Rule2021-21030
Phasedown of Hydrofluorocarbons: Establishing the Allowance Allocation and Trading Program Under the American Innovation and Manufacturing Act
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
October 5, 2021
Effective
November 4, 2021
Issuing agencies
Environmental Protection Agency
Abstract
The Environmental Protection Agency is issuing regulations to implement certain provisions of the American Innovation and Manufacturing Act, as enacted on December 27, 2020. This Act mandates the phasedown of hydrofluorocarbons, which are highly potent greenhouse gases, by 85 percent over a period ending in 2036. The Act directs the Environmental Protection Agency to implement the phasedown by issuing a fixed quantity of transferrable production and consumption allowances, which producers and importers of hydrofluorocarbons must hold in quantities equal to the amount of hydrofluorocarbons they produce or import. To establish the allowance allocation program, this rulemaking determines the hydrofluorocarbon production and consumption baselines, from which allowed production and consumption will decrease consistent with the statutory phasedown schedule; provides an initial approach to allocating calendar-year allowances and allowing for the transfer of those allowances; establishes provisions for the international transfer of allowances; and establishes recordkeeping and reporting requirements. Additionally, it establishes provisions to support implementation, compliance with, and enforcement of, statutory and regulatory requirements under the Act's phasedown provisions. Over the time period from 2022-2050, this rulemaking will avoid cumulative emissions of 4,560 million metric tons of exchange value equivalent of HFCs in the United States with a present value of cumulative net benefits of $272.7 billion.
Full Text
<html>
<head>
<title>Federal Register, Volume 86 Issue 190 (Tuesday, October 5, 2021)</title>
</head>
<body><pre>
[Federal Register Volume 86, Number 190 (Tuesday, October 5, 2021)]
[Rules and Regulations]
[Pages 55116-55222]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-21030]
[[Page 55115]]
Vol. 86
Tuesday,
No. 190
October 5, 2021
Part II
Environmental Protection Agency
-----------------------------------------------------------------------
40 CFR Parts 9 and 84
Phasedown of Hydrofluorocarbons: Establishing the Allowance Allocation
and Trading Program Under the American Innovation and Manufacturing
Act; Final Rule
Federal Register / Vol. 86, No. 190 / Tuesday, October 5, 2021 /
Rules and Regulations
[[Page 55116]]
-----------------------------------------------------------------------
ENVIRONMENTAL PROTECTION AGENCY
40 CFR Parts 9 and 84
[EPA-HQ-OAR-2021-0044; FRL-8458-02-OAR]
RIN 2060-AV17
Phasedown of Hydrofluorocarbons: Establishing the Allowance
Allocation and Trading Program Under the American Innovation and
Manufacturing Act
AGENCY: Environmental Protection Agency (EPA).
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Environmental Protection Agency is issuing regulations to
implement certain provisions of the American Innovation and
Manufacturing Act, as enacted on December 27, 2020. This Act mandates
the phasedown of hydrofluorocarbons, which are highly potent greenhouse
gases, by 85 percent over a period ending in 2036. The Act directs the
Environmental Protection Agency to implement the phasedown by issuing a
fixed quantity of transferrable production and consumption allowances,
which producers and importers of hydrofluorocarbons must hold in
quantities equal to the amount of hydrofluorocarbons they produce or
import. To establish the allowance allocation program, this rulemaking
determines the hydrofluorocarbon production and consumption baselines,
from which allowed production and consumption will decrease consistent
with the statutory phasedown schedule; provides an initial approach to
allocating calendar-year allowances and allowing for the transfer of
those allowances; establishes provisions for the international transfer
of allowances; and establishes recordkeeping and reporting
requirements. Additionally, it establishes provisions to support
implementation, compliance with, and enforcement of, statutory and
regulatory requirements under the Act's phasedown provisions. Over the
time period from 2022-2050, this rulemaking will avoid cumulative
emissions of 4,560 million metric tons of exchange value equivalent of
HFCs in the United States with a present value of cumulative net
benefits of $272.7 billion.
DATES:
Effective dates: This rule is effective on November 4, 2021, except
for amendatory instruction 3 adding 40 CFR part 84, which is effective
on October 5, 2021.
Operational dates: For operational purposes under the American
Innovation and Manufacturing Act of 2020 (AIM Act or the Act), the
regulatory text established in amendatory instruction 3, is operational
as of September 23, 2021, and effective as of October 5, 2021. The
remainder of this rule, and its associated regulatory text outlined in
amendatory instructions 1, 2, and 4 through 10, is effective November
4, 2021.
ADDRESSES: EPA has established a docket for this action under Docket ID
No. EPA-HQ-OAR-2021-0044. All documents in the docket are listed on the
<a href="http://www.regulations.gov">http://www.regulations.gov</a> website. Although listed in the index, some
information is not publicly available, e.g., Confidential Business
Information (CBI) or other information whose disclosure is restricted
by statute. Certain other material, such as copyrighted material, is
not placed on the internet and will be publicly available only in hard-
copy form. Publicly available docket materials are available
electronically through <a href="http://www.regulations.gov">http://www.regulations.gov</a>.
FOR FURTHER INFORMATION CONTACT: Andy Chang, U.S. Environmental
Protection Agency, Stratospheric Protection Division, telephone number:
202-564-6658; email address: <a href="/cdn-cgi/l/email-protection#b3d0dbd2ddd49dd2ddd7caf3d6c3d29dd4dcc5"><span class="__cf_email__" data-cfemail="42212a232c256c232c263b022732236c252d34">[email protected]</span></a>. You may also visit
EPA's website at <a href="https://www.epa.gov/climate-hfcs-reduction">https://www.epa.gov/climate-hfcs-reduction</a> for further
information.
SUPPLEMENTARY INFORMATION: Effective dates: Portions of this rule are
effective less than 30 days from publication in the Federal Register.
Section 553(d) of the Administrative Procedure Act (APA), 5 U.S.C.
chapter 5, generally provides that rules may not take effect earlier
than 30 days after they are published in the Federal Register. As
further discussed in Section II.B, this rule is covered by the
rulemaking procedures in section 307(d) of the Clean Air Act (CAA). See
CAA section 307(d)(1)(I); AIM Act subsection (k) (providing that
section 307 of the CAA ``shall apply to . . . any rule, rulemaking, or
regulation promulgated . . . pursuant to the [AIM Act] as though [the
AIM Act] were expressly included in title VI'' of the CAA). Section
307(d)(1) of the CAA states that: ``The provisions of section 553
through 557 . . . of Title 5 shall not, except as expressly provided in
this section, apply to actions to which this subsection applies.''
Thus, section 553(d) of the APA does not apply to this rule. EPA is
nevertheless acting consistently with the policies underlying APA
section 553(d) in making a portion of the revisions finalized in this
rule effective immediately, while the remainder of the rule will be
effective 30 days after publication. The purpose of the general rule in
section 553(d) of the APA that 30 days must be provided between
publication and the effective date is to ``give affected parties a
reasonable time to adjust their behavior before the final rule takes
effect.'' Omnipoint Corp. v. Fed. Commc'n Comm'n, 78 F.3d 620, 630
(D.C. Cir. 1996); see also United States v. Gavrilovic, 551 F.2d 1099,
1104 (8th Cir. 1977) (quoting legislative history). Accordingly, in
determining if there is ``good cause'' to forgo the 30-day delayed
effective date per the exception at section 553(d)(3), an agency should
``balance the necessity for immediate implementation against principles
of fundamental fairness which require that all affected persons be
afforded a reasonable amount of time to prepare for the effective date
of its ruling.'' Gavrilovic, 551 F.2d at 1105. Here, EPA has determined
that the portions of this rule that are effective less than 30 days
from publication in the Federal Register are not binding on any third
parties, and therefore the above-stated purpose of the 30-day effective
date delay is not relevant to the consideration here. The provisions of
the rule taking immediate effect are only binding on the Agency in how
it will determine allowance allocations, and the AIM Act establishes a
deadline for these determinations, namely that by October 1 of each
calendar year EPA must calculate and determine the quantity of
production and consumption allowances for the following year. In
addition, having these provisions become operational immediately upon
signature will allow EPA to make determinations regarding allowance
allocations earlier than if the effective date were delayed, which in
turn will facilitate earlier notification to regulated entities about
what their allowance allocation will be and provide them more time to
plan accordingly. Thus, EPA's action is consistent with the APA's
provision for an effective date of less than 30 days where an agency
demonstrates good cause to do so.
Accordingly, it is in keeping with the policy underlying the APA
for regulatory text in 40 CFR 84.3, 84.7, 84.9, 84.11, 84.13, 84.15,
and 84.31(h)(2) and (3), to take effect immediately. Finally, this rule
undertaken in accordance with section 307(d) of the CAA is promulgated
upon signature and widespread dissemination. For operational purposes
under the AIM
[[Page 55117]]
Act, EPA is making the regulatory text established in 40 CFR 84.3,
84.7, 84.9, 84.11, 84.13, 84.15, and 84.31 (h)(2) and (3) operational
as of September 23, 2021, which is the date of signature.
Acronyms and Abbreviations. Throughout this document, whenever
``we,'' ``us,'' ``the Agency,'' or ``our'' is used, we mean EPA.
Acronyms that are used in this rulemaking that may be helpful include:
AD/CVD--Anti-Dumping/Countervailing Duties
AIM Act--American Innovation and Manufacturing Act of 2020
ANPRM--Advanced Notice of Proposed Rulemaking
APA--Administrative Procedure Act
CAA--Clean Air Act
CBI--Confidential Business Information
CBP--Customs and Border Protection
CFC--Chlorofluorocarbon
CO<INF>2</INF>--Carbon Dioxide
CVD--Chemical Vapor Deposition
DRE--Destruction and Removal Efficiency
ECHO--Enforcement and Compliance History Online
e-GGRT--Electronic Greenhouse Gas Reporting Tool
EFCTC--European FluoroCarbons Technical Committee
EPA--Environmental Protection Agency
EVe--Exchange Value Equivalent
GHG--Greenhouse Gas
GHGRP--Greenhouse Gas Reporting Program
GWP--Global Warming Potential
HCFC--Hydrochlorofluorocarbon
HFC--Hydrofluorocarbon
HFO--Hydrofluoroolefin
IPCC--Intergovernmental Panel on Climate Change
IWG--Interagency Working Group
MDI--Metered Dose Inhaler
MMTCO<INF>2</INF> eq--Million Metric Tons of Carbon Dioxide
Equivalent
MMTEVe--Million Metric Tons of Exchange Value Equivalent
MT--Metric tons
MTCO<INF>2</INF> eq--Metric Tons of Carbon Dioxide Equivalent
MVAC--Motor Vehicle Air Conditioning
NAICS--North American Industry Classification System
NATA--National Air Toxics Assessment
NODA--Notice of Data Availability
NPRM--Notice of Proposed Rulemaking
NRC--National Research Council
ODP--Ozone Depletion Potential
ODS--Ozone-Depleting Substances
RACA--Request for Additional Consumption Allowance
RIA--Regulatory Impact Analysis
RSEI-GM--Risk-Screening Environmental Indicators Geographic
Microdata
SC-GHG--Social Cost of Greenhouse Gases
SC-HFCs--Social Costs of Hydrofluorocarbons
TRI--Toxics Release Inventory
TSCS--Toxic Substances Control Act
UNFCCC--United Nations Framework Convention on Climate Change
USGCRP--United States Global Change Research Program
WMO--World Meteorological Organization
This supplementary information section is arranged as follows:
I. Executive Summary
A. Purpose of the Regulatory Action
B. Summary of the Major Provisions of the Regulatory Action
C. Costs and Benefits
II. General Information
A. Does this action apply to me?
B. What is the Agency's authority for taking this action?
III. Background
A. What are HFCs?
B. How do HFCs affect public health and welfare?
IV. How is EPA considering environmental justice?
V. What definitions is EPA establishing to implement the AIM Act?
VI. How is EPA establishing the HFC production and consumption
baselines?
A. What are the components of the production and consumption
baselines?
1. How is EPA determining the HFC component of the production
and consumption baselines?
2. What is the HFC component of the production and consumption
baselines?
3. What are the HCFC and CFC components of the production and
consumption baselines?
B. What are the final HFC production and consumption baselines?
VII. How is EPA establishing allowances?
A. What is an allowance?
B. How is EPA determining allowance allocations?
1. Which years is EPA issuing allowances for?
2. Which companies is EPA issuing allowances to?
3. What is EPA's framework for determining how many allowances
each company receives?
4. What is EPA's framework for issuing allowances?
5. What process is EPA using to respond to requests for
additional consumption allowances?
