by Chris Combs, International Programs Director

Australia’s Clean Energy Future, the ARA and Prospects for Natural Refrigerants

Aiming to cut pollution while creating incentives for energy efficiency, the Australian Parliament passed the Clean Energy Future legislation on November 8, 2011, introducing a new carbon pricing scheme to be structured in two phases. The first three year phase, starting July 1, 2012, the carbon price is set at $23 (this article refers to the Australian Dollar which is equal to about US$1.06 as of January 11) per ton and is subject to rise by 2.5% per year in real terms. During the second phase beginning July 1, 2015, the carbon price will be determined by the market under a flexible emissions trading scheme with an annually adjusted price ceiling (starting at $20 above the expected international price) and floor (initially $15) in effect during the first 3 years. The stationary energy sector, industrial processes, fugitive emissions, and heavy vehicle commercial transport are among the areas covered by the legislation.1

The primary impact on the refrigeration and air Conditioning (RAC) industry occurs indirectly through a complementary measure established under Australia’s Ozone Protection and Synthetic Greenhouse Gas (SGG) Management legislation rather than the carbon pricing scheme described above; however the rate of the new levies on HFCs are based on the carbon price established by the Clean Energy Future legislation, and will be adjusted in future.

The SGG Management legislation applies equivalent carbon pricing to hydrofluorocarbons (HFCs) according to their global warming potential (GWP); price increases on HFC refrigerants are expected in the range of 300 to 500%. For example, this year’s levy on HFC134A with a GWP of 1300 would be about $30 per kilogram ($13.64 per pound) while the levy on R404A with a GWP of 3260 is about $75 per kilogram ($34.09 per pound). According to IIAR member Stefan Jensen, the levy is also intended to encourage increased recycling of SGGs, enhance service to existing equipment to minimize leakage, and increase the use of equipment designed specifically for lower GWP refrigerants (as long as the applicable safety standards and regulations are followed).2

The Australian Government has announced several programs to assist the private sector in adjusting to the changes made by the new legislation including grants for associations and NGOs to deliver information about energy efficiency to businesses and community organizations, grants for research to promote innovation in low emissions technologies, grants for food businesses and other business sectors to invest in energy efficient and low emission processes and equipment, and funding for educators providing essential knowledge and skills for the delivery of low emission applications.3 In July of this year the Government will begin providing funding to a new refrigerant recovery program providing financial incentives for the verified destruction of waste SGGs and ozone depleting substances, formerly run by industry.4

Concerns Regarding the HFC Levy and the Alternative (Natural) Refrigerants

Refrigerants Australia (RA), an organization whose members include the Australian divisions of DuPont, Honeywell Polymers and Australian industry groups such as the Refrigeration and Air Conditioning Contractors Association and the Air Conditioning and Refrigeration Equipment Manufacturers Association, has long been the leading voice of opposition to imposing a carbon price on fluorocarbon refrigerants. According to the RA website, the levy will cost the RAC industry about $270 million in the first year. The website foresees unintended consequences and costs that are not easy to estimate and which may vary depending on the circumstances of the affected business. It also warns of severe penalties on companies that attribute price increases to the carbon price without being able to substantiate these claims.5

The RA and its President Stephen Anderson argue against the HFC levy from an economic and business perspective, asserting that an “inelasticity of demand” exists in the refrigerant market, a claim their critics point out is not supported by the experience in Denmark and Norway. Anderson makes the case that the levy will not be effective in eliminating HFC use due to the fact that, with most of the existing RAC equipment installed in Australia, the choice for using HFC refrigerants such as R410a has already been made; this choice has been determined to a great extent by global equipment manufacturers rather than Australian contractors and consumers. Furthermore, they argue, the increased refrigerant cost would not make a significant enough price difference at the retail level, for example a domestic air conditioner or a car with air conditioning, to have a big impact on consumers’ decisions. As an example of the ineffectiveness of government efforts to raise refrigerant prices in order to discourage use, Anderson cites the experience of the United States in the 1980s when taxes on CFCs led to an explosion of refrigerant smuggling. As an alternative to tax, RA favors an approach to managing HFCs and limiting refrigerant emissions under the framework of the Montreal Protocol and Australian regulations already in place prior to the HFC levy.6

The RA also challenges the carbon price approach to HFCs from a safety standpoint. It alleges that the alternative hydrocarbon refrigerants which are exempt from the levy are very dangerous. Anderson emphasizes the flammability of hydrocarbon refrigerants; for example, he warns of the risk of companies simply switching to hydrocarbon gases to avoid the high costs of replacing HFC refrigerants without investing in the equipment needed. Adding hydrocarbons to non-hydrocarbon equipment, as is most of the RAC equipment in Australia according to Anderson, could lead to additional incidents like the large industrial fire that was caused in this manner in New Zealand.7

The Australian Refrigeration Association and Prospects for Natural Refrigerants

Perhaps it is most fitting to introduce the Australian Refrigeration Association (ARA) in the context of this controversy over the impact of Australia’s clean energy legislation on the RAC industry. The ARA and its website, www.ausref.org.au, were formally launched on May 2, 2012 at an event in the New South Wales Parliament. What sets the ARA apart from other Australian refrigeration and air conditioning industry associations is its enthusiasm for the government’s carbon pricing scheme for HFCs. The ARA aims to work with the RAC industry to successfully manage both the challenges and opportunities created by the HFC levy and the coming HCFC phase out. ARA’s mission statement regards “the transition of the industry to safe, efficient and sustainable technology and management practices” as a critical issue and states that one of its immediate goals is to cause the RAC industry “to adapt a comprehensive strategy to increase energy efficiency and reduce refrigerant and greenhouse gas emissions in all RAC sectors.” Next to the mission statement on the ARA website appears a chart forecasting global CO2 and HFC emissions until 2050, further highlighting the association’s commitment to environmental sustainability, making it an instinctive ally of natural refrigerants.8 Given that, it is no surprise that several IIAR members are among the founding members listed on ARAs website.

