Montreal Protocol Negotiations: Should the HCFC Phaseout Schedule Be Accelerated in 1995?

David E. Gushee

Senior Fellow in Environmental Policy
Office of Senior Specialists

October 12, 1994

94-788 S

SUMMARY

When the Parties to the Montreal Protocol on Substances that Deplete the Ozone Layer convene their Annual Meeting in October 1995 in Vienna, one of the issues that will be on their agenda will be whether or not to accelerate the phaseout schedule for hydrochlorofluorocarbons (HCFCs). HCFCs have ozone depleting potentials of 1.6%, (HCFC-123) to 11% (HCFC-141b) of those of the CFCs. Whereas the CFCs are scheduled to be phased out in the developed world by 1996 and in the rest of the world by 2010, the HCFCs will be capped in 1996 at essentially current levels and then reduced in several steps to zero in 2030.

Several countries, encouraged by some environmental groups, have been lobbying in Protocol working groups to generate support for accelerating the HCFC dates, with full phaseout as early as 2003 in some proposals. Their concern is that, even though the Protocol is working, the problem of ozone depletion will continue to worsen over the next decade, and HCFCs have high instantaneous ozone depleting potentials so that reducing HCFC use over the short term would have a significant benefit.

On the other hand, even a successful acceleration would have little effect in the short term, when the depletion problem is projected to be at its worst, because of the time needed to initiate such a program. Further, the specialist groups reviewing the status of substitutes for CFCs have concluded that, for some uses, particularly within the refrigeration sector, the only proven substitutes are HCFCs. To require the accelerated phaseout of the only proven alternatives for these particular uses would, many believe, cause the developing world to delay its transition from CFCs, which it is allowed to continue to use for a while, until the next generation of alternatives has been developed and proven. Such a delay in moving away from use of CFCs, were it to occur, would cause more ozone depletion than would be saved by the reduced use of HCFCs. Also, the increased legal production of CFCs for the developing world would increase two counterproductive incentives: delays in the developed world in retrofitting or replacing existing CFC-using equipment and a black market in CFCs.

This report finds that the concerns have merit, while the benefits of reduced HCFC use would likely be minimal, even if realized.

CONTENTS

SOURCES OF THE PRESSURE TO ACCELERATE
BACKGROUND
WORLD PRODUCTION AND CONSUMPTION OF CFC'S
OUTLOOK FOR HCFC'S
BIG RISK FOR SMALL POTENTIAL GAIN
WHAT ABOUT A BLACK MARKET?
CONCLUSION

FIGURES
FIGURE 1. PHASEOUT ACCELERATION REDUCES THREAT
FIGURE 2. CFC'S ARE AND WILL BE BIGGEST DEPLETERS
FIGURE 3. WORLDWIDE CFC CONSUMPTION
FIGURE 4. CFC CONSUMPTION AS REFRIGERANTS
FIGURE 5. DEMAND FOR HCFC'S TO CONTINUE

Montreal Protocol Negotiations: Should the HCFC Phaseout Schedule Be Accelerated in 1995?

When the Parties to the Montreal Protocol (MP) on Substances that Deplete the Ozone Layer convene their Annual Meeting in October 1995 in Vienna, one of the issues that will be on the agenda will be whether or not to accelerate the phaseout schedule for hydrochlorofluorocarbons (HCFCs). HCFCs have ozone depleting potentials of 1.6% (HCFC-123) to 11%. (HCFC-141b) of those of the CFCs. Currently, the Protocol agreement requires that, starting in 1996, the aggregate ozone depleting potential of HCFC production be capped at 3.1% of the total ozone depleting potential of chlorofluorocarbons (CFCs) plus 100gs of the ozone depleting potential of HCFCs consumed in 1989, then be reduced in several steps to 0 in 2030.

Several countries, notably Germany and several other Northern European nations, encouraged by a number of environmental groups, including Greenpeace and Natural Resources Defense Council (NRDC), have been lobbying in MP Working Group meetings to generate support for the idea of accelerating these dates, with full phaseout as early as 2003 in some proposals. The exact shape of the proposal to be debated in Vienna in October 1995 is not yet developed. It is expected to be put forth in March 1995 when the MP Working Group meets to finalize the agenda for the October 1995 meeting.

The key environmental question affecting the decision on whether to accelerate the HCFC phaseout schedule is:

-- What difference in environmental impact would the proposed acceleration make?

The key practical questions affecting the decision are:

-- What are the potential societal impacts -- costs, energy efficiencies, impact on the effectiveness and reliability of services, refrigeration in particular? In light of these impacts, how would potential users of HCFCs react to a reduced commercial life expectancy of HCFCs?