C. What is the process for issuing application-specific
allowances?
1. Who is EPA issuing application-specific allowances to?
2. How is EPA addressing transfers of application-specific
allowances?
3. What criteria is EPA using to evaluate application-specific
allowance requests?
4. How is EPA issuing application-specific allowances for
mission-critical military end uses?
D. What are the provisions for transferring allowances?
E. How is EPA establishing the set-aside pool of allowances?
1. Who is eligible for allowances in the set-aside pool?
a. Application-Specific End Users
b. Previously Unidentified Importers
c. New Market Entrants
d. Suggested Additional Entities Eligible for Set-Aside
Allowances
2. How large is the set-aside pool, and what are the applicable
limits for applicants?
3. How will transfers and unused allowances be treated in the
set-aside pool?
4. What is the deadline to apply for allowances from the set-
aside pool, and what information is required?
VIII. What other elements of the AIM Act is EPA addressing in this
rulemaking?
A. How is EPA addressing international trades or transfers of
HFC allowances?
B. What HFC destruction technologies is EPA approving?
C. What is EPA requiring for HFC-23 emission controls?
IX. What enforcement and compliance provisions is EPA finalizing?
A. What potential administrative consequences are available to
EPA with respect to allowances?
1. What are the administrative consequences?
2. What action could merit an administrative consequence?
3. How would EPA apply the administrative consequences?
4. What is the process for notifying and responding to proposed
administrative consequences?
B. How is EPA transitioning to refillable cylinders?
1. Background
2. What is EPA's authority for prohibiting disposable cylinders?
3. How is EPA implementing the transition to refillable
cylinders?
4. What are the costs of prohibiting disposable cylinders?
5. What are the additional benefits of transitioning to only
refillable cylinders?
6. How is EPA responding to public comments?
7. Treatment of Small Cans With Self-Sealing Valves
8. Compliance Dates
C. What are the labeling requirements?
D. What is EPA requiring for auditing?
E. Petitions To Import HFCs as a Feedstock or for Destruction
F. What other limitations are there on imports of HFCs?
1. Ban on Importing Feedstock HFCs in Cylinders
2. Imports of Heels
3. Transhipments
G. How is EPA tracking the movement of HFCs?
H. What reporting is required to support real-time review of
imports?
X. What are the recordkeeping and reporting requirements?
A. What are the generally applicable recordkeeping and reporting
provisions?
B. How is EPA responding to comments on the proposed
recordkeeping and reporting provisions?
C. How will EPA treat HFC data collected under the AIM Act?
1. Which specific data elements are not entitled to confidential
treatment?
2. Which data elements has EPA determined are entitled to
confidential treatment?
3. How will EPA aggregate data for release?
XI. What are the costs and benefits of this action?
XII. Statutory and Executive Order Review
[[Page 55118]]
I. Executive Summary
A. Purpose of the Regulatory Action
EPA is issuing regulations to implement certain provisions of the
American Innovation and Manufacturing (AIM) Act, as enacted on December
27, 2020. The Act mandates the phasedown of hydrofluorocarbons (HFCs),
which are highly potent greenhouse gases (GHGs), by 85 percent over a
period ending in 2036. The Act directs EPA to implement the phasedown
by issuing a fixed quantity of transferrable production and consumption
allowances, which producers and importers of HFCs must hold in
quantities equal to the amount of HFCs they produce or import. To
establish the allowance allocation program, this rulemaking establishes
HFC production and consumption baselines, codifies the statutory
phasedown schedule of allowed production and consumption relative to
the baseline level, provides an initial approach to allocating
calendar-year allowances and allowing for the transfer of those
allowances, establishes provisions for the international transfer of
allowances, and establishes recordkeeping and reporting requirements.
Additionally, it establishes provisions to support implementation,
compliance with, and enforcement of, statutory and regulatory
requirements under the AIM Act's phasedown provisions.
The AIM Act directs EPA to issue a final rule accomplishing these
Congressionally directed tasks by September 23, 2021. Additionally,
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 intends to issue allowances for
the 2022 calendar year no later than October 1, 2021, using the
procedure established through this rulemaking, and intends to issue
individual allowances for the 2023 calendar year no later than October
1, 2022, using the procedure established through this rulemaking.
The AIM Act further directs EPA to issue a final rule by September
23, 2021, governing the transfer of production and consumption
allowances. The AIM Act also directs EPA to issue regulations by
December 27, 2021, related to the international transfer of production
allowances. This final rule addresses these statutory directives as
well.
B. Summary of the Major Provisions of the Regulatory Action
Baselines: This rule establishes the HFC production and consumption
baselines from which the phasedown steps are measured. Using the
equation provided in the AIM Act, and based on the data available to
the Agency through the Greenhouse Gas Reporting Program (GHGRP) and
outreach conducted for this rulemaking, EPA determines that the
production baseline is 382.6 Million Metric Tons of Exchange Value
Equivalent (MMTEVe) and the consumption baseline is 303.9 MMTEVe.
Allocation: The total annual allocations for 2022 and 2023 are
344.3 MMTEVe of production allowances and 273.5 MMTEVe of consumption
allowances. EPA intends to issue allowances for 2022 by October 1,
2021, according to the framework and procedure established through this
rulemaking. Company production and consumption allowance allocations
are based on the three highest years (not necessarily consecutive) of
production or consumption between 2011 and 2019. EPA is issuing
allowances to active HFC producers and importers operating in 2020 and
is giving individualized consideration to circumstances of historical
importers that were not active in 2020. EPA is establishing the
allowance allocation framework for two years and intends to undertake a
subsequent rulemaking to govern allocations for calendar years 2024 and
beyond.
Application-specific Allowances: EPA is issuing ``application-
specific allowances'' to end users in six applications established by
the AIM Act: Propellants in metered dose inhalers (MDIs), defense
sprays, structural composite preformed polyurethane foam for marine use
and trailer use, etching of semiconductor material or wafers and the
cleaning of chemical vapor deposition (CVD) chambers within the
semiconductor manufacturing sector, mission-critical military end uses,
and onboard aerospace fire suppression. The rule details the framework
for how many allowances are issued for each end use. End users within a
specific application may transfer their allowances only with another
end user in that same application. Allowances may also be conferred, as
frequently as needed, to effectuate the production or import of HFCs
for that specific use.
Set-Aside Allowances: EPA is establishing a set-aside pool of 7.5
MMTEVe (less than 3 percent of allowances to be allocated for 2022)
that is available to three groups of companies: (1) End users in
application-specific sectors that EPA has not yet identified or
verified by the date of the final rule, (2) importers that otherwise
would have qualified for consumption allowances but are not yet
identified or verified by the date of the final rule, and (3) importers
that are new market entrants. Companies seeking to receive allowances
via the set-aside should submit applications by November 30, 2021.
HFC-23 Controls: By the established compliance date, entities that
create HFC-23 must capture the HFC-23 and either (1) expend production
and consumption allowances for the amounts sold for consumptive uses
and/or (2) timely destroy the captured HFC-23 using a technology
approved by the Administrator. As compared with the amount of chemical
intentionally produced on a facility line, no more than 0.1 percent of
HFC-23 created on the line may be emitted after the compliance date.
Enforcement and Compliance: EPA is finalizing a multifaceted
approach to deter, identify, and penalize illegal activity. These tools
include administrative consequences for allowance holders, requiring
use of refillable cylinders, increased oversight of imports including
transhipments and HFCs imported for transformation, comprehensive
tracking of containers of HFCs as they are imported, sold and
distributed, and third-party auditing. EPA has also determined that
much of the quarterly production and consumption data provided to the
Agency will not be provided confidential treatment and will be
affirmatively released without further process. This data transparency
will incentivize compliance and allow the public and competing
companies to identify and report noncompliance to EPA.
C. Costs and Benefits
EPA has estimated the costs and benefits of this action to provide
the public with information and to comply with executive orders. EPA
estimates that in 2022 the annual net benefits of this rule are $1.7
billion, reflecting compliance costs associated with recordkeeping and
reporting and refillable cylinders and cost savings due to lower
refrigerant replacement costs and reduced energy consumption of $300
million and social benefits of $1.4 billion. In 2036, when the final
phasedown step is reached at 15 percent of the statutorily defined HFC
baseline, the estimated annual net benefits of this rule are $16.4
billion. The present value of cumulative net benefits evaluated from
2022 through 2050 is $272.7 billion at a three percent discount rate or
$260.9 billion at a seven percent discount rate. Over the same time
[[Page 55119]]
period the equivalent annualized value (EAV) of benefits is $13.6
billion when using a 3 percent discount rate; the EAV of costs is
negative $0.6 billion when using a 3 percent discount rate and negative
$0.5 billion when using a 7 percent discount rate; and the EAV of
cumulative net benefits over the period 2022-2050 is $14.2 billion when
using a 3 percent discount rate and $14.1 billion when using a 7
percent discount rate.\1\ The present value of net benefits is
calculated over the 29-year period from 2022-2050 to account for
additional years that emissions will be reduced following the
consumption reductions from 2022-2036.
---------------------------------------------------------------------------
\1\ All values for costs and benefits in this section are given
in 2020 dollars and are calculated by discounting future costs and
benefits to 2022 using a three percent discount rate. Calculations
using other discount rates and discussion of the impact of the
discount rate are found in the Regulatory Impact Analysis.
Table 1--Summary of Annual Values, Present Values, and Equivalent Annualized Values for the 2022-2050 Timeframe
for Estimated Abatement Costs, Benefits, and Net Benefits for the Final Rule
[Billions of 2020$, discounted to 2022] a b
----------------------------------------------------------------------------------------------------------------
Climate Costs \c\ Net benefits
Year benefits (3%) ---------------------------------------------------------------
c d 3% 7% 3% 7%
----------------------------------------------------------------------------------------------------------------
Present Value................... $260.9 -$11.8 -$6.4 $272.7 $267.4
Equivalent Annualized Value..... 13.6 -0.6 -0.5 14.2 14.1
----------------------------------------------------------------------------------------------------------------
\a\ Rows may not appear to add correctly due to rounding.
\b\ The annualized present value of costs and benefits are calculated over a 29-year period from 2022 to 2050.
\c\ The costs presented in this table are consistent with the costs presented in RIA Chapter 3, Table 3-6.
\d\ Climate benefits are based on changes (reductions) in HFC emissions and are calculated using four different
estimates of the SC-HFCs (model average at 2.5 percent, 3 percent, and 5 percent discount rates; and 95th
percentile at 3 percent discount rate). The IWG emphasized, and EPA agrees, on the importance and value of
considering the benefits calculated using all four estimates. As discussed in the Technical Support Document:
Social Cost of Carbon, Methane, and Nitrous Oxide Interim Estimates under Executive Order 13990 (IWG 2021), a
consideration of climate benefits calculated using discount rates below 3 percent, including 2 percent and
lower, are also warranted when discounting intergenerational impacts.
Over the 15-year period of the phasedown of HFCs, at a three
percent discount rate, the present value of cumulative compliance costs
is negative $5.4 billion, or $5.4 billion in savings; the present value
of cumulative social benefits is $94.8 billion; and the present value
of cumulative net benefits is $100.2 billion. Evaluated at a seven
percent discount rate, the present value of cumulative compliance costs
is negative $3.7 billion, or $3.7 billion in savings, and the present
value of cumulative net benefits is $98.5 billion. Over the time period
of 2022-2036 the EAV of benefits is $7.9 billion when using a 3 percent
discount rate; the EAV of costs is negative $0.5 billion when using a 3
percent discount rate and negative $0.4 billion when using a 7 percent
discount rate; and the EAV of cumulative net benefits is $8.4 billion
when using a 3 percent discount rate and $8.3 billion when using a 7
percent discount rate.
EPA estimates that for the years 2022-2036 this action will avoid
cumulative consumption of 3,152 MMTEVe of HFCs in the United States.
The annual consumption avoided is estimated at 42 MMTEVe in the year
2022 and 282 MMTEVe in 2036. In order to calculate the climate benefits
associated with consumption abatement, the consumption changes were
expressed in terms of emissions reductions. EPA estimates that for the
years 2022-2050 this action will avoid emissions of 4,560 MMTEVe of
HFCs in the United States. The annual avoided emissions are estimated
at 22 MMTEVe in the year 2022 and 171 MMTEVe in 2036.
