to global climate and the stratospheric ozone layer.

Implementation Checklist

Does the organization manufacture, import or use any ozone depleting substance (ODS) subject to the Montreal Protocol and/or CAA Title VI?

  • If the phase-out date for any ODS has passed, do any of the organization’s activities qualify with applicable exceptions or essential uses?

Does the organization manufacture, import or use any HFCs?

Has the organization reviewed any such activity to begin to identify alternatives for any HFC that is or may become subject to phase-down by the pending rules?

Where do I go for more information?

Information available via the Internet includes:

  - revised Montreal Protocol, incorporating Kigali amendments 

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About the Author

Jon Elliott is President of Touchstone Environmental and has been a major contributor to STP’s product range for over 30 years. 

Mr. Elliott has a diverse educational background. In addition to his Juris Doctor (University of California, Boalt Hall School of Law, 1981), he holds a Master of Public Policy (Goldman School of Public Policy [GSPP], UC Berkeley, 1980), and a Bachelor of Science in Mechanical Engineering (Princeton University, 1977).

Mr. Elliott is active in professional and community organizations. In addition, he is a past chairman of the Board of Directors of the GSPP Alumni Association, and past member of the Executive Committee of the State Bar of California's Environmental Law Section (including past chair of its Legislative Committee).

You may contact Mr. Elliott directly at:

Tags: EPA, climate change, Environment, HFCs, Montreal Protocol, Ozone Layer