The key congressional policy question is:

-- What guidance, if any, should be given to the executive branch as it develops the U.S. position in Vienna on the HCFC phaseout schedule?

This report concludes that an acceleration of the HCFC phaseout in 1995 would increase the incentives for developing countries to stay on CFCs for both new and existing equipment, an alternative which is legal for them for up to 10 years under the terms of the Protocol. To the extent that they did so, ozone depletion would be more likely to increase over the next 10 to 20 years than to decrease.

This conclusion is in accord with the views of F. Sherwood Rowland, father of the ozone depletion theory implicating CFCs. Rowland wrote recently: "I ... have the view that the Montreal Protocol is working very well, but could perhaps be improved by allowing the use for an extended time of HCFCs with short atmospheric lifetimes such as HCFC-123." (1)

This report concludes further that, in the developed world, which does not have the legal option to stay on CFCs, the acceleration could increase both incentives and opportunities for black markets in CFCs (and possibly HCFCs as well). This conclusion is consistent with the increasing number of reports of black market transactions in CFCs in both the United States and Europe. (2)

Among the most promising alternatives to CFCs and HCFCs are hydrofluorocarbons (HFCs). HFCs have no ozone depleting potential but they do have significant global warming potential. In discussions under the United Nations Framework Convention on Climate Change, suggestions have been made that releases of HFCs to the atmosphere be regulated. Since it appears at this time that it would be releases of HFCs rather than production of HFCs that would be regulated, this analysis assumes that HFCs will continue to be available as CFC and HCFC alternatives. Should that turn out not to be the case, HCFCs would take on additional importance as alternatives to CFCs, since the search for alternatives to HFCs has barely begun.

SOURCES OF THE PRESSURE TO ACCELERATE

Why, in the face of the potential downsides to a faster HCFC phaseout, do Greenpeace, NRDC, Sweden, Germany, and others argue for an accelerated HCFC phaseout? In the case of Greenpeace, NRDC, and other environmental groups, the driving force is their perception of the dire consequences to the ozone layer of even the current phaseout schedule. As paraphrased by Alan Miller, Director of the Center for Global Change at University of Maryland, (3) "The problem of ozone depletion keeps looking worse with each assessment. There is the possibility for it to get much worse if we have a significant volcanic eruption of sulfates combined with an exceptionally cold winter in the Arctic. The next decade is very worrisome. ... The impact of reducing HCFCs is greater in the short term because the instantaneous ozone depleting potential (ODP) is close to that of CFC-11 and -12, ... based on their shorter atmospheric lifetimes. ... the peak level of depletion will occur within the next decade so that reducing HCFC use during that time period would have a much greater benefit."

These groups assert that adequate substitute products and technologies are already or will soon be available. An acceleration would act as a good stimulus for the use of alternatives and would emphasize the availability of alternatives instead of HCFCs and recycled CFCs. (4) There is a repeated history among affected industries of overstating the difficulty of identifying and implementing substitutes, they claim. The possibility that CFC use would go up is one that, in their view, can be avoided by continued pressure on the enforcement mechanisms of the Treaty, on the one hand, and by continued support for faster development of non-HCFC alternatives such as hydrocarbons, on the other.

As is summarized later in this report, input to the Technical and Economic Assessment Panel from most developing countries is for the most part not in accord with these assertions about the availability and economics of substitutes.

Sweden has been an aggressive supporter of phaseout of ozone-depleting substances from the first recognition of the problem. Sweden has historically taken a position of leadership in support of international environmental initiatives. An additional reason in this case may be that its population includes a high percentage of blond, fair-skinned people who are most sensitive to the UV-B radiation which expected to rise as ozone depletion proceeds.

Germany, in a change of position over the past decade, has become another strong, proactive environmental advocate. It also has a high percentage of fair-skinned people. Further, German authorities, as have the Swedish authorities, have been supportive of the use of hydrocarbons as refrigerants and as rigid foam blowing agents (5) despite concerns over their flammability and their impact on system energy efficiency. In both countries, refrigerators, for example, are much smaller than in the United States -- four to six cubic feet compared to a range of 18 to 24 cubic feet -- and do not incorporate the automatic defrost feature common in the United States. The larger internal space and the automatic defrost feature require larger charges of refrigerant and larger volumes of rigid foam insulation.

