review of the ozone protection and synthetic greenhouse...

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Comments to the Options Paper

Review of the Ozone Protection and Synthetic Greenhouse Gases Management Programme

Submission by shecco

November 2015


KEY MESSAGES

shecco strongly supports the Australian government’s plans to reduce F-gas emissions by 86% by 2036 at a national level and encourages Australia to show a strong leadership at a global level – especially at the Montreal Protocol negotiations on the phase out of HFC substances. shecco’s comments on the Options Paper reflect some of the key concerns for the natural refrigerant industry.

• The experience of other countries shows that HFC bans on new equipment in certain sectors (GWP > 150) can achieve a considerable reduction in emissions of fluorinated gases, while at the same time fostering the global competitiveness of national industry with respect to low GWP technologies.

• HFC bans in new equipment should be considered as the key element in the review of the SGG Management Act, which would steer innovation, incentivise adoption of future proof technology and reduce the long-term cost of transition of industry to low GWP technology. It is therefore recommended that Australia considers Option 4 as the most appropriate for reduction of HFC emissions and further evaluates feasibility of HFC bans sector-by-sector. Especially in the next 5 years, before the phase out of HCFCs, Australia has an opportunity to leapfrog HFCs and steer the technology choice of manufacturers and end users towards low GWP options, such as natural refrigerants. This way industry will avoid costly multiple conversions in the future.

• With Option 3 that foresees phase down of HFCs alone without sector-specific bans, Australia risks undermining the overall objectives of this revision and introduction of medium GWP refrigerant technologies, which will come at high cost for industry and end users in face of further restrictions.

• shecco does not recommend Option 1 and Option 2 as suitable ways forward for Australia. In light of the global market and policy trends, lack of ambition would jeopardise Australia’s leadership at international level. Such options would further incentivise companies that are lagging behind the global trends and who are resisting the change that is inevitable. Moreover, it would penalise forward-looking Australian companies that have already invested in technologies using low GWP refrigerants, such as CO2, ammonia and hydrocarbons.

• As shown by industry worldwide, the technical feasibility of natural refrigerant-based systems in refrigeration and air-conditioning applications is not an issue; and its energy efficiency can reach at least the level of HFC-based systems, if not higher. For those applications that have not yet reached this level of development, it will be possible to realise this potential through further R&D.


COMMENTS SPECIFIC TO PROPOSED OPTIONS

shecco strongly supports Option 4 (maximum reform) identified in the Options Paper and calls on the Australian government to implement it as the preferred option for limiting the use and emissions for synthetic greenhouse gases. A combination of different measures - a phase down of HFCs, sector specific HFC equipment bans and other maintenance and leak requirements - is the most appropriate way of comprehensively addressing emissions of synthetic greenhouse gases in Australia.

shecco considers Options 1, 2 and 3 to not be ambitious enough to deliver sufficient emissions reductions. While Option 3 includes a phase down of HFCs, only option 4 considers HFC equipment bans, a measure that has proven to be the most effective to deliver HFC emissions reduction in Europe and other regions.

COMMENTS SPECIFIC TO PROPOSED MEASURES

HFC equipment bans - most effective measure to reduce HFC emissions

Under Option 4, Australia’s government is exploring the possibility of introducing an import and manufacture ban on HFCs in certain applications. shecco strongly supports such measure, which will provide investment certainty to the increasing number of Australian companies that work with natural refrigerants (climate friendly alternatives to fluorinated gases) in a variety of heating and cooling applications. The advantage of HFC bans is that it ensures that high-GWP HFC-based equipment is no longer placed on the market in sectors where they are no longer necessary and for which HFC-free technologies are commercially available. At the same time, the inherent deadlines by when the transition to low-GWP substances is required, provide the industry with clarity for a strategic planning, accelerating the pace of innovation.

For example, the EU F-Gas Regulation that entered into force in January 2015 introduced bans in new equipment in the several applications:

• Ban on HFCs with GWP ≥ 150 in domestic refrigeration as of 2015

• Ban on HFCs with GWP ≥ 150 in hermetically sealed commercial refrigeration equipment as of 2022

• Ban on HFCs with GWP ≥ 150 in centralised commercial refrigeration systems with a capacity of 40kW or more as of 2022, except in the primary refrigerant circuit of cascade systems where HFCs with a GWP < 1,500 will still be allowed

• Ban on HFCs with GWP ≥ 150 in movable room air-conditioning appliances as of 2020

• Ban on HFCs with GWP ≥ 750 in small single split air-conditioning systems (containing less than 3kg of f-gases)

• Moreover, HFCs with GWP ≥ 2,500 will not be permitted neither in new stationary refrigeration equipment as of 2020, nor for the servicing of large refrigeration systems (as of 2020 for virgin HFCs, as of 2030 for reclaimed or recycled HFCs), bringing essentially an end to the use of R404A in the refrigeration sector.