Climate benefits are based on changes (reductions) in HFC emissions
and are calculated using four different estimates of the social costs
of HFCs (SC-HFCs) (model average at 2.5 percent, 3 percent, and 5
percent discount rates; and 95th percentile at 3 percent discount
rate). The SC-HFCs estimates used in this analysis were developed using
methodologies consistent with the methodology underlying the
Interagency Working Group on the Social Cost of Greenhouse Gases' (IWG)
interim estimates of the social cost of other greenhouse gases (social
cost of carbon SC-CO<INF>2</INF>, social cost of methane SC-
CH<INF>4</INF>, and social cost of nitrous oxide SC-N<INF>2</INF>O)
that were developed over many years, using a transparent process, peer-
reviewed methodologies, the best science available at the time of that
process, and with input from the public. The benefits presented in this
paragraph are the benefits associated with the average SC-HFCs at a 3
percent discount rate, but the Agency does not have a single central
SC-HFCs point estimate. The IWG emphasized the importance and value of
considering the benefits calculated using all four estimates.
As summarized further in Section XI of the preamble and described
more fully in the Regulatory Impact Analysis (RIA), EPA's analysis
indicates the principal costs (or savings) result from industry
transitioning to substitute chemicals and technology. The principal
benefits result from a decrease in emissions of HFCs into the
atmosphere and the corresponding effects on global warming. The
benefits are monetized by using the SC-HFCs. SC-HFCs is estimated using
a method consistent with the method used to estimate the Social Cost of
Greenhouse Gases (SC-GHGs). An alternative method was also considered
that estimates SC-HFCs by using the global warming potential (GWP) (or
exchange value) of HFCs and scaling to the known social cost of another
GHG, e.g., CO<INF>2</INF>, CH<INF>4</INF>, or N<INF>2</INF>O.
II. General Information
A. Does this action apply to me?
You may be potentially affected by this action if you produce,
import, export, destroy, use as a feedstock, reclaim, package, or
otherwise distribute HFCs. You may also be potentially affected by this
rule if you use HFCs to manufacture products, such as refrigeration and
air conditioning systems, foams, aerosols, and fire suppression
systems, or use HFCs in one of the six applications eligible for an
allocation under section (e)(4)(B)(iv) of the AIM Act. Potentially
affected categories, by North American Industry Classification System
(NAICS) code, are included in Table 2.
[[Page 55120]]
Table 2--NAICS Classification of Potentially Affected Entities
------------------------------------------------------------------------
NAICS code NAICS industry description
------------------------------------------------------------------------
211120....................... Crude Petroleum Extraction.
221210....................... Natural Gas Distribution.
236118....................... Residential Remodelers.
236220....................... Commercial and Institutional Building
Construction.
238220....................... Plumbing, Heating, and Air-Conditioning
Contractors.
238990....................... All Other Specialty Trade Contractors.
311351....................... Chocolate and Confectionery Manufacturing
from Cacao Beans.
322299....................... All Other Converted Paper Product
Manufacturing.
325120....................... Industrial Gas Manufacturing.
325180....................... Other Basic Inorganic Chemical
Manufacturing.
325199....................... All Other Basic Organic Chemical
Manufacturing.
325211....................... Plastics Material and Resin
Manufacturing.
325320....................... Pesticide and Other Agricultural Chemical
Manufacturing.
325412 *..................... Pharmaceutical Preparation Manufacturing.
325414 *..................... Biological Product (except Diagnostic)
Manufacturing.
325992....................... Photographic Film, Paper, Plate and
Chemical Manufacturing.
325998....................... All Other Miscellaneous Chemical Product
and Preparation Manufacturing.
326150 *..................... Urethane and Other Foam Product.
331420....................... Copper Rolling, Drawing, Extruding, and
Alloying.
332312....................... Fabricated Structural Metal
Manufacturing.
332313....................... Plate Work Manufacturing.
333132....................... Oil and Gas Field Machinery and Equipment
Manufacturing.
333314....................... Optical Instrument and Lens
Manufacturing.
333316....................... Photographic and Photocopying Equipment
Manufacturing.
333413....................... Industrial and Commercial Fan and Blower
and Air Purification Equipment
Manufacturing.
333415....................... Air-Conditioning and Warm Air Heating
Equipment and Commercial and Industrial
Refrigeration Equipment Manufacturing.
333611....................... Turbine and Turbine Generator Set Unit
Manufacturing.
333996....................... Fluid Power Pump and Motor Manufacturing.
334413 *..................... Semiconductor and Related Device
Manufacturing.
334419 *..................... Other Electronic Component Manufacturing.
334515....................... Instrument Manufacturing for Measuring
and Testing Electricity and Electrical
Signals.
334516....................... Analytical Laboratory Instrument
Manufacturing.
334613....................... Blank Magnetic and Optical Recording
Media Manufacturing.
336212 *..................... Truck Trailer Manufacturing.
336214 *..................... Travel Trailer and Camper Manufacturing.
336411 *..................... Aircraft Manufacturing.
336510....................... Railroad Rolling Stock Manufacturing.
336611 *..................... Ship Building and Repairing.
336612 *..................... Boat Building.
336992 *..................... Military Armored Vehicle, Tank, and Tank
Component Manufacturing.
339999 *..................... All Other Miscellaneous Manufacturing.
SIC 373102 *................. Military Ships, Building, and Repairing.
423120....................... Motor Vehicle Supplies and New Parts
Merchant Wholesalers.
423450....................... Medical, Dental, and Hospital Equipment
and Supplies Merchant Wholesalers.
423460....................... Ophthalmic Goods Merchant Wholesalers.
423730....................... Warm Air Heating and Air-Conditioning
Equipment and Supplies Merchant
Wholesalers.
423740....................... Refrigeration Equipment and Supplies
Merchant Wholesalers.
423830....................... Industrial Machinery and Equipment
Merchant Wholesalers.
423860 *..................... Transportation Equipment and Supplies
(except Motor Vehicle) Merchant
Wholesalers.
423990 *..................... Other Miscellaneous Durable Goods
Merchant Wholesalers.
424210....................... Drugs and Druggists' Sundries Merchant
Wholesalers.
424410....................... General Line Grocery Merchant
Wholesalers.
424610....................... Plastics Materials and Basic Forms and
Shapes Merchant Wholesalers.
424690....................... Other Chemical and Allied Products
Merchant Wholesalers.
424910....................... Farm Supplies Merchant Wholesalers.
441310....................... Automotive Parts and Accessories Stores.
443141....................... Household Appliance Stores.
443142....................... Electronics Stores.
444130....................... Hardware Stores.
446191....................... Food (Health) Supplement Stores.
452311....................... Warehouse Clubs and Supercenters.
453998....................... All Other Miscellaneous Store Retailers
(except Tobacco Stores).
454110....................... Electronic Shopping and Mail-Order
Houses.
481111....................... Scheduled Passenger Air Transportation.
482111....................... Line-Haul Railroads.
488510....................... Freight Transportation Arrangement.
493110....................... General Warehousing and Storage.
522293....................... International Trade Financing.
523130....................... Commodity Contracts Dealing.
531110....................... Lessors of Residential Buildings and
Dwellings.
531120....................... Lessors of Nonresidential Buildings
(except Miniwarehouses).
[[Page 55121]]
532420....................... Office Machinery and Equipment Rental and
Leasing.
541330....................... Engineering Services.
541519....................... Other Computer Related Services.
541715....................... Research and Development in the Physical,
Engineering, and Life Sciences (except
Nanotechnology and Biotechnology).
561210....................... Facilities Support Services.
561910....................... Packaging and Labeling Services.
561990....................... All Other Support Services.
562920....................... Recovery and Reclamation.
722511....................... Full-Service Restaurants.
811219....................... Other Electronic and Precision Equipment
Repair and Maintenance.
811412....................... Appliance Repair and Maintenance.
922160 *..................... Fire Protection.
------------------------------------------------------------------------
* Codes marked with an asterisk may apply to sectors that receive
application-specific allowances under the AIM Act.
This table is not intended to be exhaustive, but rather provides a
guide for readers regarding entities likely to be regulated by this
action. This table lists the types of entities that EPA is now aware
could potentially be regulated by this action. Other types of entities
not listed in the table could also be regulated. To determine whether
your entity is regulated by this action, you should carefully examine
the regulatory text at the end of this notice. If you have questions
regarding the applicability of this action to a particular entity,
consult the person listed in the FOR FURTHER INFORMATION CONTACT
section.
B. What is the agency's authority for taking this action?
On December 27, 2020, the AIM Act was enacted as section 103 in
Division S, Innovation for the Environment, of the Consolidated
Appropriations Act, 2021 (Pub. L. 116-260).\2\ The AIM Act directs EPA
to address HFCs by providing new authorities in three main areas:
Phasing down the production and consumption of listed HFCs; managing
these HFCs and their substitutes; and facilitating the transition to
next-generation technologies by restricting use of these HFCs in the
sector or subsectors in which they are used. This rulemaking focuses on
the first area: The phasedown of the production and consumption of
HFCs.
---------------------------------------------------------------------------
\2\ EPA interprets the phrase ``under this section'' in the AIM
Act to refer to section 103 of the Consolidated Appropriations Act,
2021, and thus to mean ``under the AIM Act.'' This approach would be
consistent with the language included in the Act, such as subsection
(a) which states that ``[t]his section may be cited as American
Innovation and Manufacturing Act of 2020.''
---------------------------------------------------------------------------
Subsection (e) of the AIM Act gives EPA authority to phase down the
production and consumption of listed HFCs through an allowance
allocation and trading program. The Act uses the term ``produce'' to
mean ``the manufacture \3\ of a regulated substance from a raw material
or feedstock chemical,'' but excludes from that definition the
destruction of HFCs using approved technologies; reclamation, reuse, or
recycling of HFCs; and HFCs for transformation.\4\ The Act uses the
term ``consumption'' to refer to the amount of HFCs produced in and
imported to the United States, subtracting the amount exported.
---------------------------------------------------------------------------
\3\ While the AIM Act and the definition in this rule use the
term ``manufacture'' in defining the term ``produce,'' in
implementing EPA's CAA title VI programs, the Agency has
historically used the term ``production'' when referring to the
manufacture of chemicals and ``manufacture'' when referring to the
manufacture of equipment. EPA intends to continue using this framing
when describing production of chemicals and manufacture of equipment
under the AIM Act to help distinguish between the two activities.
\4\ The AIM Act uses the phrase ``a regulated substance that is
used and entirely consumed (except for trace quantities) in the
manufacture of another chemical'' instead of ``transformation'' in
this definition. The quoted phrase mirrors the definition used in 40
CFR part 82, subpart A for the term ``transform.'' The AIM Act
subsequently uses the terms ``transformation'' and ``use as a
feedstock'' interchangeably. EPA interprets the use of these two
terms in the statute as being intended to have the same meaning and
accordingly EPA will use them interchangeably.
---------------------------------------------------------------------------
The Act lists 18 saturated HFCs, and by reference any of their
isomers not so listed, that are covered by the statute's provisions,
referred to as ``regulated substances'' under the Act. Congress also
assigned an ``exchange value'' <SUP>5 6</SUP> to each regulated
substance (along with other chemicals that are used to calculate the
baseline). The table in subsection (c)(1), reproduced here in Table 3,
lists the 18 regulated substances and their exchange values.
---------------------------------------------------------------------------
\5\ EPA has determined that the exchange values included in
subsection (c) of the AIM Act are identical to the GWPs included in
IPCC (2007). EPA uses the terms ``global warming potential'' and
``exchange value'' interchangeably. One MMTEVe is therefore
equivalent to one MMTCO<INF>2</INF>e.
\6\ IPCC (2007): Solomon, S., D. Qin, M. Manning, R.B. Alley, T.
Berntsen, N.L. Bindoff, Z. Chen, A. Chidthaisong, J.M. Gregory, G.C.
Hegerl, M. Heimann, B. Hewitson, B.J. Hoskins, F. Joos, J. Jouzel,
V. Kattsov, U. Lohmann, T. Matsuno, M. Molina, N. Nicholls, J.
Overpeck, G. Raga, V. Ramaswamy, J. Ren, M. Rusticucci, R.
Somerville, T.F. Stocker, P. Whetton, R.A. Wood and D. Wratt, 2007:
Technical Summary. In: Climate Change 2007: The Physical Science
Basis. Contribution of Working Group I to the Fourth Assessment
Report of the Intergovernmental Panel on Climate Change [Solomon,
S., D. Qin, M. Manning, Z. Chen, M. Marquis, K.B. Averyt, M. Tignor
and H.L. Miller (eds.)]. Cambridge University Press, Cambridge,
United Kingdom and New York, NY, USA. Available at <a href="https://www.ipcc.ch/report/ar4/wg1">https://www.ipcc.ch/report/ar4/wg1</a>.
