Audit, Compliance and Risk Blog

US joins the world in HFC phasedown

Posted by Jon Elliott on Tue, May 11, 2021


On April 30, 2021, the US Environmental Protection Agency (EPA) proposed rules to phase down production and consumption of specified hydrochlorofluorocarbons (HFCs), consistent with directives included in the 2016 Kigali Amendment to the United Nations-sponsored Montreal Protocol on Substances that Deplete the Ozone Layer. These rules were authorized by the massive coronavirus relief bill (American Innovation and Manufacturing Act of 2020 (AIM Act)) enacted in December 2020, which included dozens of unrelated provisions within its 5,593 pages.

Why are HFCs being phased out, and how?

HFCs have been 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, 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 - consumption will be cut to 90% of 2011-2013 baseline of most HFCs (plus 15% of those already covered by the Protocol) in 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. Other countries have 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 a Division S (Innovation for the Environment), in which section 103 is entitled “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 to set phase-down requirements, including a variety of associated procedural requirements including allowances associated with each baseline amount, and reclamation and destruction methods

What is EPA proposing?

EPA’s rulemaking proposes to:

  • establish HFC production and consumption baselines based on historical data;

  • establish the allowance allocation program to phase down HFC production and consumption, to be set by October 1 for the following year, and determine total levels for 2022 and 2023

  • determine an initial methodology for allocating allowances for 2022 and 2023 (proposing to calculate individual allowances by October 1, 2021 using methods to be adopted in the final version of these rules), and allowing for the transfer of those allowances;

  • establish provisions for the international transfer of allowances;

  • establish requirements to support compliance with HFC production and consumption phase-downs;

  • establish recordkeeping and reporting requirements;

  • release certain data to provide transparency and support implementation of the program; and, address certain other elements related to the effective implementation of AIM Act provisions.

What now?

As of this writing the proposal has not yet been published in the Federal Register, although this is likely by the end of June. Comments will be due 30 days after publication, after which EPA states it will move to issue final rules by the September 23 deadline and to begin implementation in 2022. EPA’s proposal also states that the allocation formulas will apply only during 2022-2023, and that EPA will initiate another rulemaking expeditiously to develop replacements. 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, AIM Act, ODS