IIAR

The American Innovation and Manufacturing (AIM) Act, which was enacted on December 27, 2020, authorized the EPA to address hydrofluorocarbons (HFCs) in three areas: (1) Phasing down HFC production, (2) Facilitating the transition to next-generation technologies through sector-based restrictions and (3) Regulating to minimize HFC releases and maximizing reclamation efforts. The EPA has methodically executed on this mandate with the three rules addressing each of these areas. The third of these rules has just completed its public review period and has been finalized.

Before addressing the third rule, Emissions Reduction and Reclamation Program, it is worthwhile to review the first two and to consider how the three rules will complement and reinforce one another to deliver upon the government’s intent to reduce harmful emissions into the environment and to meet US global commitments for emissions reduction. The ultimate goal of the three rules and this section of the AIM Act is to phase down the harmful HFC refrigerants in a stepped approach from a 2020 baseline level to a terminal level of 15% of this baseline over five incremental steps and 36 years. The first of these steps was a modest 10% that took place in 2022, with a more substantial one this year reducing a further 30% from the baseline. The second and third rules that the EPA has implemented are designed to facilitate the next major reduction scheduled to take place by 2029 to reduce a further 30%. The balance of the reductions is more modest and many years into the future, likely allowing the impacts of these three rules to fully take effect over the long-term horizon. Please see Figure 1 which depicts this phasedown plan.

Figure 1: HFC Phase Down Schedule

The first rule, Phasedown of Hydrofluorocarbons, was enacted in October of 2021 and focuses on the reduction of the supply of HFC gases through an Allowance Allocation Program. Essentially, the EPA established allowances for manufacturers to produce the chemicals, which follows the phasedown schedule with an initial 10% reduction followed by a 30% reduction. In this way, the availability of the gasses is constrained, ultimately forcing a reduction in the HFCs available to be emitted, but a more subtle force through the market-driven increase in the cost of these gases has secondary impacts to coerce users into reducing the usage of the chemicals in response to these market forces. If the first rule focused on reducing the quantity of HFC chemicals available in the marketplace, the second focused on reducing the impacts of the chemicals that are utilized by phasing down the usage of high global warming potential (GWP) chemicals. The rule, enacted in October of 2023, took a sector-by-sector approach for the users of these chemicals to first define “high GWP” chemicals for that sector and then phasing down the usage of these high GWP chemicals. The EPA set these different phasedown thresholds on new equipment installations based upon the availability of viable alternatives for each subsector in an effort to achieve the reduction goals without significantly harming any subsector that might not have an alternative approach to satisfy the needs of that sector. The sectors that align most closely with the refrigeration sectors are shown in Figure 2, which also shows the system definitions and the high GWP thresholds. It also shows the phasedown date, which ranges from 1/1/25 to 1/1/28. By phasing down the high GWP refrigerants available for use in these sectors, the EPA magnifies the impact of the production allocation reductions and their consequential emissions impacts.

Figure 2: Refrigeration Sector High GWP Phasedown Approach

Finally, with the third rule just enacted last month, September 2024, the EPA has focused on reducing the leakage from existing refrigeration systems. After the first rule of constraining the refrigerant quantities to the market, and then the second rule of reducing the GWP impact of the refrigerants used in new systems, the EPA focused using the third rule on the existing systems that remain operational which are dominated by high GWP and some ozone depletion potential (ODP) refrigerants. Because owners and operators have not been mandated to replace their systems that utilize these harmful and now regulated refrigerants, there remain many systems that continue to use these harmful chemicals. The Emissions Reduction and Reclamation Program Rule, which was released in September 2024, seeks to address these systems by implementing regulations to identify, repair, and limit the release of these harmful refrigerants into the environment.

The specific ways in which this rule achieves its goal to reduce refrigerant leakage and drive increased reclamation of refrigerants, both of which serve to reduce emissions from refrigeration systems, are varied but are largely accomplished with two major and four minor regulatory actions. First, owners and operators with significant refrigeration systems, with at least 15 lbs of refrigerant with GWP that is greater than 53, are mandated to identify and repair the source of any refrigerant leakage that is identified. Furthermore, larger systems with at least 1,500 lbs of refrigerant with GWP that is greater than 53 must be equipped with an automatic leak detection system to automatically detect released refrigerant in the facility. These systems will allow the detection more rapidly and in smaller quantities than would be possible in these larger systems, resulting in swifter leak repairs mandated by the aforementioned leak repair regulation. Complementing these two major regulatory actions are several other actions, which include a requirement to utilize reclaimed refrigerant in service repairs, a reclamation standard to ensure that reclaimed refrigerant is defined to be comprised of at least 85% reclaimed refrigerant, a requirement to remove all of the HFC refrigerant retained in a disposable cylinder prior to discarding them and a recordkeeping, reporting and labeling standard to support the rule. The graphic shown in Figure 3 provides a summary review of these activities.

Figure 3: Summary of Regulatory Actions from Emissions Reduction and Reclamation Program

This third rule is notable in that it applies to existing refrigeration systems, whereas all other rules and most EPA regulatory actions apply only to new or expansion applications. Because of this, owners and operators may not be aware of the rule or its impact on their systems. The Leak Repair regulations will take effect on January 1, 2026, forcing all owners with substantial refrigeration systems to act to identify and repair sources of leaks that reduce the charge of refrigerant in their operating systems. This is detailed below in Figure 4.  

Figure 4: Leak Repair Requirements of the Emissions Reduction and Reclamation Program

While a responsible owner will often repair any known leaks in their refrigeration systems, the automatic leak detection systems represent a more substantial cost and investment in their systems.   The EPA is sympathetic to these more substantial costs and has, as a result, provided more time for owners and operators to comply with this requirement. Owners and operators of systems with at least 1,500 lbs of refrigerant in their existing systems, which were installed after January 1, 2017, must implement an automatic leak detection system no later than January 1, 2027. The specifics of these requirements are detailed in Figure 5.

Figure 5: Leak Detection Requirements of the Emissions Reduction and Reclamation Program

Finally, the EPA’s guidance on the use of reclaimed refrigerants for service work will be mandated on or after January 1, 2029, for specific sectors. With the regulation, the market will likely develop infrastructure to make reclaimed refrigerant more available, perhaps even more available than virgin refrigerant, which will drive the adoption of this even beyond the sectors noted. The definition of this reclaimed refrigerant is that it cannot contain more than 15% by weight of virgin refrigerant. This requirement will be in effect beginning January 1, 2026. Both of these regulatory acts/definitions are more specifically described in Figure 6.

Figure 6: Reclaimed HFC Refrigerant Requirements and Compliance Dates

As described above, these regulatory actions work in concert with one another and with the prior two rules authorized by the AIM Act to reduce harmful emissions from refrigeration systems that will contribute to the effort to meet US commitments to address climate change. The EPA estimates that these HFC emission reduction actions will lead to 120 million metric tons of CO2 equivalent emissions over the years 2026 to 2050 and that this will yield $8.4 billion of benefits from the reductions. Furthermore, owners and operators are expected to save approximately $20 million in reduced refrigerant replacement costs by limiting refrigerant leakage. On balance, the program is a net benefit as the total cost of the investment is approximately $1.5 billion.