Table 3--List of Regulated Substances and Their Exchange Values
------------------------------------------------------------------------
Chemical name Common name Exchange value
------------------------------------------------------------------------
CHF2CHF2....................... HFC-134................ 1,100
CH2FCF3........................ HFC-134a............... 1,430
CH2FCHF2....................... HFC-143................ 353
CHF2CH2CF3..................... HFC-245fa.............. 1,030
CF3CH2CF2CH3................... HFC-365mfc............. 794
CF3CHFCF3...................... HFC-227ea.............. 3,220
CH2FCF2CF3..................... HFC-236cb.............. 1,340
[[Page 55122]]
CHF2CHFCF3..................... HFC-236ea.............. 1,370
CF3CH2CF3...................... HFC-236fa.............. 9,810
CH2FCF2CHF2.................... HFC-245ca.............. 693
CF3CHFCHFCF2CF3................ HFC-43-10mee........... 1,640
CH2F2.......................... HFC-32................. 675
CHF2CF3........................ HFC-125................ 3,500
CH3CF3......................... HFC-143a............... 4,470
CH3F........................... HFC-41................. 92
CH2FCH2F....................... HFC-152................ 53
CH3CHF2........................ HFC-152a............... 124
CHF3........................... HFC-23................. 14,800
------------------------------------------------------------------------
The AIM Act requires EPA to phase down the consumption and
production of the statutorily listed HFCs on an exchange value-weighted
basis according to the schedule stated in (e)(2)(C) as shown in Table
4. The phasedown schedule begins on January 1 of each year.
Table 4--Phasedown Schedule
------------------------------------------------------------------------
Percentage of
Percentage of consumption
Date production baseline
baseline (percent)
------------------------------------------------------------------------
2020-2023............................... 90 90
2024-2028............................... 60 60
2029-2033............................... 30 30
2034-2035............................... 20 20
2036 and thereafter..................... 15 15
------------------------------------------------------------------------
The AIM Act requires that the EPA Administrator ensure the annual
quantity of all regulated substances produced or consumed \7\ in the
United States does not exceed the applicable percentage listed for the
production or consumption baseline.
---------------------------------------------------------------------------
\7\ In the context of allocating and expending allowances, EPA
interprets the word ``consume'' as the verb form of the defined term
``consumption.'' For example, subsection (e)(2)(A) states the
phasedown consumption prohibition as ``no person shall . . . consume
a quantity of a regulated substance without a corresponding quantity
of consumption allowances.'' While a common usage of the word
``consume'' means ``use,'' EPA does not believe that Congress
intended for every possible use of an HFC to require the expenditure
of allowances. For example, we do not believe that Congress intended
everyone who charges an appliance or fills an aerosol can with an
HFC to expend allowances for that use.
---------------------------------------------------------------------------
In order to execute this statutory directive, EPA must determine
both a production and consumption baseline from which the yearly
targets are calculated. The AIM Act provides formulas for how to set a
baseline. The equations are composed of an HFC component, a
hydrochlorofluorocarbon (HCFC) component, and a chlorofluorocarbon
(CFC) component. Specifically, EPA is directed to calculate the
production baseline by adding: (i) The average annual quantity of all
regulated substances produced in the United States from January 1,
2011, through December 31, 2013, and (ii) 15 percent of the production
level of HCFCs in calendar year 1989, and (iii) 0.42 percent of the
production level of CFCs in calendar year 1989.
EPA is directed to calculate the consumption baseline by adding:
(i) The average annual quantity of all regulated substances consumed in
the United States from January 1, 2011, through December 31, 2013, and
(ii) 15 percent of the consumption level of HCFCs in calendar year
1989, and (iii) 0.42 percent of the consumption level of CFCs in
calendar year 1989. To implement the directive that the production and
consumption of regulated substances in the United States does not
exceed the statutory targets, the AIM Act in subsection (e)(3) requires
EPA to issue regulations within 270 days of the Act's enactment
establishing an allowance allocation and trading program to phase down
the production and consumption of the listed HFCs. These allowances are
limited authorizations for the production or consumption of regulated
substances. Subsection (e)(2)(D) directs EPA to ``determine the
quantity of allowances for the production and consumption of regulated
substances that may be used for the following calendar year'' by
October 1 each year. Subsection (e)(2) of the Act has a general
prohibition that no person \8\ shall produce or consume a quantity of
regulated substances in the United States without a corresponding
quantity of allowances. Also, within 270 days, EPA is directed in
subsection (g) to establish regulations governing the transfer of
production and consumption allowances. Subsection (e)(2)(A) provides
that no person shall hold, use, or transfer an allocated production or
consumption allowance except in accordance with the transfer
regulations. Under subsection (g), the transfer regulations are to use
the applicable exchange values and ``ensure that the transfers . . .
will result in greater total reductions'' in production and consumption
``than would occur during the year in the absence of the transfers.''
---------------------------------------------------------------------------
\8\ Under the Act's term, this general prohibition applies to
any ``person.'' Because EPA anticipates that the parties that
produce or consume HFCs--and that would thus be subject to the Act's
production and consumption controls--are companies or other
entities, we frequently use those terms to refer to regulated
parties. Using this shorthand, however, does not alter the
applicability of the Act's requirements and prohibitions.
---------------------------------------------------------------------------
Subsection (e)(4)(B)(iv) of the Act requires EPA to allocate
allowances sufficient to meet the full quantity needed for production
and consumption for six specific applications for five
[[Page 55123]]
years following enactment. EPA is to determine the necessary allowance
amount for these applications ``based on projected, current, and
historical trends.'' The six statutorily listed applications are:
Propellants in metered dose inhalers; defense sprays (e.g., bear
spray); structural composite preformed polyurethane foam for marine use
and trailer use; etching of semiconductor material or wafers and the
cleaning of CVD chambers within the semiconductor manufacturing sector;
mission-critical military end uses; and onboard aerospace fire
suppression. The allowances EPA allocates for these applications are
for the ``exclusive use'' in one of the six applications.
Subsection (j) of the AIM Act speaks to international cooperation.
Of particular relevance to this rulemaking, subsection (j)(4) requires
EPA to promulgate a rule by December 27, 2021, to carry out the
subsection. The AIM Act contains several restrictions and requirements
governing international transfers of production allowances in
subsections (j)(1) and (j)(2) and also provides some discretionary
authority to EPA in (j)(3) regarding the effect of such transfers on
production limits.
In subsection (k)(1)(A), the AIM Act provides EPA with the
authority to promulgate necessary regulations to carry out EPA's
functions under the Act, including its obligations to ensure that the
Act's requirements are satisfied. Subsection (k) of the AIM Act
explicitly makes certain sections of the CAA applicable to the AIM Act
and regulations promulgated under its authority, stating ``Sections
113, 114, 304, and 307 of the Clean Air Act (42 U.S.C. 7413, 7414,
7604, 7607) shall apply to this section and any rule, rulemaking, or
regulation promulgated by the Administrator pursuant to this section as
though this section were expressly included in title VI of that Act (42
U.S.C. 7671 et seq.).'' Accordingly, this rulemaking is subject to CAA
section 307(d) (42 U.S.C. 7607(d)(1)(I)), which provides that CAA
section 307(d) applies to ``promulgation or revision of regulations
under subchapter VI of this chapter (relating to stratosphere and ozone
protection)'' (i.e., title VI of the CAA)). Violation of the
requirements established in this rulemaking is subject to federal
enforcement and the penalties laid out in CAA section 113 including,
but not limited to, the penalties in section 113(b) for civil judicial
enforcement and section 113(c) criminal penalties. In addition,
although there is limited legislative history available on the AIM Act,
Congress is generally presumed to legislate with an awareness of the
existing law that is pertinent to enacted legislation. Given the
similarities in the text, structure, and function of the production and
consumption phasedown provisions of the AIM Act and EPA's program
phasing out ozone-depleting substances (ODS) under title VI of the
CAA,\9\ EPA finds it reasonable to build on its experience phasing out
ODS when developing the AIM Act's HFC allowance allocation and trading
program, while also recognizing that there are areas where the AIM
Act's requirements diverge from the text and framework of title VI of
the CAA. There are many instances where the definitions and structure
are either identical or have only slight differences. For example, the
definitions of ``import'' in the AIM Act and CAA section 601 are
materially similar though they have slightly different phrasing. In at
least some instances, Congress adopted language in the AIM Act that
matches EPA's implementation approach for ODS production and
consumption controls under CAA title VI as reflected in 40 CFR part 82,
subpart A. For example, the definition for ``produce'' in the AIM Act
mirrors the parallel definition in CAA section 601 in many respects,
but in contrast to the CAA definition, the AIM Act explicitly excludes
the destruction of regulated substances using technologies approved by
the Administrator from being counted in production. While the CAA
definition does not explicitly exclude destruction from production,
EPA's regulatory definition for ``production'' in 40 CFR 82.3 does
exclude destruction from being counted as production. Throughout this
rulemaking, EPA explains how the Agency is relying on and building from
its experience implementing the ODS phaseout provisions in the CAA and
its implementing regulations where such considerations are relevant to
creating the framework structure for the AIM Act's required HFC
allowance allocation and trading program. Given EPA's extensive
experience phasing out ODS under similar CAA authority for a regulated
community that bears marked resemblance to entities that could be
impacted by this rulemaking, reliance on EPA's expertise will help
achieve the goals required by Congress in implementing the AIM Act.
---------------------------------------------------------------------------
\9\ EPA's well-established regulatory program at 40 CFR part 82,
subpart A, provides for the allocation of ODS production and
consumption allowances, implementing the ODS production and
consumption controls of title VI of the CAA and facilitating an
orderly phaseout.
---------------------------------------------------------------------------
III. Background
A. What are HFCs?
HFCs are anthropogenic \10\ fluorinated chemicals that have no
known natural sources. HFCs are used in the same applications that ODS
have historically been used in, such as refrigeration and air
conditioning, foam blowing agents, solvents, aerosols, and fire
suppression. HFCs are potent GHGs with 100-year GWPs (a measure of the
relative climatic impact of a GHG) that can be hundreds to thousands of
times more potent than carbon dioxide (CO<INF>2</INF>).
---------------------------------------------------------------------------
\10\ While the overwhelming majority of HFC production is
intentional, HFC-23 can be a byproduct associated with the
production of other chemicals, including but not limited to HCFC-22.
---------------------------------------------------------------------------
Although HFCs represent a small fraction (~1.5 percent) of the
current total GWP-weighted amount of GHG emissions,\11\ their use is
growing worldwide due to the global phaseout of ODS under the Montreal
Protocol on Substances that Deplete the Ozone Layer (Montreal
Protocol), and the increasing use of refrigeration and air conditioning
equipment globally. HFC emissions had previously been projected to
increase substantially over the next several decades, but global
adherence to the Kigali Amendment to the Montreal Protocol (Kigali
Amendment) would substantially reduce future emissions, leading to a
peaking of HFC emissions before 2040.\12\
---------------------------------------------------------------------------
\11\ World Meteorological Organization (WMO), Scientific
Assessment of Ozone Depletion: 2018, World Meteorological
Organization, Global Ozone Research and Monitoring Project--Report
No. 58, 588 pp., Geneva, Switzerland, 2018. Available at <a href="https://ozone.unep.org/sites/default/files/2019-05/SAP-2018-Assessment-report.pdf">https://ozone.unep.org/sites/default/files/2019-05/SAP-2018-Assessment-report.pdf</a>.
\12\ Ibid.
---------------------------------------------------------------------------
Atmospheric observations of most currently measured HFCs confirm
their amounts are increasing in the global atmosphere at accelerating
rates. Total emissions of HFCs increased by 23 percent from 2012 to
2016 and the four most abundant HFCs in the atmosphere, in GWP-weighted
terms, are HFC-134a, HFC-125, HFC-23, and HFC-143a.\13\
---------------------------------------------------------------------------
\13\ Ibid.
---------------------------------------------------------------------------
In 2016, HFCs accounted for a radiative forcing of 0.025 W/m\2\,
not including additional forcing from HFC-23 of 0.005 W/m\2\: This is a
36 percent increase in total HFC forcing relative to 2012. This
radiative forcing was projected to increase by an order of magnitude to
0.25 W/m\2\ by 2050, not including additional forcing from HFC-23. In
2016, in Kigali, Rwanda, countries agreed to adopt an amendment to the
Montreal Protocol, known as the Kigali Amendment, which provides for a
global phasedown of the
[[Page 55124]]
production and consumption of HFCs. If the Kigali Amendment were to be
fully implemented, it would be expected to reduce the future radiative
forcing due to HFCs (excluding HFC-23) to 0.13 W/m\2\ in 2050: A
reduction of about 50 percent compared to the radiative forcing
projected in the business-as-usual scenario of uncontrolled HFCs.\14\ A
global HFC phasedown consistent with the Kigali Amendment to the
Montreal Protocol is expected to avoid up to 0.5 [deg]C of warming by
2100.\15\
---------------------------------------------------------------------------
\14\ Ibid.
