AIM Act and the EPA’s 2022 technical transition

The U.S. Environmental Protection Agency (EPA) held a refrigerant technical transition meeting in December 2022 to discuss the latest updates to their regulatory responsibility resulting from the 2020 AIM Act.

During the call, the EPA referenced industry trends related to refrigerants and their environmental impact; this meeting brought together key stakeholders, including industry leaders, government officials, and environmental organizations, to address the challenges and opportunities arising from the ongoing transition to climate-friendly refrigerants.

In December 2022, the EPA’s refrigerant technical transition meeting marked the beginning of Phase 2 in the 3-phase process, signaling a pivotal shift towards lower GWP refrigerants and demonstrating our commitment to a more sustainable, environmentally responsible cooling future.

The American Innovation and Manufacturing, or AIM Act, is a U.S. legislation — bipartisan in the United States Senate, which can feel rare these days — that aims to phase down the production and consumption of hydrofluorocarbons (HFCs), which are potent greenhouse gases used in refrigeration and air conditioning. By providing a framework for an orderly transition to climate-friendly alternatives, the AIM Act seeks to reduce HFC emissions and contribute to global climate change mitigation efforts. The EPA action consists of three phases designed to facilitate a responsible and gradual transition towards more environmentally friendly refrigerants:

1. Phase 1 (in place) is Regulatory Review and Preparation: This phase focused on evaluating existing refrigerant regulations and identifying 18 high GWP refrigerants slated for phase-down. The EPA established an HFC allowance allocation and trading system, including allowances for six specific applications listed in the AIM Act. These allowances are based on the “exchange values” of HFCs, as defined in the Act, which correspond to their 100-year GWPs. To produce or import bulk HFCs, companies must obtain the necessary allowances, ensuring that the industry moves towards more sustainable and eco-friendly refrigerants.
2. Phase 2 (in progress) is Transition to Lower GWP Refrigerants: This phase embodies the real-world transition towards embracing lower GWP refrigerants across different industries. It involves putting new policies, regulations, and incentives in place to motivate manufacturers, operators, and service personnel to adopt eco-friendly refrigerants, while gradually reducing the usage of high GWP substances. This critical stage ensures that the industry progresses towards more sustainable and climate-friendly refrigeration and air conditioning solutions. You can think of this as the innovation and manufacturing aim of the AIM Act, and/or the area where next generation technologies start evolving faster. Phase 2 could be responsible for some ESG-related economic growth, which would be a nice win.
3. Phase 3 (Pending) is Refrigerant Leak Prevention through Regular Maintenance: This phase will include registration, recordkeeping, reporting and recycling of HFCs and will expand upon similar rules to EPA 608 that presently apply to Ozone Depleting Substances, with responsibilities like chronically leaky, leak inspection requirements and even a few possible new items that EPA has been talking about for a few years.  But we won’t know exactly for a few months. (We will keep you updated.)

 

A refresher on the AIM Act and the “phase down”

As a refresher, Phase 1 was the HFC refrigerant phase down. Congress mandated the EPA complete and communicate this plan within 270 days of the signing of the AIM Act, so the EPA by September 2021 had released the following schedule:

• EPA has reduced access to HFCs by 10% and the most dramatic reduction in access to material will occur in 2024.
• The 2024 reduction will remain place until 2030.
• The EPA uses a confusing formula based on CO2 emissions to determine quantities.
• For instance, R-125 and R-134a have different GWP values:

 

 
Therefore, EPA has set the max limit for 2023 at 303 million Metric Tons of CO2e of any combination of the entire HFC list of refrigerants.  The EPA is leaving it up to the market to determine the right mix of refrigerants.  In 2024, the limit will drop to 205 million metric tons of CO2e.  if you want to have some fun, try out the EPA’s allowance calculator and plug in various values to see how they affect the carbon balance sheet for your potential use or allocation.

This is a complicated issue with many moving parts, but at its core, there is a simple problem that the industry faces: in the nearly 30 years since regulations went into place, the leak rates have gone up significantly and all the regulations, court cases, hard work and creative workarounds are reducing emissions or leading to better outcomes.
 

