The U.S. Environmental Protection Agency (EPA) recently issued a final rule to implement a 40% reduction below baseline levels of HFC production from 2024 through 2028. The rule aligns with the AIM Act, which was passed in December 2020 and gave the EPA the authority to phase down HFCs to 15% of their baseline levels by 2036.

The U.S. began the phasedown in 2022, with an initial 10% reduction in HFC production from the baseline level, while 2024 brings an additional 30% cut. The baseline was derived from the three highest nonconsecutive years of HFC production and/or import between 2011 and 2019. 

This final rule establishes the methodology for allocating HFC production and consumption allowances, starting with calendar year 2024 allowances. Companies that produced or imported bulk HFCs in 2021 and 2022 are eligible for allowances in 2024 through 2028. According to EPA, the methodology will be similar to the approach used for calendar years 2022 and 2023, while incorporating former new market entrants from an earlier set-aside pool as general pool allowance holders. 

“This latest allocation rule is a critical step in the implementation of the AIM Act schedule for phasing down HFC refrigerants,” said Stephen Yurek, president and CEO of AHRI. “Our industry appreciates the work of the EPA and the timely issuance of this rule as we prepare for the next HFC reduction step-down next January.”

The final rule also amends the HFC consumption baseline to reflect corrected data submitted to EPA. Specifically, EPA is amending the consumption baseline from 303,887,017 Metric Tons of Exchange Value Equivalent (MTEVe) to 302,538,316 MTEVe to account for verified revisions from entities for 2011 through 2013, as well as the Agency’s internal review of baseline calculation methodologies.

EPA also recently finalized a good cause final rule that makes a minor adjustment to the production baseline and associated phasedown schedule. Specifically, EPA adjusted the baseline from 382,554,619 MTEVe to 382,535,439 MTEVe to reflect additional destruction and transformation of HFCs that occurred during 2011–2013. This corrected production baseline begins applying to allowance allocations for calendar year 2024.

Under the AIM Act, by October 1 of each calendar year, EPA must calculate and determine the quantity of production and consumption allowances for the following year. EPA will start using the approach established through this rulemaking to issue 2024 allowances by October 1, 2023.

EPA is planning two additional regulatory actions under the AIM Act in 2023. The first is a final rule placing restrictions on the use of HFCs in certain sectors to facilitate sector-based transitions to alternative chemicals, and the second is a proposed rule establishing certain requirements for the management of HFCs and HFC substitutes in equipment, such as air conditioners.