\15\ Ibid.
---------------------------------------------------------------------------
There are hundreds of possible HFC compounds. The 18 HFCs listed as
regulated substances by the AIM Act are some of the most commonly used
HFCs and have high impacts as measured by the quantity emitted
multiplied by their respective GWPs. These 18 HFCs are all saturated,
meaning they have only single bonds between their atoms and therefore
have longer atmospheric lifetimes.
In the United States, HFCs are used primarily in refrigeration and
air conditioning equipment in homes, commercial buildings, and
industrial operations (~75 percent of total HFC use in 2019) and in air
conditioning in vehicles and refrigerated transport (~8 percent).
Smaller amounts are used in foam products (~11 percent), aerosols (~4
percent), fire protection systems (~1 percent), and solvents (~1
percent).\16\
---------------------------------------------------------------------------
\16\ Calculations are based on EPA's Vintaging Model, which
estimates the annual chemical emissions from industry sectors that
historically used ODS, including refrigeration and air-conditioning,
foam blowing, solvents, aerosols, and fire suppression. The model
uses information on the market size and growth for each end use, as
well as a history and projections of the market transition from ODS
to alternatives. The model tracks emissions of annual ``vintages''
of new equipment that enter into operation by incorporating
information on estimates of the quantity of equipment or products
sold, serviced, retired, or converted each year, and the quantity of
the compound required to manufacture, charge, and/or maintain the
equipment. Information on these estimates is available in U.S. EPA,
April 2016, EPA Report EPA-430-R-16-002. Inventory of U.S.
Greenhouse Gas Emissions and Sinks: 1990-2014. Available at <a href="https://www.epa.gov/ghgemissions/inventory-us-greenhouse-gas-emissions-and-sinks-1990-2014">https://www.epa.gov/ghgemissions/inventory-us-greenhouse-gas-emissions-and-sinks-1990-2014</a>.
---------------------------------------------------------------------------
EPA considered the emissions reductions from an HFC consumption
phasedown in the United States and presented the results in the 2016
Biennial Report to the United Nations Framework Convention on Climate
Change (UNFCCC).\17\ At that time, EPA provided a reductions estimate
of 113 million metric tons of carbon dioxide equivalent
(MMTCO<INF>2</INF>e) of reduced HFC emissions in the United States
associated with the implementation of an amendment proposal submitted
in 2015 by the United States, Canada, and Mexico that was under
consideration by the parties to the Montreal Protocol and was very
similar to the Kigali Amendment. While the Kigali Amendment ultimately
adopted under the Montreal Protocol has certain marked differences from
the AIM Act, given that the two documents have a nearly identical list
of HFCs to be phased down following the same schedule, the 2016
Biennial Report provides useful information. The Biennial Report
included estimates for HFC actions under CAA section 612 modeled in the
2016 Current Measures scenario. HFC emissions reductions through
additional measures in 2020 and 2025 relative to the 2016 Current
Measures scenario were presented under the Additional Measures scenario
and included both options for continued action under the CAA and the
implementation of an HFC phasedown in the United States, which is
similar to the requirements of the AIM Act with an earlier start
date.\18\ The emissions reductions for the Additional Measures scenario
were estimated to be 63 MMTCO<INF>2</INF>e in 2020 and 113
MMTCO<INF>2</INF>e in 2025.
---------------------------------------------------------------------------
\17\ U.S. Department of State. Second Biennial Report of the
United States of America Under the United Nations Framework
Convention on Climate Change. Washington, DC, 2016. Available at
<a href="http://unfccc.int/national_reports/biennial_reports_and_iar/submitted_biennial_reports/items/7550.php">http://unfccc.int/national_reports/biennial_reports_and_iar/submitted_biennial_reports/items/7550.php</a>.
\18\ The Current Measures scenario in the Biennial Report
included HFC reductions estimated under a rule EPA issued on July
20, 2015, under section 612 of the CAA, which, among other things,
changed listings under the Significant New Alternatives Policy
program for certain HFCs and blends from acceptable to unacceptable
in various end uses in the aerosols, refrigeration and air
conditioning, and foam blowing sectors. The Additional Measures
scenario in the Biennial Report included additional actions that EPA
anticipated under a proposed amendment to the Montreal Protocol to
phase down HFC production and consumption, some of which were
included in a rule EPA issued on December 1, 2016, under section 612
of the CAA. Since the 2016 Biennial Report, after a challenge to the
2015 rule, the U.S. Court of Appeals for the D.C. Circuit (``the
court'') issued a partial vacatur of the 2015 rule ``to the extent
[it] requires manufacturers to replace HFCs with a substitute
substance,'' and remanded the rule to EPA for further proceedings.
Later, the court issued a similar decision on portions of the rule
issued December 1, 2016. See Mexichem Fluor, Inc. v. EPA, 760 F.
App'x 6 (D.C. Cir. 2019) (per curiam).
---------------------------------------------------------------------------
B. How do HFCs affect public health and welfare?
As EPA has previously recognized, elevated concentrations of GHGs
including HFCs have been warming the planet, leading to changes in the
Earth's climate including changes in the frequency and intensity of
heat waves, precipitation, and extreme weather events; rising seas;
and, retreating snow and ice. Similarly, EPA has previously recognized
that the changes taking place in the atmosphere are a result of the
well-documented buildup of GHGs due to human activities and are
changing the climate at a pace and in a way that threatens human
health, society, and the natural environment. While EPA is not
statutorily required to make any particular scientific or factual
findings in order to regulate HFCs under the AIM Act's phasedown
provisions, in this section EPA is providing some scientific background
on climate change to offer additional context for this rulemaking and
to help the public understand the environmental impacts of GHGs such as
HFCs.
Extensive additional information on climate change is available in
the scientific assessments and the EPA documents that are briefly
described in this section, as well as in the technical and scientific
information supporting them. One of those documents is EPA's 2009
Endangerment and Cause or Contribute Findings for Greenhouse Gases
Under Section 202(a) of the CAA (74 FR 66496, December 15, 2009).\19\
In the 2009 Endangerment Finding, the Administrator found under section
202(a) of the CAA that elevated atmospheric concentrations of six key
well-mixed GHGs--CO<INF>2</INF>, CH<INF>4</INF>, N<INF>2</INF>O, HFCs,
perfluorocarbons (PFCs), and sulfur hexafluoride (SF<INF>6</INF>)--
'')--``may reasonably be anticipated to endanger the public health and
welfare of current and future generations'' (74 FR 66523, December 15,
2009). The 2009 Endangerment Finding, together with the extensive
scientific and technical evidence in the supporting record, documented
that climate change caused by human emissions of GHGs (including HFCs)
threatens the public health of the population of the United States. It
explained that by raising average temperatures, climate change
increases the likelihood of heat waves, which are associated with
increased deaths and illnesses (74 FR 66497, December 15, 2009). It
noted that while climate change also increases the likelihood of
reductions in cold-related mortality, evidence indicates that the
increases in heat mortality will be larger than the decreases in cold
mortality in the United States (74 FR 66525, December 15, 2009). The
2009 Endangerment Finding further explained that compared with a future
without climate change, climate change is expected to increase
tropospheric ozone pollution over broad areas of the United States,
[[Page 55125]]
including in the largest metropolitan areas with the worst tropospheric
ozone problems, and thereby increase the risk of adverse effects on
public health (74 FR 66525, December 15, 2009). Climate change is also
expected to cause more intense hurricanes and more frequent and intense
storms of other types and heavy precipitation, with impacts on other
areas of public health, such as the potential for increased deaths,
injuries, infectious and waterborne diseases, and stress-related
disorders (74 FR 66525 December 15, 2009). Children, the elderly, and
the poor are among the most vulnerable to these climate-related health
effects (74 FR 66498 December 15, 2009).
---------------------------------------------------------------------------
\19\ As noted in the NRPM for this action, in describing the
2009 Findings in this rulemaking, EPA is neither reopening nor
revisiting them (see 86 FR 27516, May 19, 2021).
---------------------------------------------------------------------------
The 2009 Endangerment Finding also documented, together with the
extensive scientific and technical evidence in the supporting record,
that climate change touches nearly every aspect of public welfare \20\
in the United States with resulting economic costs, including: changes
in water supply and quality due to changes in drought and extreme
rainfall events; increased risk of storm surge and flooding in coastal
areas and land loss due to inundation; increases in peak electricity
demand and risks to electricity infrastructure; and the potential for
significant agricultural disruptions and crop failures (though offset
to some extent by carbon fertilization). These impacts are also global
and may exacerbate problems outside the United States that raise
humanitarian, trade, and national security issues for the United States
(74 FR 66530, December 15, 2009).
---------------------------------------------------------------------------
\20\ The CAA states in section 302(h) that ``[a]ll language
referring to effects on welfare includes, but is not limited to,
effects on soils, water, crops, vegetation, manmade materials,
animals, wildlife, weather, visibility, and climate, damage to and
deterioration of property, and hazards to transportation, as well as
effects on economic values and on personal comfort and well-being,
whether caused by transformation, conversion, or combination with
other air pollutants.'' 42 U.S.C. 7602(h).
---------------------------------------------------------------------------
In 2016, the Administrator similarly issued Endangerment and Cause
or Contribute Findings for greenhouse gas emissions from aircraft under
section 231(a)(2)(A) of the CAA (81 FR 54422, August 15, 2016).\21\ In
the 2016 Endangerment Finding, the Administrator found that the body of
scientific evidence amassed in the record for the 2009 Endangerment
Finding compellingly supported a similar endangerment finding under CAA
section 231(a)(2)(A), and also found that the science assessments
released between the 2009 and the 2016 Findings ``strengthen and
further support the judgment that GHGs in the atmosphere may reasonably
be anticipated to endanger the public health and welfare of current and
future generations'' (81 FR 54424, August 15, 2016).
---------------------------------------------------------------------------
\21\ As noted in the NRPM for this action, in describing the
2016 Findings in this rulemaking, EPA is neither reopening nor
revisiting them (see 86 FR 27516, May 19, 2021).
---------------------------------------------------------------------------
Since the 2016 Endangerment Finding, the climate has continued to
change, with new records being set for several climate indicators such
as global average surface temperatures, greenhouse gas concentrations,
and sea level rise. Additionally, major scientific assessments continue
to be released that further improve our understanding of the climate
system and the impacts that GHGs have on public health and welfare both
for current and future generations. According to the IPCC's Sixth
Assessment Report, ``it is unequivocal that human influence has warmed
the atmosphere, ocean and land. Widespread and rapid changes in the
atmosphere, ocean, cryosphere and biosphere have occurred.'' These
updated observations and projections document the rapid rate of current
and future climate change both globally and in the United
States.<SUP>22 23 24 25</SUP>
---------------------------------------------------------------------------
\22\ USGCRP, 2018: Impacts, Risks, and Adaptation in the United
States: Fourth National Climate Assessment, Volume II [Reidmiller,
D.R., C.W. Avery, D.R. Easterling, K.E. Kunkel, K.L.M. Lewis, T.K.
Maycock, and B.C. Stewart (eds.)]. U.S. Global Change Research
Program, Washington, DC, USA, 1515 pp. doi: 10.7930/NCA4.2018.
Available at <a href="https://nca2018.globalchange.gov">https://nca2018.globalchange.gov</a>.
\23\ IPCC, 2021: Summary for Policymakers. In: Climate Change
2021: The Physical Science Basis. Contribution of Working Group I to
the Sixth Assessment Report of the Intergovernmental Panel on
Climate Change [Masson-Delmotte, V., P. Zhai, A. Pirani, S.L.
Connors, C. P[eacute]an, S. Berger, N. Caud, Y. Chen, L. Goldfarb,
M.I. Gomis, M. Huang, K. Leitzell, E. Lonnoy, J.B.R. Matthews, T.K.
Maycock, T. Waterfield, O. Yelek[ccedil]i, R. Yu and B. Zhou
(eds.)]. Cambridge University Press. In Press.
\24\ National Academies of Sciences, Engineering, and Medicine,
2019. Climate Change and Ecosystems. Washington, DC: The National
Academies Press. Available at <a href="https://doi.org/10.17226/25504">https://doi.org/10.17226/25504</a>.
