EPA Proposes “Technology Transition” Rule under the AIM Act to Further Restrict Use of HFCs

On December 15, 2022, the U.S. Environmental Protection Agency (EPA) published a proposed rule restricting the use of certain hydrofluorocarbons (HFCs) in aerosols, foams, refrigeration, air conditioning, and heat pump products and equipment. EPA’s proposed Phasedown of Hydrofluorocarbons: Restrictions on the Use of Certain Hydrofluorocarbons under Subsection (i) of the American Innovation and Manufacturing Act of 2020 rule, 87 Fed. Reg. 76738 is the third rule proposed to be promulgated under the American Innovation and Manufacturing Act of 2020 (AIM Act), 42 U.S.C. § 7675 et seq., and the first to address the AIM Act’s technology transition requirements under subsection (i). HFCs are potent greenhouse gases originally developed to replace ozone-depleting substances.

Key Takeaways

  • What does this rule do? The proposed rule restricts the use of certain HFCs with high Global Warming Potential (GWP) in the refrigeration, air-conditioning, and heat pump sector, as well as the aerosols and foams sectors. This proposed rule also imposes new recordkeeping and reporting obligations on those companies that manufacture, import, export, destroy, sell, offer for distribution or sale, or otherwise distribute products imported or manufactured using an HFC in these sectors. Lastly, this proposed rule sets forth a process for the public to petition EPA under section (i)(3) of the AIM Act. Such petitions, if granted, would require EPA to initiate rulemakings that would further restrict the use of specific HFCs in various sectors and subsectors.
  • Stakeholders Affected. This proposed rule will have broad implications for manufacturers, importers, exporters, and retailers of products that contain HFCs within the refrigeration, air-conditioning, and heat pump sector, as well as the aerosols and foams sectors. The proposed rule would not directly regulate individuals or entities that are the ultimate consumers of these products but will undoubtedly impact supply chains.
  • Opportunity for Public Comment. Comments are due on January 30, 2023, and EPA will hold a virtual public hearing in advance of that date on December 30, 2022. Industry stakeholders should evaluate and comment on the proposed rule, which will have consequential impacts for all that utilize HFCs in the above-identified sectors.

Key Provisions of the Proposed Rule

Establishes a restriction on high-GWP HFCs in specific sectors and subsectors. The proposed rule would restrict the use of certain HFCs with high GWP within new products in refrigeration, air conditioning, heat pumps; foam blowing; and aerosols. EPA is specifically requesting comment on whether to establish an upper GWP limit of 700 GWP for use in new refrigerated transport, chillers, and certain air conditioning units, while other HFCs, including those used in the automatic commercial ice machines with refrigerant capacity of more than 500 grams would be completely prohibited. EPA proposes establishing an upper GWP limit of 150 GWP for use in foam-blowing and aerosol products and equipment.

The proposed rule would also restrict the import of existing products and equipment that contain HFCs in these sectors through a two-stage process. Beginning in 2025, the manufacturing or importing of products using HFCs in certain refrigeration, air conditioning and heat pumps, foam blowing, and aerosol sectors and subsectors would be prohibited. Beginning in 2026, the sale, distribution, offer for sale or distribution, export, or any other activity pertaining to those products would be also prohibited. Beginning one year from promulgating any final regulation, manufacturing or importing products using HFCs in certain motor vehicle air conditioning sectors and subsectors would be prohibited. Beginning in 2026, the sale, distribution, offer for sale or distribution, export, or any other activity related to these products would also be prohibited. Importantly, as seen above, EPA is proposing to establish a sell-through exception, which would allow for the sale of existing inventory for one year after the manufacturing and import prohibition goes into effect.

One can find the full list of compliance dates for applicable sectors and subsectors range from 2025 to 2027 in Table 4 of the proposed rule. Notably, EPA is not extending the sale, distribution, export, and offer for sale or distribution restriction to the sale of used products or equipment containing HFC, except that the restrictions will apply to imports of existing or used equipment. EPA has not specified that refrigerant blends made with reclaimed HFCs will be given a zero or near zero GWP, or otherwise specified how to establish the GWP of a reclaimed refrigerant.