The case can be made that the fire hazard from the small volumes of flammable refrigerants and flammable blowing agents in the insulating foams in the smaller refrigerators in Germany and Sweden, for example, is more acceptable than the fire hazard from the larger charges of refrigerants and blowing agents in the larger units common in the U.S. The case can also be made that the reduced insulation value of the foam can be compensated for by changes in foam thickness and other design changes with less impact in smaller units than in larger ones.

BACKGROUND

Within the overall goal of the Montreal Protocol to protect human health and the environment from activities likely to affect negatively the ozone layer, the Parties have set a specific goal of reducing the concentrations of ozone depleting substances (ODs) in the stratosphere to levels that existed before the appearance of the Antarctic ozone hole in about 1980. That level is currently estimated to be two parts per billion (ppb) of ozone depleting substances in the stratosphere. (6) Natural, pre-industrial background levels are estimated as having been about one part per billion.

Current concentrations are about 3.6 ppb and rising toward an estimated peak of about 3.8 ppb in the year 2000. Both the rate at which the levels are rising and the level at which they will peak are decreasing as a result of implementation of the Montreal Protocol, which began about five years ago. The trends and the effects of the additional steps agreed to in 1990 and 1992 are shown in Figure 1 on the following page.

Under the Protocol, the Parties have set up a complex system of working groups, committees, and panels to study the various issues which implementing the Protocol generates. A staff level group called the Open-Ended Working Group (OEWG) meets twice per year; the United Nations Environmental Program (UNEP) provides the secretariat. Every four years (or more often if requested), technical specialists report updated assessments of the science of ozone depletion, (7) of the environmental effects of ozone depletion, and of the availability and economics of alternatives to the controlled substances. (8) on the basis of these studies, policy recommendations are made. So far, there have been two meetings of the Parties to the Protocol at which major policy changes have been agreed to -- London in 1990 and Copenhagen in 1992. The next meeting at which such policy changes will be considered will be in Vienna, Austria, in October 1995.

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insert figure 1 here (9)

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Under the amended Protocol, all CFC production for consumption in the developed world will end by the end of 1995. (10) Production for and in the developing world (defined in the Protocol's Article 5) will end 10 years later.(11) The European Union countries have agreed to phase out CFC production by the end of 1994, one year ahead of the Protocol requirement. However, recent reports indicate that non-aerosol CFC consumption in Europe has not fallen as rapidly as it has in the United States and Japan.

The full HCFC phaseout schedule is that production and consumption be capped in 1996 at 3.1% of the ODP of the CFCs produced in 1989 plus 100% of the ODP of HCFCs produced in 1989, (12) reduced to 65S of the 3.1% in 2004, 35% in 2010, 10% in 2015, 0.5% in 2020, and 0% in 2030. The United States has opted for a more rapid phaseout of some of the longer-lived HCFCs, namely full phaseout for HCFC-141b (13) by 2003, a freeze at baseline levels (14) for HCFC-142b and HCFC-22 in 2010, and complete phaseout of these two by 2020. All other HCFCs will be frozen at baseline levels (15) in 2015 and phased out by 2030. Under this schedule, which will be amplified by EPA over time to account for all HCFCs, the U.S. will be well within the cap guidelines of the Protocol.

A large number of other ozone depleting substances has also been put under phaseout schedules, all of which were also accelerated at the 1992 meeting in Copenhagen. The mathematical model from which Figure 1 is derived includes estimates of release rates of all listed ozone depleters over time, from the developed world and from the developing world (Article 5 countries). For the Article 5 countries, an assumption is made that, during their 10 year grace period, transition away from CFCs will be gradual, rather than all at once at the end of the period.

Since the data reporting system is not complete (some countries do not report, and some countries' reports are incomplete), a factor of about 25% of the reported CFC volumes is added for "unreported emissions."(16) From the reported and estimated release rates, the ozone depletion potentials, and the atmospheric life cycles of the various substances, aggregate levels of ozone depleting potential over time for each major category of ozone depleting substances (ODS) are calculated and plotted, as in Figure 2.

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insert figure 2 here (17)

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According to the most recent scientific review, (18) the impact of HCFCs on stratospheric ozone is so small that accelerating the phaseout schedule for HCFCs at this time would have a very small, impact on ozone depletion. (19) Much more critical to future ozone depletion are (1) the potential for noncompliance, (2) how developing countries phase out of CFC use, (3) the schedule on which methyl bromide use is curtailed, and (4) whether the halons (20) currently contained in existing equipment can be withdrawn and destroyed rather than released.

