Incentives and HFC-phase down: what are the most efficacious options?

At the meeting in December of the American Geophysical Union (AGU), glaciologists released some alarming observations: the Antarctic Thwaites glacier is torn by cracks and risks of crumbling completely at time intervals estimated from 5 to 10 years. The news is alarming because this glacier – more or less, as big as Florida – contains enough water to raise sea levels around the world by about half a meter.  Already today, the melting of the glacier contributes to 4% of the current annual rise in sea level. Not fortuitously, this glacier is also called “Doomsday glacier”. As reported by the foreign press, Thwaites is worrying but there are many other large glaciers in Antarctica that retreat, thin and melt as the Antarctic Ocean is warming. Many are held back because Thwaites acts as a buffer. If Thwaites collapsed, scientists believe that the melting process will accelerate for others as well, leading to the collapse of the entire ice sheet and to the catastrophic global sea level rise by several metres. If this happened, there would be no coastal city in the world that, over time, would not be submerged, with a disastrous cost for life and economies. A scenario from Armageddon!

Again, prevention is better than cure: nobody has calculated what the described scenario can mean in terms of costs, but catastrophes in Summer 2021 in Europe should help you to do the math.

Main tasks for the cold sector
Each sector must play its part in the climate protection and this fundamentally results in two measures for the cold industry: increasing appliances’ energy efficiency and decreasing refrigerants’ direct emissions.

If the energy efficiency matter can be notably aided by a rise of the share of renewable energies in the energy mix – keystone for the battle against the climate change – to decrease direct emissions, on the contrary, the only solution is acting on refrigerants, eliminating or drastically decreasing those whose GWP is medium or high and shifting to solutions with zero, or almost, GWP.

HFC emissions increase
The Kigali Amendment to Montreal Protocol and the European F-gas Regulation have made great strides towards this direction, but the efficacy of these decisions resides in finding the most suitable tools for implementing them. In fact, despite the awareness of refrigerants’ climatic impact, of the need of reducing them and in spite of the efforts made until now to manage that, today in some Countries the emissions of HFC are increasing. Italy and Japan are an example of it. In Europe, according to the last EEA report, in 2020 their consumption rose by 7% compared to 2019, therefore an additional 7% has been placed in circulation, whereas the trend should be the opposite.

Speeding up the transition
Both the F-gas Regulation for Europe and the Amendment of Kigali for all signatory Countries provide for precise time schedules of gradual HFC reduction. According to Kigali, the decrease will start in 2024 for many Countries, for others in 2028, for others it has already started. The licit question we might ask is why not starting before and more intensely wherever it is possible? «Starting the HFC decrease before would be a benefit for the environment but probably also for the economy», states Irene Papst, from HEAT GmbH in a side event to COP26 organized by the Green Cooling Initiative, European initiative for sustainable cold. Starting before the phase-down would have numerous advantages that Papst lists as follows:

• It would avoid the need of carrying out too many conversions among different molecules, directly shifting to new refrigerants;
• It would avoid a further accumulation of HFC on the market, in the appliances that contain them;
• It might exploit positive synergies with energy efficiency policies;
• The accelerated phase-down in those sectors that today already rely on technological alternatives might leave availability of HFC for those sectors that instead have no alternatives at disposal.

Measures to support the transition
To be efficacious and fast, the phase-down must be necessarily supported by political and market instruments. During the side event to COP 26, they analysed possible instruments to favour the phase-down of HFC and they highlighted incentive and disincentive measures, which will not be efficacious if they do not take place in a suitable context, which needs:

• Skilled technicians’ will of operating with the alternatives that must be diffused and able to recover correctly refrigerants at their life end, to avoid they are dispersed into the environment;
• The presence of certification and qualification schemes for the technicians entrusted with operating on plants;
• Suitable industrial and safety standards that provide reasonable guidelines and in conformity with technology developments, especially for flammable refrigerants.

We would like to complete these items as follows:

• The existence of a coordinated collection and recovery system of the refrigerant, key to facilitate a circular economy of the same. Relying on skilled technicians for the machine refrigerant recovery is not sufficient if they do not know where they can deliver it or if it has unrealistic economic and bureaucratic costs;
• The need of introducing sound control instruments so that the measures chosen are really implemented, so that it is possible to fight illegal markets and to find effective deterrents to illegal trafficking.