\25\ NOAA National Centers for Environmental Information, State
of the Climate: Global Climate Report for Annual 2020, published
online January 2021. Available at <a href="https://www.ncdc.noaa.gov/sotc/global/202013">https://www.ncdc.noaa.gov/sotc/global/202013</a>.
---------------------------------------------------------------------------
IV. How is EPA considering environmental justice?
Executive Order 12898 (59 FR 7629, February 16, 1994) and Executive
Order 14008 (86 FR 7619, January 27, 2021) establish federal executive
policy on environmental justice. Executive Order 12898's main provision
directs federal agencies, to the greatest extent practicable and
permitted by law, to make environmental justice part of their mission
by identifying and addressing, as appropriate, disproportionately high
and adverse human health or environmental effects of their programs,
policies, and activities on minority populations and low-income
populations in the United States. EPA defines environmental justice as
the fair treatment and meaningful involvement of all people regardless
of race, color, national origin, or income with respect to the
development, implementation, and enforcement of environmental laws,
regulations, and policies.\26\ Meaningful involvement means that: (1)
Potentially affected populations have an appropriate opportunity to
participate in decisions about a proposed activity that will affect
their environment and/or health; (2) the public's contribution can
influence the regulatory agency's decision; (3) the concerns of all
participants involved will be considered in the decision-making
process; and (4) the rule-writers and decision-makers seek out and
facilitate the involvement of those potentially affected.\27\ The term
``disproportionate impacts'' refers to differences in impacts or risks
that are extensive enough that they may merit Agency action. In
general, the determination of whether there is a disproportionate
impact that may merit Agency action is ultimately a policy judgment
which, while informed by analysis, is the responsibility of the
decision-maker. The terms ``difference'' or ``differential'' indicate
an analytically discernible distinction in impacts or risks across
population groups. It is the role of the analyst to assess and present
differences in anticipated impacts across population groups of concern
for both the baseline and proposed regulatory options, using the best
available information (both quantitative and qualitative) to inform the
decision-maker and the public.\28\
---------------------------------------------------------------------------
\26\ See, e.g., Environmental Protection Agency. ``Environmental
Justice.'' Available at <a href="https://www.epa.gov/environmentaljustice">https://www.epa.gov/environmentaljustice</a>.
\27\ The criteria for meaningful involvement are contained in
EPA's May 2015 document ``Guidance on Considering Environmental
Justice During the Development of an Action.'' Environmental
Protection Agency, 17 Feb. 2017. Available at <a href="https://www.epa.gov/environmentaljustice/guidance-considering-environmental-justice-during-development-action">https://www.epa.gov/environmentaljustice/guidance-considering-environmental-justice-during-development-action</a>.
\28\ The definitions and criteria for ``disproportionate
impacts,'' ``difference,'' and ``differential'' are contained in
EPA's June 2016 document ``Technical Guidance for Assessing
Environmental Justice in Regulatory Analysis.'' Available at <a href="https://www.epa.gov/sites/production/files/2016-06/documents/ejtg_5_6_16_v5.1.pdf">https://www.epa.gov/sites/production/files/2016-06/documents/ejtg_5_6_16_v5.1.pdf</a>.
---------------------------------------------------------------------------
A regulatory action may involve potential environmental justice
concerns if it could: (1) Create new disproportionate impacts on
minority populations, low-income populations, and/or indigenous
peoples; (2) exacerbate existing disproportionate
[[Page 55126]]
impacts on minority populations, low-income populations, and/or
indigenous peoples; or (3) present opportunities to address existing
disproportionate impacts on minority populations, low-income
populations, and/or indigenous peoples through the action under
development.
Executive Order 14008 calls on agencies to make achieving
environmental justice part of their missions ``by developing programs,
policies, and activities to address the disproportionately high and
adverse human health, environmental, climate-related, and other
cumulative impacts on disadvantaged communities, as well as the
accompanying economic challenges of such impacts.'' Executive Order
14008 further declares a policy ``to secure environmental justice and
spur economic opportunity for disadvantaged communities that have been
historically marginalized and overburdened by pollution and under-
investment in housing, transportation, water and wastewater
infrastructure, and health care.''
Further, under Executive Order 13563 (76 FR 3821, January 18,
2011), federal agencies may consider equity, human dignity, fairness,
and distributional considerations, where appropriate and permitted by
law. Likewise, the Presidential Memorandum on Modernizing Regulatory
Review calls for procedures to ``take into account the distributional
consequences of regulations, including as part of any quantitative or
qualitative analysis of the costs and benefits of regulations, to
ensure that regulatory initiatives appropriately benefit and do not
inappropriately burden disadvantaged, vulnerable, or marginalized
communities.'' \29\ EPA also released its June 2016 ``Technical
Guidance for Assessing Environmental Justice in Regulatory Analysis''
(2016 Technical Guidance) to provide recommendations that encourage
analysts to conduct the highest quality analysis feasible, recognizing
that data limitations, time and resource constraints, and analytic
challenges will vary by media and circumstance.\30\
---------------------------------------------------------------------------
\29\ See <a href="https://www.whitehouse.gov/briefing-room/presidential-actions/2021/01/20/modernizing-regulatory-review">https://www.whitehouse.gov/briefing-room/presidential-actions/2021/01/20/modernizing-regulatory-review</a>.
\30\ See <a href="https://www.epa.gov/sites/default/files/2016-06/documents/ejtg_5_6_16_v5.1.pdf">https://www.epa.gov/sites/default/files/2016-06/documents/ejtg_5_6_16_v5.1.pdf</a>.
---------------------------------------------------------------------------
As described elsewhere in this preamble, this rule establishes the
framework for the United States' phasedown of HFCs, which will achieve
significant benefits by reducing production and consumption of certain
chemicals with high GWPs. Section III.B of this rule briefly summarizes
the public health and welfare effects of GHG emissions (including HFCs)
as documented in EPA's 2009 and 2016 Endangerment Findings. As part of
these Endangerment Findings, the Administrator considered climate
change risks to minority populations and low-income populations,
finding that certain parts of the population may be especially
vulnerable based on their characteristics or circumstances, including
the poor, the elderly, the very young, those already in poor health,
the disabled, those living alone, and/or indigenous populations
dependent on one or limited resources due to factors including but not
limited to geography, access, and mobility.
More recent assessment reports by the United States Global Change
Research Program (USGCRP), the Intergovernmental Panel on Climate
Change (IPCC), and the National Research Council (NRC) of the National
Academies demonstrate that the potential impacts of climate change
raise environmental justice issues.\31\ These reports concluded that
low-income communities can be especially vulnerable to climate change
impacts because they tend to have more limited capacity to bear the
costs of adaptation and are more dependent on climate-sensitive
resources such as local water and food supplies. In corollary, some
communities of color, specifically populations defined jointly by both
ethnic/racial characteristics and geographic location, may be uniquely
vulnerable to climate change health impacts in the United States.
Native American tribal communities also possess unique vulnerabilities
to climate change, particularly those impacted by degradation of
natural and cultural resources within established reservation
boundaries and threats to traditional subsistence lifestyles. The
Technical Support Document for the 2009 Endangerment Finding also
specifically noted that Southwest native cultures are especially
vulnerable to water quality and availability impacts, and Native
Alaskan communities are already experiencing disruptive impacts,
including coastal erosion and shifts in the range or abundance of wild
species crucial to their livelihoods and well-being.
---------------------------------------------------------------------------
\31\ Supra footnotes 22, 23, and 24. See also EPA. 2021. Climate
Change and Social Vulnerability in the United States: A Focus on Six
Impacts. U.S. Environmental Protection Agency, EPA 430-R-21-003.
---------------------------------------------------------------------------
This rulemaking, as part of the phasedown of HFCs in the United
States, achieves significant benefits associated with reducing
emissions of potent GHGs. However, as described in the RIA and
summarized below, there is significant uncertainty about how the
phasedown of HFC production and the issuance of allowances by
themselves, as well as the interactions with market trends independent
of this rulemaking, could affect production of HFCs and HFC
substitutes--and associated emissions--at individual facilities,
particularly in communities that are disproportionately burdened by air
pollution. In its proposed rulemaking, EPA solicited comment, data, and
other information that could be helpful to EPA in future rulemaking
actions in analyzing and, as appropriate, reducing the potential for
inadvertent or unexpected distributional effects from this program,
including the potential for environmental justice concerns due to the
release of toxic chemicals that are feedstocks, catalysts, or
byproducts in the production of HFCs or HFC substitutes. Information
provided in response to this solicitation is available in the docket
for this rulemaking, and EPA intends to take it into account, as
appropriate, as the Agency moves forward in implementing the AIM Act.
A reasonable starting point for assessing the need for a more
detailed environmental justice analysis is to review the available
evidence from the published literature and from community input on what
factors may make population groups of concern more vulnerable to
adverse effects (e.g., cumulative exposure from multiple stressors),
including but not limited to the 2009 and 2016 Endangerment Findings
and the reports from USGCRP, IPCC, and NRC. It is also important to
evaluate the data and methods available for conducting an environmental
justice analysis.
EPA's 2016 Technical Guidance does not prescribe or recommend a
specific approach or methodology for conducting an environmental
justice analysis, though a key consideration is consistency with the
assumptions underlying other parts of the regulatory analysis when
evaluating the baseline and regulatory options.
The environmental justice analysis performed to support this
rulemaking is described in the associated RIA and is based on public
data from the Toxics Release Inventory (TRI), GHGRP, EJSCREEN (an
environmental justice mapping and screening tool developed by EPA),
Enforcement and Compliance History Online (ECHO), and Census data. In
addition, this analysis integrates suggestions received during the
public comment period to the extent possible. Where applicable and
practicable, the Agency examined certain metrics for an
[[Page 55127]]
environmental justice analysis comprising more than just climate change
effects, including: The proximity of companies receiving allowances to
populations disaggregated by race and ethnicity, low-income
populations, and/or indigenous peoples; the number of companies
receiving allowances that may be adversely affecting population groups
of concern; the nature, amounts, and location of regulated HFC
production that may adversely affect population groups of concern; and
potential exposure pathways associated with the production of the
regulated HFCs or with chemicals used as feedstocks, catalysts, or
byproducts of HFC production unique to particular populations (e.g.,
workers). The environmental justice analysis also contains information
on non-production releases (as defined by TRI), water releases, and
offsite disposal for chemicals used in HFC production. The analysis of
potential environmental justice concerns focused mainly on
characterizing baseline emissions of air toxics that are also
associated with chemical feedstock use for HFC production. As noted in
the RIA, there is uncertainty around the role that HFC production plays
in emissions of these air toxics. In addition, EPA conducted a
proximity analysis to examine community characteristics within one and
three miles of these facilities. The Agency also explored larger radii
(five and 10 miles) in response to public comments that releases from
these facilities may travel longer distances. The relatively small
number of facilities directly affected by this rule enabled EPA to
assemble a uniquely granular assessment of the characteristics of these
facilities and the communities where they are located.
Overall, this rule reduces GHG emissions, which will benefit
populations that may be especially vulnerable to damages associated
with climate change. However, the manner in which producers transition
from high-GWP HFCs could drive changes in future risk for communities
living near facilities that produce HFCs and HFC substitutes, to the
extent the use of toxic feedstocks, byproducts, or catalysts changes
and those chemicals are released into the environment with adverse
local effects. The environmental justice analysis, which examined
racial and economic demographic and health risk information, found
heterogeneity in community characteristics around individual
facilities. The analysis showed that the total baseline cancer risk and
total respiratory risk from air toxics (not all of which stem from HFC
production) varies, but is generally higher, and in some cases much
higher, within one to ten miles of an HFC production facility. The
analysis also found that higher percentages of low-income and Black or
African-American individuals live near several HFC production
facilities compared with the appropriate national and state level
average. EPA noted in the proposed rulemaking, and reiterates here,
that it is not clear the extent to which these baseline risks are
directly related to HFC production, but some feedstocks, catalysts, and
byproducts are toxic, particularly with respect to potential
carcinogenicity (e.g., carbon tetrachloride, tetrachloroethylene, and
trichloroethylene). All HFC production facilities are near other
industrial facilities that could contribute to the cumulative National
Air Toxics Assessment (NATA) cancer and respiratory risk; the number of
neighboring TRI facilities within one mile of an HFC production
facility ranges from two to 14, within three miles there are two to 19
neighboring TRI facilities, within five miles there are two to 34
neighboring TRI facilities, and within 10 miles there are six to 66
neighboring TRI facilities. At this time, it is not clear how emissions
related to HFC production compare to other chemical production at the
same or nearby facilities. Additionally, some HFC alternatives, such as
hydrofluoroolefins (HFOs), use the same chemicals as feedstocks in
their production or release the same chemicals as byproducts,
potentially raising concerns about local exposure. Emissions from
production facilities manufacturing non-fluorinated substitutes (e.g.,
hydrocarbons, ammonia) could also be affected by the phasedown of HFCs.