WORLD PRODUCTION AND CONSUMPTION OF CFC'S

World production of CFCs peaked in 1988 at about 1.25 million tons (2.5 billion lbs) per year. Since then, it has been going down rapidly, as the developed world, led by the United States and Japan, has responded to the Protocol's production restrictions (Figure 2).

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insert figure here (21)

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This rapid a phasedown of CFC production is remarkable, given the perception in 1987 that the best that could be done was 50% by 1998. Clearly, both government and industry have been aggressive in working toward change in a number of CFC-dependent industrial sectors which thought, until the ozone depletion concern arose, that they had found and were using the ultimate in cheap, safe, environmentally benign, high-performance products.

Except for some special cases with small volumes involved, it appears that, in the developed world, the foaming agent, sterilant, solvent, and other markets for controlled ozone-depleting substances in new applications will be able to meet the January 1, 1996, phaseout date. Producers of air conditioning and refrigeration equipment have responded rapidly to the impending production ban on CFCs, introducing since 1989 equipment designed for alternatives. Currently, all new air conditioning and refrigeration equipment produced in the developed countries is using HCFCs, HFCs, or other non-CFC refrigerants such as ammonia or light hydrocarbons.

Thus, in the developed countries, consumption of CFCs for new refrigeration equipment has dropped almost to zero. Providing refrigerants for existing air conditioning and refrigeration equipment presents a difficult case, however, particularly in the United States and Japan, and perhaps in Western Europe.

In the United States, the EPA and the various trade associations of equipment vendors, refrigerant producers, and service contractors are pushing hard to accelerate the rate at which this inventory of equipment is retrofitted or replaced and stocks of recovered and reclaimed refrigerants built up. However, the rate of retrofit and replacement is slow compared to the inventory of equipment, and there is little evidence of CFC inventory buildup, particularly among small scale users. (22)

The situation in Western Europe, where the CFC phaseout will occur one year earlier through voluntary action by the European Union, may not be as comfortable as many expect; it appears that there is more use of CFCs in space conditioning and refrigeration than many officials realize. Use of CFCs as refrigerants did not decline to 1986 levels until 1993, (23) unlike in North America and Japan where it was well below 1986 levels by 1990. Further, retrofitting has been and continues to be infrequent. (24)

Current CFC flows into refrigerant markets in the developed world are primarily for maintenance, plus an unknown amount for buildup of inventory in anticipation of the pending production phaseout. However, that is not the case for the rest of the world, where much new equipment continues to be based on CFCs, and the refrigeration market is expanding more rapidly than in the developed world (Figure 4).

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insert figure 4 here

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Consumption of CFCs for refrigeration has more than doubled over the past several years in the developing countries. (25) Use of CFCs has risen 80% in Tunisia, 99%. in China, which is building and plans to continue to build millions of refrigerators per year using CFCs as refrigerant. India, a late signer of the Montreal Protocol, has built a number of CFC production facilities and is running them, although it says that much of its production replaces CFCs previously imported.

OUTLOOK FOR HCFC'S

According to the 1994 Report of the Technology and Economic Assessment Panel, (26) for most of the current CFC applications other than refrigeration, HCFCs are only one of many products that can do the job. HFCs, hydrocarbons, and a range of other products and technologies serve adequately, and in some cases better.

For many refrigeration applications, however, the range and acceptability of alternatives to CFCs are not as well developed as for other sectors.

"In commercial refrigeration new equipment uses HFCs (small part of the total volume), HCFCs or HCFC-based blends. The use of HCFC-22 in particular is the first choice ... in many parts of the world. With the R&D on HFC based blends proceeding, ... the progression to HFC alternatives is currently under considerable scrutiny. Many investigations still have to be performed." (27)

Centrifugal chillers are used extensively for comfort cooling of buildings. EPA has concluded that "HCFC-123 is the most energy efficient CFC-free building cooling system currently available." (28) Energy efficiency is one of the factors to be considered when weighing the pros and cons of CFC substitutes. TEAP concludes:

"For HCFC-123 no practical alternative has been identified, although research and development is ongoing." (29)

For other commercial refrigeration applications, HCFC-22 is the first choice. HFCs may prove to be satisfactory in many of these uses, but much work needs to be done before their use can be undertaken with confidence:

"Replacement candidates for HCFC-22 in new chillers are the HFCs, the HCs (hydrocarbons), and blends of these chemicals; blends of the chemicals are not suitable for use with flooded evaporators that dominate in the chiller industry.... This will be the practical situation for a number of years to come." (30)

Taking all these factors into consideration, the Refrigeration Committee of the TEAP expects continued widespread use of HCFCs in the refrigeration sector, as displayed in Figure 5.