Incentive measures: they are all those measures that aim at favouring the affirmation of alternatives to traditional refrigerants. Among them:

• Tax exemption on the import of alternative refrigerants, especially natural ones with very low costs of life end treatment;
• Incentives for the installation of plants with alternatives to HFC, especially for highly performing ones from the energy point of view;
• Green Public Procurement that favours the solutions with alternatives to HFC;
• Market mechanisms like those at the Article 6 of Paris Agreement that might be applied also to HFC, for instance in terms of “scraping” of old appliances and replacement with new efficient models and low-impact refrigerants, correct recovery of refrigerants at life end and so on.

Disincentive measures: they are all those measures that discourage the use of appliances with HFC. Among them:

• Prohibition on certain refrigerants in determinate applications, wherever alternatives are available;
• Limit to the placing on the market of HFCs (Cap and Trade);
• Taxes on the import of HFC, both in bulk and in appliances;
• Taxes for the refrigerant treatment at life end;
• Tax refunds to encourage the correct recovery of HFC from plants;
• Mandatory documentation for any appliance containing HFC;
• Obligation of assuring the tightness of plants and of limiting losses;
• Agreements with public and private banks to limit the financing to plants containing HFC.

The unique solution does not exist
The choice of measures depends on the situation of the Country at stake. «Different situations need different measures» Papst states. The Countries that produce refrigerants, for instance, will have to focus on measures to favour a reconversion of productions.

Strong incentives for the solutions with low GWP would be necessary for the Countries that import refrigerants. Concerning the nations that manufacture machines and plants, in addition to the benefits for the release on the market of solutions with low GWP, it would also be necessary to aim at creating a market for such solutions, starting for instance from Green Public Procurement mechanisms and boosting the solutions with low GWP.

Irrespective of the measures that we choose, they must become a guide for the market. It must be clear what long-term consequences will derive from the choices made today; we must made possible alternatives and their benefits known; finally, all political measures must be easily communicated, understood and implemented.

Incentives and disincentives all over the world

Norway: taxes on HFC
In Norway many HFC and PFC are taxed, both if they are imported and if they are produced in the Nation. The tax is based on the GWP value of molecules and for 2021 it amounts to 6 Euro cents per Kilo of CO₂ equivalent.

The tax concerns:

• The import and production of pure gases in bulk or contained in pre-charged appliances and the import of all mixtures of HFCs and PFCs;
• The tax is not applied on HFCs or PFCs that are recycled
• If the HFCs or PFCs are delivered again to a recycling or elimination structure, the tax is given back to the structure itself.

Denmark: emission reduction
Denmark as well applies some taxes on HFC according to their GWP. These taxes were introduced in 2001, increased on July 1^st 2021 and will remain unchanged for at least the whole 2022.

France: taxes on HFC and incentives for alternative solutions
In France, there are both incentive and disincentive measures. Since January 1^st 2021, a law has been in force, according to which:

• A tax on HFC will be applied starting from 2023, from which recycled or regenerated refrigerants, then reintroduced on the market, are excluded. This tax is applied to the HFC produced or imported in France, in raw form or pre-charged in appliances. It is due by the person that carries out the first delivery of HFC on the market of France and it is paid to fiscal services. The tax amount is progressive and subdivided according to the following scheme:
  1. 2023: 15€/Teq CO₂
  2. 2024: 18€/Teq CO₂
  3. 2025: 22€/Teq CO₂
  4. 2026: 26€/Teq CO₂
  5. 2027: 30€/Teq CO₂

The target of the increase of HFC cost starting from 2023 is encouraging users to replace their plants with more environment-friendly solutions and appliances.

• Until 2023 and since January 1^st ° 2019 there are tax breaks for companies when they buy refrigerating and air conditioning machines, or heat pumps without HFC. Companies can deduct from their taxable income an amount corresponding to 40% of the original value of all HFC-free refrigeration and air conditioning appliances. Moreover, a system of energy certificates subsidizes energy efficiency projects. The upgrading of refrigerating appliances can be part of a more global project of energy management and allow benefitting from these subsidies. Among the measures that are considered to improve the energy efficiency of the plant, there are, just to make an example, the use of electronic valves, a regulation system that allows achieving a floating pressure, systems of heat recovery from cold production groups.