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As an industry we have forced Congress, the EPA, and environmental agencies to take more drastic actions.  And this Phase 2 of the AIM Act represents an important milestone in ending the Business-as-Usual Approach:

 

The AIM Act and the era of eco-friendly refrigerants

In November 2022, Phase 2 of the EPA’s rulemaking process, known as the Technology Transition Phase, began. Although the official name may not fully convey the EPA’s objective, this phase, which we refer to as “The Reduced Effect Phase,” focuses on establishing GWP limits for refrigerants, thereby driving the adoption of lower GWP alternatives and reducing the overall environmental impact of refrigeration and air conditioning systems.

Under the AIM Act, the Biden-Harris Administration initiated the HFC phasedown plan aimed at reducing HFC emissions by 40% below historical levels starting in 2025, with an ambitious goal of an 85% reduction by 2036. The proposed Phase 2 regulation will facilitate this comprehensive phase down by expediting the shift from HFCs in sectors where alternatives are accessible or being introduced, ultimately contributing to enhanced climate benefits and cost savings. The AIM Act helps, thusly, to usher in new eras of refrigerant and refrigeration equipment.

The 18 HFCs listed as regulated substances by the AIM Act are some of the most used HFCs and have high impacts as measured by the quantity emitted multiplied by their respective GWPs.

This Phase 2 is like a hyper-charged version of EPA controls commonly found in the SNAP, or the Significant New Alternatives Policy program, which evaluates and regulates substitutes for ozone-depleting substances, including refrigerants, to protect the environment and public health. By identifying and approving safer alternatives, the SNAP program promotes the transition to more environmentally friendly refrigerants and other substances in various industries.

The proposed rule-making is the result of many years of R&D and analysis by both the EPA and the impacted industry participants.  Last July the EPA published “Regulatory Impact Analysis for Phasing Down Production and Consumption of Hydrofluorocarbons (HFCs)” and the conclusion was that the industry would financially benefit from a rapid HFC phasedown when the Social Cost of Carbon is applied to the calculus for determining benefits.

That report serves as the backstop for EPA’s logic in determining the economic impacts from this transition to lower GWP refrigerants.  Essentially the 253-page report considers the cost to control, capture and destroy or manage the end of a refrigerants — and then offsets these costs with the environmental benefits.

Although the report was published in 2022, it builds on the results from a 2015 report presented to the IPCC, and it does incorporate recognized costs related to technical needs, the cost of leaks, energy consumption, efficiency, cost of refrigerant, capital expenses, abatement options and many other variables.

The December 2022 meeting marked the beginning of a multi-step process for reviewing and updating this EPA regulation. First, stakeholders were given until January 30, 2023, to submit their comments and feedback on the proposed changes. Following the comment period, the EPA now has a 90-day window to review the submitted comments, conduct internal meetings, and make any necessary updates to the regulations based on the feedback received. Once this review process is complete, the EPA will publish an updated notification, outlining the finalized changes to the regulations and any further steps required for implementation.

Basically, the EPA let the industry know that 2025 is the end of business as usual.

Starting in 2025 new equipment will have a limit on the type of allowable refrigerants with a cap of 700 GWP.  The detailed view of this regulation is more complicated and will require everyone from engineers, architects, maintenance, operations, and finance people to understand the new limits.

“The EPA’s message to the industry is clear: by 2025, business as usual will be a thing of the past, as new equipment will face a 700 GWP cap on refrigerants. This complex shift demands a united effort from engineers, architects, maintenance, operations, and finance professionals to adapt and embrace a more sustainable and compliant future together.”

 

 
If you live in California, Washington, or New York, you may already be familiar with the concept of GWP limits, but if you are new to this topic then you will need to polish up on your GWP or carbon literacy.

“Carbon literacy is the compass that guides you on our journey towards a compliant future, empowering individuals and organizations to make informed choices and take actions that encompass the full lifecycle needs, striking a balance between cost, environmental impact, and regulatory requirements.”

Consider this perspective: With just over 18 months to prepare, your organization faces a significant transition. As the industry typically replaces 5% of equipment annually, it means that in less than two years, 5% of your equipment will be based on new technology and refrigerants not currently in use, emphasizing the importance of adapting swiftly and efficiently to these changes.

(This is an important pause, too: one conventional argument against a plan to address HFCs or climate change work in general is a loss of manufacturing jobs. But with the increase need for new technologies in the space, we’ll actually see an intermediate-to-long-term growth in those jobs.)
 

What is the comprehensive impact of the AIM Act, then?