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insert figure 5 here

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In sum, at this stage of technological evolution, TEAP views HCFCs as the only economically sound alternatives to CFCs in a number of refrigeration, cooling, and chilling applications. This group was confident in 1992 that the needs for these applications could be met at HCFC production levels within the 3.1% ODP cap on HCFCs agreed to at Copenhagen for the rest of this century and that the need will decrease thereafter as technology advances. The 1994 TEAP report concludes that there is no evidence that the situation has changed enough to change its position on the need for HCFCs.

In Nairobi in July 1994, Greenpeace, supported by Sweden and Germany, sought to persuade the working group that the TEAP assessment of the need for HCFCs in refrigeration was unduly pessimistic concerning the potential for non-HCFC refrigerants to replace CFCs in new refrigeration equipment. The Greenpeace representative pointed in particular to hydrocarbons as potential substitute refrigerants, citing the penetration of hydrocarbons into the home refrigerator market in Germany as an example.

The TEAP representative, in response, cited the need to consider many factors other than ODP in evaluating substitutes for CFCs and HCFCs. Flammability, toxicity, overall system energy efficiency, cost, reliability, and maintenance needs must all be considered in the refrigerant selection process. They are particularly critical to the voluntary acceptance of alternatives in the developing world because of the 10-year grace period provided to it under the Protocol. The non-HCFC substitutes fall short, at this time, compared to the HCFCs, as described in the TEAP report quoted earlier in this report.

Therefore, were HCFCs to be reduced in availability or phased out sooner, alternatives not yet fully proven, or more costly, or more hazardous, or more unfriendly on some other dimension would be called into play. In Article 5 countries, affording to statements made at Nairobi by their representatives, those in need of new refrigeration capacity would, if they could not turn to HCFCs for long enough to make the transition economically sound, tend to stay with CFCs until experience with the non-CFC alternatives was more persuasive as to the benefits of their performance with respect to reliability, costs, and other impacts. They would make only the one transition -- from CFCs to the non-HCFC technologies.

In Figure 5, the difference between HCFCs used as refrigerants and total HCFCs is the amount of HCFCs expected to be used as blowing agents for foamed products. The quantity is significant. Most of this use will be in rigid insulating foams, used in building insulation and in refrigerator cases. The HCFCs trapped in these foams insulate better than do the alternative non-CFC blowing agents such as hydrocarbons, carbon dioxide, and nitrogen.

TEAP's Rigid and Flexible Foam Committee has concluded that alternative blowing agents such as HFCs, hydrocarbons such as cyclopentane, atmospheric gases such as nitrogen and carbon dioxide, and not-in-kind technologies such as vacuum panels are not yet far enough advanced for the committee to recommend reliance on them, even without considering side effects such as flammability and cost. HCFCs are currently the only place to turn:

"Until zero-ODP substitutes are available in sufficient quantities and with sufficient testing, it will be virtually impossible for manufacturers currently planning and investing in HCFC conversion to change course and adopt any new zero-ODP foam technology before 1996 if energy efficiency levels are to be maintained. The lead time for testing and development of some substitutes prior to commercialization could be several years.'' (31)

At the urging of Greenpeace and the several proactive European countries, the working group in Nairobi asked both the Open Ended Working Group and the TEAP to revisit the question of substitutes for HCFCs. The TEAP agreed to do so, including in its deliberations a range of factors such as those included in EPA's Significant New Alternatives Program (SNAP). It will have an updated evaluation for the March 1995 meeting. It is unlikely, according to some of the participants in the TEAP process, that there will be enough new information or changes in circumstances in the next few months to change the Panel's assessment.

BIG RISK FOR SMALL POTENTIAL GAIN

In sum, for those uses identified by the TEAP as requiring HCFCs to replace CFCs, because other alternatives are either not yet reliable, impose other undesirable effects such as flammability, or cost a great deal more than the HCFCs, HCFCs will continue to be the least undesirable refrigerants and blowing agents available. The use of HCFCs at the contemplated level will contribute about 5%. of the ozone depletion estimated to occur over the next several decades. To accelerate the phaseout schedule, even by the maximum 25 years associated with the most aggressive option discussed to date, would reduce their contribution to peak ozone depletion levels and to the timing of the peak only marginally, even if everyone were to comply with both the spirit and the letter of the Treaty.

Because of the problems associated with going beyond HCFCs, it is probable, and a number of representatives from developing countries have already indicated that it would be likely, that many current and potential CFC users in the developing world who now can be expected to make the transition to HCFCs over the next decade or so would instead stay with CFCs, while still being in compliance with the Treaty requirements.