European Union: limit to the placing on the market and prohibitions of use
The 517/2014 regulation represents the European solution for the reduction of HFC.

It is a mixed disincentive system because it provides for:

• A “cap and trade” system based on the system of shares, according to which each producer and importer can yearly release on the market just a certain quantity of HFC, depending on the share due to them. Shares include also the quantities of HFC contained in pre-charged appliances.
• A system of HFC use prohibition for various applications. Prohibitions become effective in a fathomed way. Since January 1^st 2022, for instance, it is forbidden the use of HFC with GWP 150 in commercial appliances and freezers such as displays, bottle coolers, etc., as well as in multipack control units with capacity exceeding 40kW.

N.B: this Regulation is now under review. We do not know how the new will be, yet (State: January 2022)

Germany: incentives for solutions with natural refrigerants
In the national panorama for the climate protection, Germany provides for some incentives for the installation or the retrofit of fixed commercial refrigeration plants, of heat pumps and, since 2020, also for conditioning plants of buses and trains that

• Use halogen-free refrigerants
• Are designed to be highly efficient, in other words use measures or components that increase their efficiency, provided that they are subjected to energy monitoring for 5 years Among the measures considered for efficiency, there are, for instance, the use of covers or doors for refrigerated furniture, the use of LED lights, the defrost possibility on demand, the capacity control, the heat recovery, the coupling with renewable sources and so on.

Austria: incentives for efficiency and natural refrigerants
The Austrian Government provides funding for the purchase of plug-in refrigerators and freezers for commercial use, energy-efficient, contained in the list www.topprodukte.at or able to satisfy the “top products” criteria defined by the Ministry.  The grant is paid in a lump sum, depending on the type of device, and is limited to 30% of purchase costs. Investment costs for a loan application must amount to at least 2,000 Euros. All companies, the other entrepreneurial organizations, confessional associations and institutions can participate.

Poland: F-gas data bank
To satisfy the demands of the F-gas regulation about the reduction of plant losses, Poland has created a centralized register for plant operators where it is compulsory to register electronically all the activities carried out on plants with over 5 tons of eq. CO₂ of F-gas (and with ODS). In this data bank, are registered all operations carried out on plants, from installation to maintenance, repair, loss control, refrigerant recovery and plant dismantling.

Italy: F-gas data bank
A system resembling the Polish one can be found also in Italy where, since September 25^th 2019, the F-gas data Bank is in operation. To collect the information contained in the registers provided for by the European Union’s regulation 517/2014, the sales of greenhouse-effect fluorinated gases and of appliances containing such gases, as well as the activities of service, maintenance, repair and dismantling of such appliances, are communicated electronically to the Bank. Each activity of installation, loss control, maintenance, repair and dismantling must be registered in the website within 30 days from its execution. The rule is valid for any typology pf plant or appliance, irrespective of the quantity of fluorinated gas. The installer technicians of F-gas plants must input in the new platform the data concerning interventions on:

• Air conditioning and refrigeration plants containing F-gas
• Fixed plants with heat pump;
• Appliances for the fire protection;
• Cold storage of trucks, lorries and trailers;
• Electrical switches

Seychelles: staggered withdrawal schemes
Since February 2021, the State of Seychelles Islands has applied a staggered percentage withdrawal scheme on the import value of refrigerants – both in cylinders and in appliances – with GWP exceeding 100. Specific taxes for import are applied on them, too. Taxes and withdrawals increase with the GWP rise. Only the refrigerants with GWP under 100 are free from both tax and withdrawals.

Thailand: aid for production conversion
In Thailand, RAC NAMA financial aid project, supported also by foreign funds such as GIZ Proklima, provides technological and financial support for the conversion of production lines to the use of natural refrigerants. Moreover, it facilitates the transfer of competences for the use of such refrigerants. The focus is on commercial plug-in refrigeration, split conditioners and mini chillers. It is not a Statal programme but an international cooperation programme that however succeeds in achieving results in the direction of discouraging the use of HFC.