For over two decades, the HVAC industry has been largely defensive in response to EPA regulations. The initial focus on equipment with 50 lbs. or more of refrigerants reflected the era’s centralized cooling and larger systems. However, today’s trend towards smaller systems in buildings aims to stay below the 50 lb. threshold, showcasing the industry’s ongoing defensive posture towards regulatory requirements.

In my career we have solved the CFC and HCFC transition issues, but this transition is different. This new regulatory ERA has 5 unique challenges that the previous transitions did not:

1. The products being phased down, are also components in blends used in the next generation.  For instance, R-134a & R-125, are used in several next gen blends (448A, 449A, 464A etc.).  So, as we phase out the refrigerants, we continue to use them to solve tomorrow’s problems.
2. THE EPA is limiting the GWP in addition to shutting off access to phased out materials, the EPA is also controlling where, when, and how next gen refrigerants look.  Historically the EPA relied on the chemical producers to develop a solution leaving the market to creatively forge new paths.  Now the EPA is telling the market what it expects from these new chemicals.
3. States are increasingly taking the initiative to address gaps in the federal regulatory framework. As the EPA faces politicization, resulting in delayed or adjusted timelines for market engagement, states have come together through the US Climate Alliance to create their own policy development resource. By crafting new regulations tailored to their specific state needs, they are actively driving change to meet unique environmental and climate goals.
4. Shareholders are closely monitoring companies’ actions and exerting pressure to ensure responsible decision-making by demanding Environmental, Social, and Governance (ESG) reporting. This increased scrutiny reflects a growing awareness of the importance of sustainable business practices and a commitment to holding companies accountable for their environmental impacts.
5. EPA regulations are now extending their reach to target systems below the 50 lbs refrigerant threshold, while the SEC’s ESG reporting demands comprehensive disclosures that encompass a wider scope beyond the 50 lb refrigerant limit. This reflects a growing emphasis on sustainability and accountability in both environmental regulations and financial reporting.

 

One beauty of the AIM Act: Phasing out of obsolete refrigerants

Presently the three most common refrigerants that represent the bulk of market activity have a very high GWP (keep in mind that in 18 months these will no longer be available in new equipment):
 

 
EPA’s newest regulatory effort represents a new generation of refrigerants that we’ll call eco-friendly or “Class 6.” Here are the previous classes, as defined by Trakref unless otherwise noted:

1. Class 1 – High ODP CFCs (as defined by EPA)
2. Class 2 – Low ODP HCFCs (As defined by EPA)
3. Class 3- High GWP no ODP
4. Class 4 – Flammable, Low GWP and No ODP
5. Class 5 – Low GWP (Lower than class 3, R-448A, R-449A, )
6. Class 6 – Eco Friendly Refrigerants (GWP is equal to or lower than EPA requirements)
7. Class 7 – Natural Refrigerants (Includes Ammonia)

 

What are some examples of eco-friendly refrigerants?

 
The last 25 years can be best described as an intense commitment to solve the cooling problem but not the environmental problem.  The marketplace has been aware of the high GWP factor for HFC since they entered the market.

“The industry’s intense commitment to solving the cooling problem inadvertently placed emphasis on the wrong issue, neglecting the environmental problem. t’s crucial to refocus your efforts on the actual problem – addressing the environmental impact and adopting sustainable cooling solutions.”

Eco-friendly refrigerants are cooling substances with low environmental impact, are safe to use, no harm to the ozone layer and contribute less to global warming. These refrigerants typically have low Global Warming Potential (GWP, less than 700 GWP) and meet EPA thresholds as defined in the proposed rule, making them a more sustainable choice compared to traditional refrigerants like pure HFCs. Eco-friendly refrigerants help reduce greenhouse gas emissions and support a greener, more regulatory responsible approach to cooling and refrigeration systems.
 

What other forward pushes could the AIM Act spur in the industry?

Over the past 25 years, the market’s response to EPA regulations has been to develop and deploy equipment below the EPA reporting threshold (since less than 50 LB systems were less regulated), essentially sidestepping environmental responsibility. However, this short-sighted approach has led to increasing emissions and failed to address the underlying environmental concerns. As new regulations impact all equipment, the industry must reevaluate its priorities and shift from evasive tactics to a comprehensive strategy focused on genuinely reducing emissions and embracing sustainable cooling solutions.
 