Every ton of CFCs so consumed would deplete ozone 10 to 50 times as much as the HCFCs foregone would. If some 5%, more or less (depending on the mix of HCFCs they would have used), of the projected commitments to HCFCs over the next decade stay with CFCs, ozone depletion would increase compared to a full transition to HCFCs. In other words, it wouldn't take many defectors from the CFC-to-successor technologies to undo the ozone benefits from a majority converting from CFCs to successor alternatives.

Further, there are those CFC users not now reporting or currently underreporting their use (estimated, as reported earlier, to be 20 to 25% of the estimated total consumption). The incentive for them to join and fully participate in the Protocol system is currently a mix of, among other factors, official awareness, public opinion, the possibility of trade sanctions if noncompliance is demonstrated, and financial contributions for conversions from the developed world through the Treaty's Multilateral Fund. According to TEAP, going beyond HCFCs for the functions cited would cost more than going to HCFCs and would cost a lot more than staying on CFCs. Thus, the incentive to join the Parties would be reduced, the costs to the Multilateral Fund of conversion projects in developing countries would be increased, and fewer projects per Fund dollar could be funded. The most probable outcome would be that unreported CFC use would be higher than projected under the current schedule, and ozone depletion would be greater.

So, for two of the three major sources of ozone depletion over the next decade -- unreported CFC use and Article 5 country phasedown of CFC use -- an HCFC acceleration would tend to decrease the rates at which these CFC uses would be reduced. With CFCs having 10 to 50 times the ozone depleting potential of HCFCs, it is almost certain that net ozone depletion increases from a slowdown in conversions from CFC would overwhelm the ozone depletion benefits from an acceleration in the rate of HCFC phasedown.

WHAT ABOUT A BLACK MARKETS

The foregoing discussion does not take into account the possibility of a black market in CFCs. (32) Throughout 1994, rumors have been circulating in the United States and Europe that significant quantities of newly-produced CFCs have been moving across national borders labeled as recycled, recovered, or reclaimed CFCs. Under the Protocol, recycled, recovered, or reclaimed CFCs are not subject to consumption or import limits.

These rumors have not been substantiated with solid evidence but have gained sufficient currency that they were discussed at the OEWG meeting in Nairobi in July 1994. The U.S. Customs Service has been asked by EPA to increase its surveillance of import centers to identify such shipments. Imports of recovered CFCs are subject to the same tax as U.S.-produced CFCs, so it would be in the interest of Customs to find the shipments and tax them, if they are occurring. Several European countries have also issued statements that they are increasing border surveillance.

The issue is potentially one of significance, even though its magnitude at this time is highly uncertain. The inventory of CFC-using equipment in the developed world is very large. Some 350 million pounds of CFCs per year are needed for servicing. By the time this equipment is replaced, something like 1 to 2 billion pounds of CFCs above and beyond that which can be recovered, reclaimed, and recycled will be needed, depending on how quickly the equipment is either retired or converted. The total amount of CFCs stockpiled for future use is not known, but is estimated at somewhere between 150 million and 300 million pounds. (33) The CFC inventory is likely to run out well before the stock of CFC-using equipment is retired.

CFC producers in the developed world will be able to continue to produce CFCs after 1995 for export to Article 5 countries. Both production and export activities are subject to monitoring and enforcement of Protocol terms. Article 5 countries can consume CFCs at a rate of 0.3 kilograms (kg) per capita or the annual average of their 1995-7 consumption, whichever is the lower. With economic development until 1997 and population growth thereafter, these countries will, until the end of their grace period, be able to produce and consume more CFCs than they historically have. There will be supplies of CFCs in the developing world and demand for CFCs in both the developing and developed world.

Trade in recovered CFCs will also be legal. Alerted by their own experience with trade issues, coupled with the recent reports of illegal trade, the working groups of the Protocol have had on their agenda for the past several meetings discussions concerning how to implement and enforce the Protocol's trade provisions. A system of manifests which identify the history of the shipment contents and its chemical composition is being developed.

However, CFCs produced legally for use in the developing world can become "used," recovered CFCs eligible for import into the developed world or, after CFC phaseout in the rest of the world, into those countries as well. (34) It is widely believed that some of the "used" refrigerant in international trade today is virgin material produced in the developing world which has been "doped" with water and other contaminants to make it appear to be "used" material. The basis for this conjecture: the volumes emanating from some countries are reported to be larger than could be recovered from those countries' inventory of CFC-using equipment.

