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On October 5, 2021, the EPA published a Final Rule in the Federal Register: “Phasedown of Hydrofluorocarbons (HFCs): Establishing the Allowance Allocation and Program under the American Innovation and Manufacturing Act” (AIM Act). The AIM Act directs the EPA to phasedown production and consumption of HFCs in the United States by 85% over the next 15 years. The effective date of this final rule is November 4, 2021.

Companies potentially affected by this rule are those that produce, import, export, destroy, use as a feedstock, reclaim, package, or otherwise distribute HFCs. Others potentially affected include those that use HFCs to manufacture products such as refrigeration and air conditioning systems, foams, aerosols, fire suppression systems, or use HFCs in one (1) of the following six (6) specific applications:

  • Propellants in metered dose inhalers;
  • Defense sprays (e.g., bear spray);
  • Structural composite preformed polyurethane foam for marine and trailer use;
  • Etching of semiconductor material or wafers and the cleaning of chemical vapor deposition chambers within the semiconductor manufacturing sector;
  • Mission-critical military end uses; and
  • On-board aerospace fire suppression.

The EPA will address HFC phasedown by reducing production and consumption, maximizing the reclamation of HFCs, minimizing the release of HFCs from equipment, and facilitating the transition to next-generation technologies through sector-based restrictions.

To accomplish the phasedown, the EPA is undertaking the actions listed below.

  • Establishing HFC production and consumption baselines.
  • The baselines are calculated using a formula provided in the AIM Act that considers past HFC, hydrochlorofluorocarbon (HCFC), and chlorofluorocarbon (CFC) amounts.
  • By October 1st of each year, the “EPA must issue production and consumption allowances for the following calendar year, relative to those baselines.” The maximum number of allowances that the EPA may allocate per year is shown in Table 2 below.
Table 2 is pulled from the EPA Fact Sheet which can be found here:
  • The EPA will establish an allowance allocation and trading program. The EPA indicated that they have established an initial methodology for issuing allowances for 2022 and 2023. The EPA intends to undertake subsequent rulemaking to govern allocations for calendar years 2024 and beyond.
  • The EPA will issue allowances to companies that produced and/or imported HFCs in 2020, based on the three (3) highest non-consecutive years of production or import between 2011 – 2019. The EPA is giving individualized consideration of circumstances of historical importers that were not active in 2020.
  • The EPA will issue “application-specific allowances” directly to entities that operate within the six (6) applications listed in the AIM Act. These entities will be able to confer their allowances to producers or importers to acquire needed HFCs.
    • The EPA explained that conferring allowances is not an allowance transfer. The company receiving a conferred allowance may produce or import on behalf of the end user and it is not designed to consume calendar year production or consumption of allowances.
  • The EPA will set aside some allowances for application-specific end users and small importers that the EPA has not yet identified or verified by the date of this final rule. Companies seeking to receive allowances via the “set-aside” should submit applications to the EPA by November 30, 2021.

The EPA is also finalizing a “multifaceted approach to deter, identify, and penalize illegal activity.” This planned approach utilizes administrative consequences for allowance holders, requiring the use of refillable cylinders, increased oversight of imports, and third-party auditing.

Finally, the EPA has determined that much of the quarterly production and consumption data provided to the agency will not be given confidential treatment and will be affirmatively released without further process. “This data transparency will incentivize compliance and allow the public and competing companies to identify and report noncompliance to the EPA.”

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