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“New regulations demand fresh perspectives. Managing the complexities of these updated rules calls for a united effort from engineers, architects, maintenance, operations, and finance professionals. By working together, we can overcome the intricacies and successfully adapt to the new limits imposed on our industry. Resistance to change will only obstruct progress and impede your capacity to mature amidst these challenges.”

The transition to eco-friendly refrigerants will hasten the obsolescence of various refrigerant substances due to their environmental impacts. The EPA, empowered by the AIM Act, now exercises authority over HFC refrigerants, prompting the cooling industry to adopt more sustainable alternatives.

As a result, HFCs — alongside CFCs and HCFCs — have become obsolete refrigerants, signifying a major shift towards environmentally responsible cooling solutions in the industry.

So, in terms HFC refrigerants, we’d define obsolete refrigerants as substances being phased out, or already phased out, due to regulations that restrict their use, availability, and application. This transition is mandated by Congress, which has identified certain refrigerants as having harmful effects on the ozone layer and contributing to global warming. These refrigerants now include chlorofluorocarbons (CFCs), hydrochlorofluorocarbons (HCFCs), and hydrofluorocarbons (HFCs). Consequently, these substances are being replaced with greener alternatives to mitigate their adverse environmental impacts and adhere to both international and national regulations.

“Clutching onto your old business as usual habits in this regulatory driven marketplace is like holding on to a flip phone in a smartphone world: soon you’ll be as obsolete as the refrigerants you’re replacing.”

Phase 2 of the AIM Act ushers in extensive regulations affecting 100% of cooling equipment across the United States. These new measures will have far-reaching implications on training, maintenance, equipment choices, and even the fundamental approach to cooling, necessitating significant adjustments throughout the industry.
 

Has GWP now taken center stage because of the AIM Act?

Historically, refrigerant usage has been driven by two main factors: price and performance, with enthalpy representing the latter. Enthalpy, which describes the energy transfer during the cooling process, involves the absorption and release of heat by the refrigerant. However, the transition to eco-friendly refrigerants introduces a new consideration: Global Warming Potential (GWP). This additional factor emphasizes the importance of minimizing the environmental impact of refrigerants, marking a significant shift in the industry’s approach to cooling solutions.

“Regulations signal to the markets that we must go beyond price and performance and include Global Warming Potential (GWP) in our decision-making process. This shift ultimately provides a more accurate, view of a cooling system’s lifecycle impact on the the new bottom line”

Calculating, tracking, and managing the GWP of refrigerants will be a complex task, as many companies currently have limited or no refrigerant management in place. Although refrigerants have a relatively short atmospheric lifespan, they have a significant impact on the environment during their presence.

To better understand the implications of refrigerants on compliance policy development, sustainability and ESG reporting, keep checking this blog. This is our world.
 

Some additional AIM Act Phase 2 takeaways

1. The EPA emphasized the importance of continued collaboration among all stakeholders to ensure a successful transition to climate-friendly refrigerants while maintaining safety and efficiency standards.
2. Participants acknowledged the need for ongoing education and training to ensure technicians and industry professionals are well-equipped to handle new refrigerants and technologies.
3. The meeting highlighted the importance of developing and implementing policies and incentives to accelerate the adoption of low-GWP refrigerants and sustainable cooling technologies.

The EPA refrigerant technical transition meeting in December 2022 served as a valuable platform for discussing key challenges, opportunities, and progress in the refrigerant industry. By fostering collaboration and knowledge sharing among stakeholders, the event aimed to support the ongoing transition towards more sustainable and climate-friendly refrigeration and air conditioning solutions.

“A new calculus emerges in evaluating a cooling system’s impact on a business, transcending price and performance to include Global Warming Potential (GWP). This shift introduces a vital variable, offering a more comprehensive understanding of the system’s lifecycle impact on both business costs and operations.”

Trakref has been actively involved in supporting operational maturity by including changes to policy development so clients can deliver on regulatory and sustainability goals related to the refrigerant and HVAC/R management. During EPA refrigerant technical transition meetings over the past 3 years, Trakref has contributed to discussions on key challenges, opportunities, and advancements within the sector. By promoting collaboration and knowledge sharing among stakeholders, we remain committed to assisting the ongoing transition towards more sustainable and climate-friendly refrigeration and air conditioning solutions.