The proposed manifest system discussed in Nairobi and being developed in most developed countries is being designed to require evidence that materials labeled "used" actually were used. How well the proposed system would work remains to be seen.

CONCLUSION

On the basis of this analysis, it appears that an acceleration in 1995 of the Montreal Protocol's current schedule for phaseout of HCFCs could create the potential for significant environmental and economic costs while at best offering only minimal environmental benefits. Because it would take about 10 years to have any effect in the marketplace, it would have no significant impact on the path of ozone depletion over the next decade when, according to the environmental concern, the need is greatest, even if the acceleration were to be implemented without adverse effects on current plans to phase out CFCs.

However, because the technologies to be substituted for HCFCs are in a number of applications less effective, more costly, or more detrimental in terms of other environmental, health, and safety factors, an acceleration would increase the pressure in the developing world to delay their phaseout of CFCs. The resultant continuing use of capacity to produce CFCs for the developing world would increase the supply of CFCs in the developing world. Meanwhile, the phaseout of CFC production in the developed world, coupled with the remaining useful life of equipment designed for CFCs, will increase CFC prices there and increase both opportunities and incentives for development of black markets, supplied from plants in the developing world with CFC production allowances.

It is possible that some of the more detrimental side effects could be minimized with extra effort in enforcement throughout the world and in funding from the Protocol's Multilateral Fund (35) for projects to replace or retrofit CFC-using equipment and to turn to zero ODP alternatives for new equipment. However, the same level of effort and expenditure, if directed toward accelerating the phaseout of CFC use in the developing world, even if phased into HCFC use, and reductions in methyl bromide use everywhere would provide far more environmental benefits at less risk of undesirable side effects, either economically or environmentally.

A major underpinning for the conclusion that the risk is high compared to the benefit is the state of technology for alternatives to the HCFCs: that is, that the alternatives are not yet adequate to the task. The progress already made in development of alternatives to CFCs has been remarkable compared to the perceptions of what would be achievable when the Protocol was first placed in force just seven years ago. Should technology advance sufficiently, as it most probably will, then the risks associated with phasing out HCFCs would go down.

Under the Protocol, the state of the technology is under continual reassessment. Thus, the equation might look very different in 1996 for a 1997 decision than it does in 1994 for a 1995 decision concerning the HCFC phaseout schedule. If so, then the TEAP would so report, and on the basis of actions taken to date, the Open-Ended Working Group would recommend an acceleration and the Parties would agree to it.

The U.S. Environmental Protection Agency (EPA) has as yet taken no formal position on an accelerated HCFC phaseout. It has, however, stated that: (36)

"HCFCs have an important role to play as transitional refrigerants.... HCFCs contribute to the destruction of stratospheric ozone to a much lesser extent than CFCs Use of HCFCs as transitional refrigerants will allow industry to move away from CFCs more rapidly and, therefore, will offer significant environmental health benefits over the continued use of CFCs.... Their global warming potentials are also lower than those for the CFCs.... There are clear environmental and health benefits to be gained by allowing near-term use of HCFCs until substitutes with zero ozone depleting potential (ODP) are developed."

EPA has not made similar statements during recent staff-level meetings of the Montreal Protocol Parties (37) when Greenpeace and Germany, among others, have argued for an accelerated HCFC phaseout schedule. Even though the use of HCFCs as transitional refrigerants is viewed by EPA as constructive within the United States, and the environmental benefit from an accelerated phaseout is so minimal, as demonstrated in the scientific review and reflected in the scientific opinion of Dr. Rowland, EPA has remained silent in the international negotiations. It has not taken there the same position in favor of transitional use of HCFCs that it has in its domestic regulations.

The question is: Should it? And if so, should it do so now or wait until later in the process in case new information changes the picture? Where the U.S. comes down on this issue will have a substantial effect on the outcome next October. The current equivocal U.S. position causes the outcome to be uncertain, which arguably increases the reluctance of developing countries to move now from CFCs to HCFCs where HCFCs are currently the preferred alternatives.

Endnotes

1. "Letter to the Editor, by F. Sherwood Rowland, ASHRAE, Journal, Oct. 1993, page 14.

2. Typical is the report in Ozone Depletion Network Online Today, September 8, 1994, which quotes William Corcoran of Allied-Signal, a CFC producer, as saying that the black market in CFCs is undercutting the effectiveness of the CFC production phasedown by increasing the supply and holding down the price of CFCs.