The sector-specific bans have given a clear signal to industry on where to channel their investments and how to plan their manufacturing and purchase of equipment. While most of the bans are still to enter into force, the effects are already being recognised. For example, the ban on HFCs in


commercial refrigeration has triggered accelerated adoption of HFC-free technology. With over 5,500 CO2 transcritical supermarkets already in place in Europe, major industry experts predict that Europe will see over 6,000 new CO2-only stores annually by 2018, with progressively more being installed in Southern Europe as solutions for warmer climate become increasingly available. An estimated number of 81,000 CO2 transcritical stores is predicted to exist in Europe by 2030. This trend is having an impact on other regions, including Australia and this will only intensify in the near term (2016-2018).

Graph: Number of CO2 transcritical stores by 2030

Source: shecco Market Development

Image: Number of CO2 transcritical stores worldwide

Source: shecco Market Development


The Options Paper suggests a very modest ban on HFCs with GWP < 2500 as of 2020 in supermarket refrigeration, while a more ambitious ban would be feasible and more cost effective for Australian businesses. With a regulatory framework that does not incentivise very low GWP technology options, which are already widely available, Australia risks phasing in medium GWP refrigerants, which are likely to face further restrictions in the future. This will come at high cost of manufacturers and end users, and could also have detrimental effects on Australia’s competitiveness. In order to incentivise truly climate friendly technologies in supermarket refrigeration, which are already commercially available, shecco recommends introducing a ban on HFCs with GWP > 150 as of 2020 in this sector.

By banning very high GWP (GWP > 2500) refrigerants that are no longer widely used in new refrigeration and air-conditioning equipment, Australia risks undermining the objectives of the Review of the Ozone Protection and Synthetic Greenhouse Gases Management Programme and its credibility at the international level. Due to growing environmental concerns, there is a trend towards lowering the GWP of refrigerants in general and the use of HFCs with GWP > 2500 in new equipment is relatively low. The use of these very high GWP refrigerants can be easily avoided already today, as an array of refrigerants exists with GWP below this limit to be used in different applications.

The table below provides an overview of GWP values of some HFCs and natural refrigerants in refrigeration and air-conditioning applications today. R404A, R407A, R410A, R134a are among the most commonly used HFC refrigerants today. Looking at their GWP values it becomes clear that a ban on HFC > 2150 or more targets only one of these refrigerants - R404A, the use of which is on steep decrease in new equipment anyways. This is mostly because its energy efficiency is lower than that of other HFC refrigerants, which can be used in the same application.

The role of the revised SGG Act should be to provide direction to the Australian industry and end users to move away from HFC refrigerants with GWP > 150, to avoid the shift from very high GWP refrigerants to high GWP and medium GWP ones, where already proven alternatives with GWP not greater than 4 exist.

Industry is ready for bans on HFCs with GWP > 150 in new equipment in majority of refrigeration & AC sectors as of 2020

While the Options Paper suggests a modest ban in commercial refrigeration and mobile air conditioning, it fails to consider possible bans on high GWP HFCs in other sectors where energy efficient, cost effective climate friendly technologies are already readily available. shecco urges the Australian government to consider and evaluate feasibility of sector-specific bans

HFC Refrigerant GWP value R404A 3922 R407A 2107 R410A 2088 R134a 1430 R32 675 R1234yf 4

Natural Refrigerant GWP value Isobutane 4 Propane 3.3 CO2 1 Ammonia 0 Water 0 Air 0


on HFCs with GWP > 150 by 2020. Such a measure would accelerate the transition to very low GWP technologies and ensure that Australia can be of the global leader (rather than a follower) in this area.

According to industry experts, the technical feasibility of low-GWP natural refrigerant-based technology in refrigeration and air-conditioning applications is no longer an issue, while in terms of energy efficiency, compared with HFC-based systems, natural refrigerant-based solutions can reach at least the same level of performance or even higher.

It is rather the current and future level of commercial availability of products using natural refrigerants (CO2, ammonia, hydrocarbons, water, air and their combinations) that determines the year as of which HFC bans are possible for the various refrigeration and air-conditioning sub-sectors.

For the establishment of HFC bans in the EU F-Gas Regulation, a thorough and objective sector-by-sector assessment of status and potential of HFC-free technology with involvement of different stakeholders was conducted, and a similar process would be necessary for the case of Australia.