EPA also seeks comments on whether to restrict HFCs in these, and future sectors and subsectors by (1) setting Global Warming Potential (GWP) limits for HFCs used within a sector or one or more subsectors and/or (2) restricting specific HFCs, whether neat or used in a blend, by sector or one or more subsectors.

Establishes a process for submitting additional technology transition petitions to EPA to restrict the use of HFCs in specific sectors and subsectors. All such petitions would have to be submitted electronically to EPA with certain required minimum information, including:

  1. Either (i) a GWP limit applicable to regulated substances or blends containing regulated substances with GWP at or above that limit, or (ii) the specific name(s) of the regulated substances or blend containing regulated substances to be restricted and its GWP;
  2. The sector or subsector for which restrictions on use of the regulated substance would apply;
  3. Date that the requested restrictions would go into effect and information concerning why the date is appropriate;
  4. Request EPA negotiate with stakeholders and provide an explanation for its support or opposition to the use of negotiated rulemaking procedures; and
  5. Submit information related to the “Factors for Determination” identified in subsection (i)(4) of the AIM Act.

In making a determination to grant or deny any such petition, EPA will consider the “Factors for Determination”, which includes:

  1. Best available data;
  2. Availability of substitutes for the use of the regulated substance in a sector or subsector, taking into account (i) technological feasibility, (ii) commercial demands, (iii) affordability for residential and small business consumers, (iv) safety, (v) consumer costs, (vi) building codes, (vii) appliance efficiency standards, (viii) contractor training costs, (ix) and other relevant factors including the quantities of regulated substances available from reclaiming, prior production, or prior import;
  3. Economic costs and environmental impacts compared to historical trends; and
  4. Remaining phase-down period for regulated substances under the final rule promulgated under subsection (e)(3) of the AIM Act.

Establishes recordkeeping and reporting requirements. The proposed rule would require that products manufactured or imported using a HFC in certain sectors be subject to certain labeling, reporting, and recordkeeping requirements, using the same reporting platform used under previous AIM Act rules and the Greenhouse Gas Reporting Program.

Requests information on future rulemakings. EPA is requesting advance information for the development of future rulemakings that would restrict the use of HFCs for other sectors and subsectors, including heat pump water heaters and certain retrofitted equipment in the refrigeration, air conditioning, and heat pump sector. EPA is also requesting advance information to develop a future rulemaking for establishing a third-party auditing program to verify substances used in products. EPA also seeks comment on whether other authorities would allow for reporting emissions tied to HFC substitute production.

Identifies Costs & Benefits. EPA estimates its proposed rule will produce incremental benefits between $5 billion and $50 billion in 2020 dollars. EPA also estimates that the proposed rule would result in lower compliance costs, resulting in cumulative incremental savings from 2025-2050 between $2.2 billion and $8 billion.

Addresses Environmental Justice. Like EPA’s Allocation Framework Rule promulgated under the AIM Act, EPA prioritizes environmental justice in this proposed rule. This proposal has an extensive analysis of environmental justice (EJ) implications in the accompanying Draft Regulatory Impact Analysis Addendum about the benefits communities with EJ concerns will receive by the reduction of HFCs and reduction of GHG emissions. EPA noted that with the phasedown of HFCs, HFC substitutes would likely ramp up in production and use, which could have future risks on populations located near such facilities. EPA is further requesting comment on the use of microsimulation approaches and techniques for regulatory impact analysis, including for better understanding the burdens faced by communities.

Next Steps and Opportunity for Comment

Those potentially affected by this proposed rule are encouraged to submit comments to EPA by the January 30, 2023 comment deadline. Comments can be submitted here. EPA will also host a virtual public hearing on December 30, 2022. Complete registration for the virtual public hearing here. The SBA Office of Advocacy will also host EPA to discuss the proposed rule at a virtual Environmental Roundtable on January 10, 2023. Email [email protected] to complete registration for the Environmental Roundtable.

Beveridge & Diamond’s Air and Climate Change group helps clients in numerous industries achieve compliance with the ever-changing legislative and regulatory landscape thereby reducing cost and risk to operations. For more information, please contact the authors.