3. Private communication, September 23, 1994.

4. International Environment Reporter, August 10, 1994, page 659.

5. A major use of rigid foams is as insulating material in refrigerator walls.

6. Usually reported as parts per billion of chlorine equivalent, represented as Clx.

7. The mechanism is a panel of scientists (most recently, 226 from 29 countries) working under the auspices of the World Meteorological Organization (WMO) and the United Nations Environmental Program (UNEP).

8. The mechanism for these evaluations is the Technical and Economic Assessment Panel (TEAP), which serves under UNEP as the gathering place for expertise from all over the world on all facets of CFC uses and alternatives thereto.

9. Source: Environmental Protection Agency.

10. Production in the developed world after 1995 for export to the developing world is allowable, provided that the importing countries stay within their consumption allowances.

11. Because of the wording in the Protocol text, there is some uncertainty about whether the 10 year grace period for Article 5 countries extends to 2010 (10 years after the CFC phaseout date agreed to in 1990) or to 2005 (10 years after the CFC phaseout date agreed to in 1992). A number of Article 5 countries prefer 2010.

12. This level would allow production in the future of about the same number of tons per year of HCFCs as there were tons of CFCs produced in 1989 yet would produce only about 5% of the ozone depletion potential of the CFC volumes replaced.

13. The ozone depleting potential of HCFC-141b is 11% of that of CFC-11 or CFC-12. The other HCFCs have ODPs nearer to 1.5 to 5% of that of CFC-11 or -12.

14. The baseline level remains to be defined. It is expected to be defined as the 2009 production level.

15. The baseline level is expected to be defined as the 2014 production level.

16. Since the actual volumes involved are not reported, the 25% figure is inferred from a variety of sources but is viewed by observers as probably between 20% and 30%. Also, since it is an unknown number deriving from unknown activities with unknown commitment to the CFC phasedown, estimates of the rate at which it will decline are also rather uncertain.

17. Source: Memorandum from ICF Inc. to Steve Seidel, Environmental Protection Agency, September 2, 1994. The calculations assume compliance with the 1992 phaseout schedule. Unlike Figure 1, which depicts Clx, levels in the stratosphere, this figure depicts Clx levels in the troposphere plus the stratosphere. This changes the numbers but not the trends.

18. Scientific Assessment of Ozone Depletion 1994: Executive Summary." UNEP, WMO, US National Aeronautics and Space Administration, and U.S. National Oceanic and Atmospheric Administration, August 19, 1994.

19. "If emissions of HCFCs were to be totally eliminated by 2004, the integrated effective chlorine loading above the 1980 level is predicted to be 5% less over the next 50 years relative to full compliance with the Amendments and Adjustments to the Protocol." Scientific Assessment, page 11.

20. Halons are bromine-containing chemicals used primarily in firefighting. Bromine is about 50 times as potent an ozone depleter as chlorine.

21. In this figure, and in the next two, the historical data points are estimates from an incomplete data base, while the projections are based on official statements from Parties to the Protocol, many of which have not yet developed the requisite implementing actions. Thus, the uncertainties for most data points are large compared to those associated with historical data from the developed nations only.

22. "CFC Phaseout: Future Problem for Air Conditioning Equipment?" by David E. Gushee. CRS Report 93-382, April 1, 1993. More recent data show an increase in the number of CFC-containing units retrofitted or replaced, but the increase is not great enough to change the conclusion that serious problems will probably arise. Large, technologically sophisticated companies appear to be building inventories of CFCs as they replace or retrofit CFC-using equipment unit by unit, but most small users, including most automobile owners, still appear to be in a denial" mode.

23. European Chemical Industry Council, reported in Global Environmental Change Report, February 11, 1994. Pp 1-3.

24. Ibid.

25. "The Biggest Chill," by Lee Edson. Across the Board, March 1994, pp 36-40.

26. The TEAP Panel's latest draft report is dated March 1994.

27. The March 1994 draft TEAP Report, page 7.6.

28. "1992 Accomplishments and Prospects for 1993." EPA Office of Atmospheric Programs. Document No. EPA 430-K-92-031. Page 7.

29. Op cit. Page 7-7

30. op cit. Also page 7-7.

31. The March 1994 TEAP Report, page ES-5.

32. And probably HCFCs as well, if their phaseout is accelerated.

33. The Refrigeration Committee of TEAP, August 1994.

34. There is little incentive for illegal trade in CFCs between Article 5 countries until their grace period ends.

35. 25% of which is to come from the United States

36. Final Rule: Significant New Alternatives Policy (SNAP) program. 59 FR 13071. March 18, 1994.

37. Most recently at Nairobi, Kenya, July-8, 1994.