However, given limited information regarding where substitutes will be
produced and what other factors might affect production and emissions
at those locations, it is unclear to what extent this rule may affect
baseline risks from hazardous air toxics for communities living near
HFC production facilities. Further, the HFC phasedown schedule
prescribed by Congress--with a 10 percent reduction by 2022, a 40
percent reduction by 2024, a 70 percent reduction by 2029, an 80
percent reduction by 2034 and an 85 percent reduction by 2036--may also
reduce the potential for a facility to increase emissions above current
levels for a prolonged period.
EPA requested commenters provide data or other information to help
better characterize these changes and their implications for nearby
communities. Several commenters asserted that the RIA for the proposed
rulemaking overestimated the environmental justice benefits, in part
because emissions at HFC production facilities have likely declined
since the 2014 NATA that EPA relied upon in its analysis. EPA responds
that the Agency relied on the 2014 NATA data as a proxy for cumulative
exposure to air toxics near HFC production facilities, which is the
most recent year of data available. EPA plans to use more recent NATA
data in future analyses of potential environmental justice concerns as
it becomes available. EPA has not quantitatively assessed the potential
benefits in terms of reductions in risk or exposure to environmental
justice communities from changes in HFC production resulting from the
rule. The absence of this assessment is due to data constraints and
uncertainty about where HFCs and HFC alternatives will be produced in
the future and where some HFC alternatives are produced now (e.g., for
non-HFC technologies). EPA also lacks information on which
alternative(s) or type(s) of alternative (fluorinated, non-fluorinated,
etc.) will take the dominant market share for the current uses of HFCs.
One commenter provided extensive suggestions for how EPA could
augment and strengthen its environmental justice analysis for the final
rulemaking. Suggested factors and metrics included increasing the area
of analysis and integrating the Risk-Screening Environmental Indicators
Geographic Microdata (RSEI-GM), which incorporates data from the TRI
together with factors such as each chemical's fate and transport
through the environment, each chemical's relative toxicity, and
potential human exposure. One other commenter suggested that EPA use
existing data available in EJSCREEN to identify whether certain
communities should be prioritized by EPA in mitigating any adverse
impacts, and also to serve as a benchmark for measuring the effects of
this rule over time. EPA will explore opportunities to prioritize areas
with environmental justice concerns, particularly those related to
multiple or cumulative exposures to environmental hazards, and to
improve environmental justice analysis in future rulemakings. Updates
to the environmental justice analysis can be found in the RIA for this
final rulemaking, and notably, EPA explored larger radii (five and 10
miles) from identified facilities. Results at these larger radii are
similar to the average aggregate community characteristics near HFC
production facilities at one-
[[Page 55128]]
and three-mile distances contained in the proposed rulemaking RIA. To
examine the potential exposure of nearby communities to all reported
TRI air emissions from each HFC production facility, EPA extracted
concentrations weighted by toxicity for chemicals emitted by each
facility over a 50-kilometer radius from the RSEI-GM model. The one-,
three-, five- and 10 mile-buffers are shown on these maps and indicate
that the highest concentrations are immediately adjacent to the
facilities (i.e., within a mile). Toxicity-weighted concentrations
decline further from the facility as these releases disperse. The area
with moderate concentrations is mostly within the 10-mile buffer.
However, because of prevailing wind directions, toxicity-weighted
concentrations are not uniformly distributed around the facilities and,
in some cases, communities outside of the 10-mile buffer are still
exposed to elevated concentrations. Linking these toxicity-weighted
concentrations with specific communities of concern is an area of
investigation to improve environmental justice analyses. EPA will
further consider use of RSEI-GM for future regulatory analyses. EPA
also added information from EJSCREEN on wastewater discharges,
proximity to hazardous waste, ground-level ozone concentrations, and
particulate matter concentrations near HFC production facilities. The
Agency reiterates, consistent with our view in the proposed rulemaking,
that there is uncertainty around the role that HFC production plays in
emissions of these air toxics, as well as the impact that this program
will have on the location and amount of production of HFCs and their
substitutes and any associated air pollution emissions. The
environmental justice analysis is intended as a tool to inform
potential concerns. While EPA finds evidence of environmental justice
concerns near HFC production facilities from cumulative exposure to
existing environmental hazards in these communities, at this early
stage in the development of the HFC allowance allocation program, EPA
cannot, on the basis of this analysis, determine the extent to which
this rule will contribute to or reduce existing environmental justice
concerns for communities of color, low-income people, and/or indigenous
peoples. This is primarily due to uncertainty with regard to where and
in what quantities substitutes for high-exchange-value HFCs will be
produced.
In the proposed rulemaking, EPA specifically sought comment on
whether changes in emissions, particularly in communities that are
already disproportionately affected by air pollution, could occur as
the result of the HFC allowance allocation program, the associated
ability to transfer allowances, or other unrelated changes in the
market. EPA also sought comment on whether there are remedies that
could be applied as part of the design of the program in the event the
Agency determines such unintended distributional impacts exist. In
addition, EPA solicited comment on whether other regulatory authorities
would be more appropriate to address any inadvertent or unexpected
distributional effects that are identified, for example, if a producer
obtained allowances in sufficient quantities to increase HFC
production, which could potentially increase air emissions at that
location.
EPA received comments in response to the question of what the
Agency should consider for future rulemakings with respect to
environmental justice. Several commenters noted that the AIM Act does
not require EPA to consider environmental justice. Some commenters also
noted that enforcing existing controls or limits promulgated under
various other CAA authorities (e.g., criteria pollutants and air
toxics) or state and local regulations (e.g., permitted air toxics
limits) that would be applicable to HFCs and alternatives are
sufficient to address any potential environmental justice concerns, and
are also the most direct strategy for addressing such concerns.
In response, EPA reiterates that Executive Order 12898 (59 FR 7629;
February 16, 1994) and Executive Order 14008 (86 FR 7619, January 27,
2021) establish federal executive policy on environmental justice. As
outlined at the beginning of this section, the main provision of
Executive Order 12898 directs federal agencies, to the greatest extent
practicable and permitted by law, to make environmental justice part of
their mission by identifying and addressing, as appropriate,
disproportionately high and adverse human health or environmental
effects of their programs, policies, and activities on minority
populations and low-income populations in the United States.
Additionally, Executive Order 14008 calls on agencies to make achieving
environmental justice part of their missions ``by developing programs,
policies, and activities to address the disproportionately high and
adverse human health, environmental, climate-related and other
cumulative impacts on disadvantaged communities, as well as the
accompanying economic challenges of such impacts.'' Executive Order
14008 further declares a policy ``to secure environmental justice and
spur economic opportunity for disadvantaged communities that have been
historically marginalized and overburdened by pollution and under-
investment in housing, transportation, water and wastewater
infrastructure, and health care.'' Further, under Executive Order 13563
(76 FR 3821, January 18, 2011), federal agencies may consider equity,
human dignity, fairness, and distributional considerations, where
appropriate and permitted by law. In addition, the Presidential
Memorandum on Modernizing Regulatory Review calls for procedures to
``take into account the distributional consequences of regulations,
including as part of a quantitative or qualitative analysis of the
costs and benefits of regulations, to ensure that regulatory
initiatives appropriately benefit, and do not inappropriately burden
disadvantaged, vulnerable, or marginalized communities.'' EPA has
promulgated other regulations or limits under different authorities
that may affect the facilities identified in the RIA and the
surrounding communities, but EPA is also committed to taking a holistic
view of facilities affected by these rulemakings pursuant to the two
above-cited executive orders that direct EPA to make environmental
justice part of its mission for any and all rulemaking processes. In
such instances where other authorities may be a more appropriate
avenue, EPA expects that effects on surrounding communities and
associated mitigating solutions would be addressed through those
regulatory processes and under commensurate timelines.
Additionally, one commenter disagreed with assumptions underlying
EPA's environmental justice analysis. First, the commenter asserted
that Congress has previously recognized that feedstock emissions are
too insignificant to be a concern and has already provided other
authority to protect communities near industrial facilities (i.e.,
standards for hazardous air pollutants contained in sections 112(d) and
(f) of the CAA and codified in 40 CFR 63, specifically subparts F, G,
H, and I). Second, the commenter asserted that the Toxic Substances
Control Act (TSCA) risk evaluations are deficient and should not be
used as a basis for environmental justice regulations. Lastly, the
commenter asserted that more information is needed on background
concentrations and sources. EPA continues to rely on the latest
information available from the TSCA risk evaluation process to inform
the
[[Page 55129]]
potential for worker exposure from HFC feedstocks. These risk
evaluations did not assess air, water, or disposal exposures to the
general population when these exposure pathways are or can be regulated
under other EPA-administered statutes. However, EPA recently announced
plans to conduct additional analysis for the risk evaluations for seven
of the first 10 chemicals evaluated under the amended TSCA to ensure
that the risk evaluations did not overlook risk to fenceline
communities (i.e., communities near industrial facilities). EPA is also
revisiting the assumptions from the risk evaluations regarding the
assumed use of personal protective equipment for purposes of risk
determination. Following these additional analyses, EPA will issue
revised risk determinations on the whole chemical substance, rather
than on each condition of use. This has the potential to change the
unreasonable risk determinations under TSCA for some of the first 10
chemicals, including the four chemicals with risk evaluations completed
in 2020 (i.e., carbon tetrachloride, tetrachloroethylene,
trichloroethylene, and methylene chloride).
EPA is finalizing requirements for other provisions in this rule
that are relevant for environmental justice. For example, as further
explained in Section X.C.1, some commenters stated that providing
facility-level chemical-specific production data would be beneficial to
communities located adjacent to chemical manufacturing facilities. EPA
is determining in this final rulemaking that facility-level production
data is not entitled to confidential treatment, and EPA intends to
release this information to the public. This additional transparency
will allow neighboring communities to see how emissions from a
particular facility compare to changes in HFC production levels.
Finally, EPA received suggestions for additional ways that EPA
could consider environmental justice in future rulemakings, including
but not limited to: Considering indirect pollution effects, e.g.,
increased motor vehicle emissions; considering a comprehensive
emissions and release evaluation approach for all facilities including
all media and all applicable limits; integrating existing and newly
deployed fenceline monitoring data; evaluating the effects of producing
certain HFC substitutes on air and water quality; and evaluating how
exports of products and equipment containing HFCs could affect other
countries' environmental justice concerns. EPA acknowledges receipt of
these various comments, and will consider them, as appropriate, as we
develop future rulemakings.
As noted in the proposed rule and reiterated here, EPA intends to
develop another rule before allowances are allocated for calendar year
2024 that may alter the framework and procedure for issuing allowance
allocations established in this rule. EPA will continue to monitor the
impacts of this program on HFC and substitute production, and emissions
in neighboring communities, as we move forward to implement this rule.
EPA may consider taking appropriate action in the future--including
action--under CAA authorities, in future HFC allocation rules, or under
other relevant authorities, if we develop further information
indicating there is a risk of disproportionate impacts.
EPA notes that this rule affects a small number of entities through
a unique phasedown and allocation program, and that these entities
manufacture a wide variety of products and are subject to a number of
distinct market and regulatory forces independent of this HFC program.
As such, the issues and possible remedies identified here may not be
broadly applicable or practicable in other rulemakings.
V. What definitions is EPA establishing to implement the AIM Act?
EPA is establishing definitions to implement the framework for the
AIM Act generally and the allowance allocation and trading program
specifically. EPA proposed to define new terms that arise from the text
of the AIM Act. EPA also proposed to adopt existing definitions as
written in 40 CFR part 82, subpart A, with modifications as needed to
conform to differences in the AIM Act. EPA proposed this approach
because these definitions are commonly understood by those familiar
with the ODS phaseout experience.
Many proposed definitions did not garner specific comment. EPA is
finalizing them as proposed and further discussion of those terms can
be found in the proposed rule. These terms are: Central Data Exchange,
Consumption allowances, Destruction, Exporter, Facility, Foreign
country, Importer, Individual shipment, Non-objection notice, Person,
Production allowances, Production line, Transform, and Used regulated
substances.
The remainder of this section discusses comments received on the
remaining proposed definitions.