More specifically, the “Preparatory study for a review of Regulation (EC) No 842/2006 on certain fluorinated greenhouse gases”1 evaluated the possible market penetration rate of low-GWP solutions (GWP < 150) for different sectors for the case of industrialised (A2) as well as developing countries (A5). The “penetration rate” is defined as the maximum market potential of a technical choice to replace new products or equipment relying upon HFCs in a particular sector, while taking into account cost effectiveness, energy efficiency, safety, availability of materials and components. The table below denotes the market penetration of key low-GWP alternatives to HFCs in industrialised countries by 2030 in some key refrigeration and air-conditioning sectors.

Refrigeration sectors Key low-GWP option Market penetration of key low-GWP options in 2030 in (industrialised) countries (%)

Domestic refrigeration R600a CO2 HFC1234yf

95 (100 in EU already in 2015) 5 0

Commercial refrigeration Centralised systems R290 indirect + CO2 cascade

R290 + CO2 + CO2 cascade CO2

90 10 0

Condensing units R290 direct R290 indirect CO2

40 30 30

Stand-alone units R290 direct CO2

85 15

Industrial refrigeration Small equipment Ammonia 95 Large equipment Ammonia 95 Transport refrigeration Refrigerated trucks R290 direct

CO2 80 20

Refrigerated vans CO2 HFC1234yf

50 50

Reefer containers CO2 100 Fishing vessels Ammonia + CO2 cascade 95

1 Preparatory study for a review of Regulation (EC) No 842/2006 on certain fluorinated greenhouse gases, http://ec.europa.eu/clima/policies/f-gas/docs/2011_study_en.pdf


AC sectors Key low-GWP option Market penetration of key low-GWP options in 2030 in (industrialised) countries (%)

Stationary AC Moveable AC 290 direct

CO2 HFC1234yf

40 20 40

Single Split AC R290 direct CO2 HFC1234yf

40 15 45

Multi split AC R290 direct CO2 HFC1234yf

70 30 0

Rooftop AC R290 direct CO2

65 35

Small chillers R290 direct CO2 Ammonia

60 20 20

Large chillers R290 direct CO2 Ammonia Water (R718)

15 0 60 25

Centrifugal chillers R290 HFC1234ze Water (R718)

20 50 30

Heat pumps R290 direct CO2 HFC1234yf

60 20 20

Mobile AC – road vehicles Passenger cars (incl. trucks) HFC1234yf

CO2 (100) (100)

Buses HFC1234yf CO2

100 0

Table: Market penetration of key low-GWP options in 2030 in industrialised countries

Source: Preparatory study for a review of Regulation (EC) No 842/2006 on certain fluorinated greenhouse gases, http://ec.europa.eu/clima/policies/f-gas/docs/2011_study_en.pdf

Phase-down of HFCs without HFC bans (GWP > 150) = business as usual

The Option 3 foresees introduction of an HFC phase down without any sector-specific bans. Only with HFC bans, can intermediary and costly transitions to “medium” GWP technologies be avoided. Only by giving the industry and end-users clear signals and the investment certainty to switch to low-GWP alternatives, will the use of f-gases be eliminated in sectors where the use of HFCs is no longer necessary.

If it is not coupled with HFC bans, the HFC phase-down alone will essentially drive the introduction of medium-GWP blends of fluorinated gases. As the experience from the phase out of CFCs and HCFCs indicates, these medium-GWP blends will also face stricter measures in the future, leading to further transitioning to lower GWP refrigerants. Such transition would come at high cost for the European companies and end-users. HFC bans will ensure that these unnecessary, intermediary and costly steps are skipped for the benefit of the Australian economy and consumers.


The Options Paper considers two different possible phase-down schedules on the basis of the North American Amendment proposal to the Montreal Protocol. shecco calls upon the Australian government to adopt an HFC phase down schedule that would be more line with the schedule adopted under the EU F-Gas Regulation, which will deliver higher emissions reductions by 2030 (79% compared to 2009-2012 baseline). A comparison of the phase down suggested under the North American proposal and the one adopted under the EU F-Gas Regulation highlights the ambition gap (see graph below). We assess that there could be room for making Australian phase-down schedule proposal much more ambitious than the ones currently indicated in the Options Paper in order to maintain and raise Australia’s competitiveness in the long run.

Graphs: Comparison of proposed amendments to the Montreal Protocol with EU F-Gas Regulation HFC phase down

Source: EIA presentation at ATMOsphere Network Paris 2015


ADDITIONAL COMMENTS

Lack of recognition of natural refrigerants

The Options Paper also indicates that there is currently a range of alternatives to synthetic greenhouse gases in most RAC applications or that alternatives are in development and could soon be introduced in the Australian market.