Moving forward, Trakref will continue to provide valuable resources, tools, and expertise to help companies navigate the complex regulatory landscape and adopt eco-friendly refrigerants. By offering comprehensive refrigerant management solutions, Trakref aims to empower organizations to comply with regulations, reduce their environmental impact, and optimize their operational efficiency in the evolving refrigerant industry.
 

So what should we expect from AIM Act Phase 3, then?

The 3rd and final phase of the rulemaking process will establish recordkeeping and reporting requirements, along with addressing other elements crucial to effectively implementing the American Innovation and Manufacturing Act.

This final phase will not be visible for at least six months. Meanwhile, the industry must actively participate, adjust its approach, and begin sharing experiences and best practices in adopting alternative refrigerants, retrofitting existing systems, and training technicians for the safe handling and disposal of refrigerants. This proactive engagement will be instrumental in facilitating a smoother transition towards sustainable and eco-friendly refrigeration and air conditioning solutions.

Everyone involved in the refrigerant industry should actively explore and adopt digital solutions to help fulfill the obligations associated with managing transactions for the 4 Rs of refrigerants: Recordkeeping, Reporting, Registration, and Recycling. Leveraging Trakref technology can streamline compliance efforts and ensure that industry standards are met efficiently and effectively. The increasing scope of regulations and responsibilities has outgrown traditional methods like work orders or Excel spreadsheets, making it essential to partner with a digital solution provider like Trakref to support your success in navigating these complex requirements.

“Dive into the digital wave and ride the ‘4 Rs’ of refrigerants – Recordkeeping, Reporting, Registration, and Recycling – with Trakref! Embrace technology for efficient, effective, and essential compliance, leveraging data from work orders while leaving spreadsheets in the past (where old refrigerants and ideas belong). Together, we’ll conquer the complexities of the ever-evolving refrigerant industry!”

 

Trakref will help with HFC phasedown

Scope 1 emissions reporting, ESG reporting in general, or social cause reporting are becoming more top-of-mind for companies, but it’s not fully there yet. Companies don’t know how to do it properly, and it falls into poorly-managed, poorly-contextualized processes that use old tech.

Ideally, what you want from any refrigerant management and Scope 1 emission reporting tool is:

• A way to see and understand the data
• Task management
• Some level of automation
• Clear reporting capabilities

There are more bells and whistles that help out, but those are the core things you need to effectively report Scope 1 emissions.
 

 

Here’s what Trakref can do:

Refrigerant tracking: Trakref provides a centralized platform for tracking refrigerant use across an organization. This includes tracking the amount of refrigerant used, refrigerant charge, air conditioning, liquid refrigerant, the location of each refrigerant-containing device, and the dates of any maintenance or service activities. By tracking refrigerant use in this way, Trakref can help organizations identify opportunities to reduce their refrigerant use and associated emissions. Think of us as your refrigerant charge BFF. We handle everything about the terms and conditions associated with refrigerant charge. We know all the regulations and protocols that are impacting refrigerant charge calculations in each area, and we bake that into our systems so that you don’t need to worry about it. You can focus on operations.
 

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Emissions calculations: Trakref can calculate an organization’s refrigerant-related emissions based on the type and amount of refrigerant used, as well as other factors such as equipment age and efficiency. These emissions can then be reported as part of the organization’s overall Scope 1 emissions.

Leak detection: Refrigerant leaks are a common source of emissions in many organizations. Trakref can help organizations detect and address refrigerant leaks quickly, reducing the amount of emissions released into the atmosphere.

Compliance tracking: Trakref can help organizations stay compliant with regulations related to refrigerant use and emissions, such as the Environmental Protection Agency’s (EPA) Refrigerant Management Program. By staying compliant with these regulations, organizations can avoid fines and penalties and demonstrate their commitment to sustainability and environmental responsibility. You can do this while keeping the air conditioning on, which is going to please your people.

Reporting: Trakref provides a range of reporting capabilities, including reports on refrigerant use, emissions, leak rates, and compliance. These reports can be used to inform decision-making and to demonstrate progress in reducing emissions and improving environmental performance.

Overall, Trakref can be an important tool for organizations looking to manage their Scope 1 emissions related to refrigerant use. By providing a centralized platform for tracking refrigerant use, detecting leaks, and calculating emissions, Trakref can help organizations reduce their environmental impact and meet their ESG goals.