As for the concerns about the impact of the carbon levy expressed by Refrigerants Australia, ARA’s President, Tim Edwards, has publicly described their comments on hydrocarbons as scaremongering. Edwards notes that it is common knowledge among refrigeration technicians that there are dangers with all refrigerants; careful handling is required equally for both fluorocarbons and the natural refrigerants. The central issues are economic efficiency and environmental impact; and, as Edwards points out, natural refrigerants are preferable to HFCs on both counts. He adds that hydrocarbon refrigerants already have a proven track record of safe and efficient use, citing the fact that there are over 400 million domestic refrigerators using hydrocarbons worldwide and extensive use in the automotive air conditioning service market with a negligible record of safety issues. Furthermore, the Consumer Goods Forum, a group comprising many of the leading global food suppliers and retailers, endorses natural refrigerants as safe, energy efficient and environmentally friendly. The ARA stresses that the idea behind the carbon legislation is to encourage the transition from fluorocarbons to natural refrigerants, which Australia’s HVAC&R industry should embrace rather than fear. Any safety incidents that occur with natural or any other refrigerants are a result of the failure to follow industry standards and safe work practices. The risks of ignoring safety standards apply to all refrigerants and should therefore not be regarded as something unique to natural refrigerants.9

In light of the need for increasing awareness on the proper handling of natural refrigerants, ARA offers access to a set of government-subsidised training units on the safety and legal requirements for the handling, use and storage of natural refrigerants. Three separate units are available covering hydrocarbons, CO2 and ammonia. A second set of three units corresponding to each of the refrigerants just mentioned covers the installation and commissioning of systems, components and related equipment.10

IIAR member John Mott acknowledges that the Australian RAC industry faces a number of real challenges related to the HFC levy in the short term. These include a frenzy of efforts to reduce loss of synthetic coolants that could prove to be costly for many small HFC contractors, not to mention the real risk of desperate “maverick contractors” dropping HCs into large systems not designed for HCs with disastrous consequences that could represent a major setback for natural refrigerants. On the latter point, he adds that efforts are under way to finalize the publication of an HC code of practice as soon as possible. He emphasizes that education and communication are crucial for the transition to the widespread use of HCs. Another difficulty is his observation that the Australian government, so far, has done little in the way of offering financial support for this transition which represents a “massive and expensive challenge” for all the players in the refrigeration industry; he concludes that a lobbying effort is required to prod the government to play its promised roll in providing financial support for this endeavor.11

Hydrocarbon refrigerant manufacturers and distributors have experienced a substantial spike in demand during 2012, and it is believed that most of this is from the long-established automotive air-conditioning service market. There also appears to be increasing interest in HCs from the transport refrigeration sector, where the high leakage rates of HFC R404a are now a significant cost burden, and as understanding spreads of the significant fuel savings from HCs that are available to trucking companies operating refrigerated trailers on long journeys between State capitals. Reduced refrigerant and fuel costs are more than sufficient to justify the application of sophisticated leak detection and alarm systems by prudent operators. While the requirement for gaining manufacturer’s approval of system modifications remains a contentious issue between supporters and opponents of hydrocarbon refrigerants, there is hope that development of the hydrocarbon code of practice may provide greater clarity and guidance than currently exists.12

Mott paints a brighter picture for the long term outlook, expecting the achievement of “a semi-orderly progression to natural refrigerants.” Most of the Australian supermarket industry has accepted CO2 cascade technology; the number of CO2 cascade systems in operation today is approaching 100 and he expects the remaining 3400 or so supermarkets to be updated with this technology over the coming decades. End users have recently begun to adopt transcritical CO2 systems; IIAR member and ARA Board member Klaas Visser has been a pioneer in this effort which he refers to as the “revival” of CO2 as a refrigerant (given that CO2 was widely used as a refrigerant in the late 19th and early 20th centuries).13 As for hydrocarbons, Mott notes that many HC “mini-chillers”(<500 grams) have been installed for air conditioning in remote areas, HC commercial chillers (<60 kg per circuit) are beginning to be installed for air conditioning and other purposes, and many refrigerators for home use are now available with HCs. Aldi supermarkets use self-contained HC freezer cabinets from Austrian manufacturer AHT. Last but not least, new installations of ammonia chillers for air conditioning and process applications continue to appear in Australia.14

---

1 Clean Energy Future site: http://www.cleanenergyfuture.gov.au/
clean-energy-future/an-overview-of-the-clean-energy-legislative-package/
2 Examples from presentation by Stefan Jensen prepared for Eurammon
3 Department of Climate Change and Energy Efficiency website: http://www.
climatechange.gov.au/government/clean-energy-future/legislation.aspx
4 Stefan Jensen’s presentation
5 http://www.refrigerantsaustralia.org/carbon.html
6 http://www.climatecontrolnews.com.au/news/preparing-for-the-carbon-tax
7 http://www.climatecontrolnews.com.au/news/carbon-tax-ignites-explosive-debate
8 http://www.ausref.org.au/index.php/about-ara/our-mission
9 http://www.ausref.org.au/index.php/24-ara-content/mediareleases/51-media-release-refrigerants-australia-scaremongering-allrefrigerants-have-risks
10 http://www.ausref.org.au/index.php/2012-10-15-13-37-09/courseinformation