However, overall, the Options Paper lacks specifics, especially when it comes to examining the value of environment-friendly natural refrigerants with regard to their energy efficiency and cost-effectiveness.

The measures addressing reductions of HFC emissions should be coupled with energy efficiency requirements and the HFC phase down. However, the Options Paper fails to recognise this potential. shecco urges the government to remain neutral and use science and evidence-based methods in their review.

Flammability and toxicity of refrigerants

The supporting documents of the Options Paper indicate that using lower GWP gases as substitutes for high GWP gases will generate some additional risks: for instance, it stresses that hydrocarbon refrigerants are more flammable than synthetic refrigerants, while it fails to note the flammability risks of other high GWP HFC replacements, such as unsaturated HFCs (commercially known as “HFOs”) and their blends. Moreover, the toxicity of ammonia is mentioned but the toxicity of synthetic refrigerants is not acknowledged.

It should be noted that natural refrigerant properties are well known and have been studied in their entirety. Low-GWP chemical refrigerants on the other side, given their chemical complexity and short or no commercial use have still unknown negative contribution to ozone depletion, global warming and ecological safety, which is subject to continued debate. For example, decomposition of HFC1234yf (commercially known as “HFOs”) in trifluoroacetic acid (TFA) leading to water toxicity could have a serious environmental impact, which has not been fully assessed yet in relation to the anticipated amounts to be used in different applications.

Given that natural refrigerants are well known and their properties have been studied extensively any risks associated with them can be addressed already in the design phase of a system. Flammability of hydrocarbons, toxicity of ammonia or high pressure of carbon dioxide are well managed in a variety of applications. The experience in use of chemical low-GWP alternatives is very low – for example the formation of hydrogen fluoride (HF), highly toxic substance that occurs when low-GWP HFC1234yf burn or are in contact with hot surface has not been studied sufficiently yet.

It is essential that the government considers information that is objective and neutral with regards to natural refrigerants and non-natural refrigerants when it comes to their safety.

Need for financial incentives

shecco regrets that the Options Paper does not explore measures to encourage and help the HVACR industry transition to low or zero GWP refrigerant technology through incentives. Ultimately, it is the HVACR industry and their customers who will have to bear the costs for adapting to new refrigerants


and finding new technical solutions. A clear and ambitious regulatory environment would stimulate innovation while rewarding those that have already taken the necessary steps in the right direction.

End-user acceptance is a challenge that the industry is facing when introducing new technologies in the market. In particular, cost plays an important role in the selection of any given technology from a consumer perspective. There is a risk that short-term solutions are adopted, which in the long-term do not provide the benefit of low GWP and high-energy efficiency.

Companies working with natural refrigerants make huge investments into innovation. New technology usually has a higher cost than conventional systems before it reaches higher production levels. While industry attracts a few early adopters, the most difficult step is to convince the rest of the market. Customers and end-users often acquire short-term solutions just by looking at acquisition costs.

The early introduction of natural refrigerant technologies should be supported and incentivised. It is especially small and medium-sized companies that require incentives: these could be tied to energy efficiency and a low-GWP threshold limit.

Training is a barrier for natural refrigerant uptake

Lack of training is a key barrier for a wider uptake of natural refrigerants. Training on natural refrigerants takes substantial amounts of time and support from the government is needed.

Skilled personnel are essential in ensuring the safe handling of natural refrigerants and a smooth transition to the low-carbon economy: natural refrigerants have different characteristics, system layouts, components and servicing practices. Lack of knowledge among technicians on how to handle these refrigerants poses a serious barrier to greater market uptake of natural refrigerant technologies. The government has a role in taking the responsibility in incentivising industry to undertake training on natural refrigerants through financial or non-financial incentives.

It is important that the promotion of natural refrigerants and the incentives for training are implemented at the same time. If there are no products in the market, the knowledge does not reach service people and engineers, and they do not have motivation to acquire new skills. On the other hand, if there are products in the market but retailers and installers do not have the necessary knowledge, then they do not sell those products.


About shecco

For the past 15 years market accelerator shecco has been active in helping bring climate friendly technologies faster to market. shecco supports over 150+ partners worldwide in the HVAC&R sector, where the focus is on sustainable refrigeration, heating & cooling technologies using natural refrigerants. shecco offers a variety of services in three areas: 1) media, including online industry platforms, magazines and a catalogue of dedicated research reports; 2) market development, including market research, consultancy and public affairs services, as well as special international projects; and 3) events, including international conferences and national workshops.

For more information, please contact:

Marc Chasserot

Managing Director

shecco

[email protected]

Tel: +1 (917) 724-7813

Klara Skacanova

Deputy Manager - Market Development

shecco

[email protected]

Tel: +32 2 230 3700

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