Allowance. The AIM Act defines allowance as a limited authorization
for the production or consumption of a regulated substance established
under subsection (e). EPA is adopting that definition and adding that
an allowance allocated under this subsection does not constitute a
property right as stated in subsection (e)(2)(D)(ii)(aa). The framework
for issuing allowances is subject to change through notice and comment
rulemaking.
One commenter stated that the discretion to retire, revoke, or
withhold allowances should not be within the definitions of allowance
or application-specific allowance. EPA is removing this text from the
regulatory definitions of allowance and application-specific allowance
in this final rulemaking. While the Agency has the authority to adjust
allowances and is finalizing regulatory text outlining the
circumstances in which such adjustments may occur and a process for
levying administrative consequences, reiterating a statement of that
authority in the definitions is unnecessary.
Bulk. EPA is defining this term as ``a regulated substance of any
amount that is in a container for the transportation or storage of that
substance such as cylinders, drums, ISO tanks, and small cans. A
regulated substance that must first be transferred from a container to
another container, vessel, or piece of equipment in order to realize
its intended use is a bulk substance. A regulated substance contained
in a manufactured product such as an appliance, an aerosol can, or a
foam is not a bulk substance.'' The examples provided in the definition
are not exclusive. This definition serves to distinguish between a
regulated substance that is in a container from a regulated substance
that is in a product or other type of use system. Imported equipment
and products that contain HFCs are outside the scope of the allowance-
based phasedown component of the AIM Act.
One commenter requested that EPA clarify that the reference to
small cans in the proposed definition does not include consumer
products such as air conditioning recharge kits, drain cleaners, and
other products that contain HFCs. The commenter expressed concern that
requiring tracking of such products would impose significant regulatory
burdens and costs. EPA responds that small cans of HFCs qualify as
containers of bulk HFCs under this rule and the HFC allowance
allocation program it establishes if the HFC must first be transferred
from the small can to a piece of equipment in order to realize its
intended use. Air conditioning recharge kits are small cans of
refrigerant used to recharge motor vehicle air conditioners and would
therefore qualify as a container of bulk HFC. Their size and intended
[[Page 55130]]
customer do not change the fact that they are containers and not
products for purposes of this program, notwithstanding the commenter's
concern, which EPA acknowledges, that tracking such products could be
burdensome. The fact that some HFCs are housed in small containers does
not remove them from the total inventory of HFCs for which EPA must
account in implementing the phasedown mandate prescribed in the AIM
Act. Thus, under the structure being finalized in this rule, allowances
will be needed to import these air conditioning recharge kits.
Similarly, those that have provided data on historical imports of small
cans of refrigerant are eligible to receive an allowance allocation
from the Agency under the framework finalized here. Entities that have
not reported previously have options to receive allowances under the
set-aside discussed in section VII.E. Without more information on drain
cleaners, EPA cannot confirm whether this would be a container of bulk
HFCs. If it can realize its intended use (e.g., cleaning drains)
without the need to transfer HFCs from a container to a piece of
equipment, it would likely not be a bulk container.
One commenter argued that cylinders containing HFCs that are used
in total flooding fire suppression systems are not bulk containers and
so import of these cylinders would be considered as a ``product
containing'' HFCs under the proposed rule. EPA disagrees. System
cylinders are pressurized cylinders that contain a chemical (in this
case an HFC), and therefore resemble other bulk chemicals. Regardless
of its intended use, it is an HFC in a container that needs to be
transferred to a piece of equipment to realize its intended purpose
(i.e., the extinguishant is incorporated into the total flooding system
from these containers). Consistent with regulations under CAA title VI,
EPA has treated pressurized system cylinders used in total flooding
fire suppression systems differently than handheld, wheeled, and other
fire suppression systems. The latter are self-contained, ready-to-use
systems that can realize their intended use without transfer of the
HFCs to another product or container. Fire suppression system cylinders
must be connected to the rest of the fire suppression system to realize
their intended use. EPA has previously considered whether system
cylinders in total flooding applications were covered by the
Nonessential Products Ban under section 610 of the CAA. The Agency
stated: ``EPA recognizes that total flooding agents contained in total
fire suppression systems used to extinguish fires are different from a
portable device used to extinguish fires.'' The Agency went on to
explain: ``These total flooding systems differ from an aerosol product
or pressurized dispenser in that total flooding systems are `systems'
that are completely installed and can be triggered to be automatically
activated during an emergency situation. The extinguishant is
incorporated into the system from bulk containers. Accordingly, ``such
systems thus do not constitute a pressurized dispenser or aerosol
product within the meaning of section 610. Portable fire extinguishers,
on the other hand, do constitute a pressurized dispenser, as they
provide the product and dispensing apparatus in a self-contained
portable unit.'' (58 FR 69647, December 30, 1993)
Additionally, under the class I ODS phaseout regulations in 40 CFR
part 82, subpart A, fire suppression system cylinders are treated as a
bulk substance. Companies that import used halons must petition the
Agency prior to import under 40 CFR 82.13, with the exception of halon
aircraft bottles, and report these imports to EPA. Given fire
suppression system cylinders using HFCs have the same function as those
for ODS, EPA concludes that it is reasonable to treat system cylinders
of HFCs as bulk substances under this rule and the HFC allowance
allocation program it establishes. The fact that some HFCs are housed
in fire suppression system cylinders does not remove them from the
total inventory of HFCs for which EPA must account in implementing the
phasedown mandate prescribed in the AIM Act.
Chemical vapor deposition chamber cleaning. EPA proposed to define
this term as ``in the context of semiconductor manufacturing, a process
type in which chambers used for depositing thin films are cleaned
periodically using plasma-generated fluorine atoms and other reactive
fluorine-containing fragments.'' This definition is based closely on
the source category definition for electronics manufacturing in the
GHGRP (40 CFR 98.90(a)(2)).
Some commenters suggested that EPA use the GHGRP term and
definition for ``chamber cleaning'' from 40 CFR 98.98 for consistency
with reporting under that program. EPA is defining ``chemical vapor
deposition chamber cleaning'' in this rule because Congress provided
that EPA allocate allowances necessary for ``the etching of
semiconductor material or wafers and the cleaning of chemical vapor
deposition chambers within the semiconductor manufacturing sector''
(emphasis added) in subsection (e)(4)(B)(iv). This is narrower than the
term defined under GHGRP, which is ``chamber cleaning.'' The term
``chamber cleaning'' under the GHGRP is broader and contains more
process types than chemical vapor deposition. EPA is not aligning the
term with the term defined under GHGRP given the specific language of
the AIM Act. EPA is, however, broadening the description of the process
type to explicitly include chamber cleaning by thermally dissociated
fluorine fragments.
Confer. EPA is defining this term as ``to shift unexpended
application-specific allowances obtained in accordance with subsection
(e)(4)(B)(iv) of the AIM Act from the end user allocated such
allowances to one or more entities in the supply chain for the
production or import of a regulated substance for use by the end
user.'' This term is intended to distinguish conferring an allowance
from an allowance transfer. A company receiving conferred allowances
may produce or import HFCs with those application-specific allowances
on behalf of the conferrer rather than expending calendar year
production or consumption allowances. There is no offset for the
conferring of allowances.
A few commenters stated that there may be more than one entity in
the supply chain between the producer/importer and the application-
specific end user, such as a purifier. In that instance, a commenter
wanted EPA to allow for the re-conferral of application-specific
allowances without the transaction being considered a transfer. EPA
understands that the supply chains may be unique to each particular end
use and is clarifying that application-specific allowances may be re-
conferred as needed. EPA has amended the definition of ``confer''
finalized in this rulemaking to state that application-specific
allowances may be conferred one or multiple times to entities in the
supply chain. EPA is also amending the recordkeeping and reporting
provisions to ensure that all entities in the conferral chain are
identified.
Consumption. With respect to the definition of ``consumption,''
commenters stated that the statutory definition of consumption in the
AIM Act includes ``all imports'' and does not distinguish between
imports of chemicals in large quantities for later use in a product
manufactured in the United States and imports of the same chemical
already contained in such a product manufactured abroad. The commenters
disagreed with EPA excluding HFCs contained in imported products from
the calculation of consumption, thereby excluding
[[Page 55131]]
imported products containing HFCs from the calculation of the baseline
and from the requirement to obtain and expend allowances.
EPA responds that the Agency is finalizing its proposed reading of
the definition of consumption, and in this context, the adopted
reference of the term ``import,'' as being limited to bulk substances.
In doing so, EPA is drawing a distinction between the import of bulk
regulated substances and the import of regulated substances contained
in products, and concludes, as explained below, that the definition of
``consumption'' is appropriately read to be limited to import of bulk
substances.\32\ The effect of this decision is that consumption
allowances are required for the import of bulk HFCs and not for the
import of products containing HFCs. As explained here and in section
VI.A, the definition of ``consumption'' in the AIM Act is ambiguous and
does not speak directly to whether imported products containing HFCs be
included in the consumption baseline or subject to the allowance
obligation. EPA further concludes that the AIM Act's definition of
``consumption'' is reasonably interpreted not to encompass imports of
products containing HFCs, because doing so: (1) Is consistent with
EPA's longstanding practice under the closely related provisions of
title VI of the CAA; and (2) would create severe implementation
difficulties, requiring EPA to obtain decades-old baseline data that
almost certainly no longer exist, vastly expanding the number of
regulated entities, and sweeping in a range of businesses (such as
retailers) that likely did not anticipate being subject to these
regulations.
---------------------------------------------------------------------------
\32\ As discussed earlier in this definitions section, EPA is
defining a bulk substance as ``a regulated substance of any amount
that is in a container for the transportation or storage of that
substance such as cylinders, drums, ISO tanks, and small cans. A
regulated substance that must first be transferred from a container
to another container, vessel, or piece of equipment in order to
realize its intended use is a bulk substance. A regulated substance
contained in a manufactured product such as an appliance, an aerosol
can, or a foam is not a bulk substance.''
---------------------------------------------------------------------------
EPA's resolution of this interpretive issue begins with the text of
the statute. The AIM Act does not directly address whether products
containing HFCs that are imported to the country should be included in
the Agency's consideration of ``consumption.'' In subsection (b)(3),
Congress defined ``consumption'' to include ``the quantity of regulated
substance imported into the United States,'' but did not direct EPA as
to how to determine such ``quantity.'' Congress particularly did not
direct EPA as to whether this includes the import of products that
contain regulated substances versus the import of regulated substances
themselves. Because the statute does not address this, the Agency is
left to interpret the statute in a reasonable manner. Because this
instance ``involves an administrative agency's construction of a
statute that it administers, [the] analysis is governed by Chevron.''
Food & Drug Admin. v. Brown & Williamson Tobacco Corp., 529 U.S. 120,
132 (2000). Under the Chevron framework, the initial inquiry is
``whether Congress has directly spoken to the precise question at
issue.'' Chevron U.S.A. Inc. v. Natural Resources Defense Council,
Inc., 467 U.S. 837, 842 (1984). ``In determining whether Congress has
specifically addressed the question at issue, [the analysis] should not
[be confined] to examining a particular statutory provision in
isolation. The meaning--or ambiguity--of certain words or phrases may
only become evident when placed in context.'' FDA, 529 U.S. at 133.
Here, there is no statutory text in the AIM Act--and the commenter was
not able to provide any citation to such text--that unambiguously
requires EPA to consider imports of products containing regulated
substances in the calculation of ``consumption,'' in addition to
considering the imports of bulk regulated substances.
While EPA understands that the phrase ``quantity of the regulated
substances into the United States'' could be read to include regulated
substances contained in products imported into the United States, that
is not the only permissible reading. Rather, this language can also
reasonably be read to include only imported bulk substances. To inform
the Agency's analysis of whether Congress has directly spoken to the
precise question at issue, the Agency has looked to the definition of
``consumption'' under title VI of the CAA. The title VI statutory
definition of ``consumption'' is analogous to the parallel definition
in the AIM Act, and thus EPA looked to the title VI definition on the
question of whether the AIM Act statutory language is unambiguous. The
AIM Act language is substantially similar to the definition of
``consumption'' provided by Congress for the phaseout of ODS in section
601(1) of the CAA, which defines the term ``consumption'' to include
``the amount'' of ODS ``imported,'' but additionally states that
``[s]uch term shall be construed in a manner consistent with the
Montreal Protocol.'' This demonstrates that Congress understood, in the
context of the CAA, that the term ``consumption,'' including the
embedded phrase ``the amount imported,'' could reasonably be read in
different ways. Under the Montreal Protocol, calculation of a country's
consumption is limited to bulk substances and does not include imports
of products containing ODS. Consistent with that practice, EPA has
applied the ODS production and consumption controls under title VI of
the CAA to bulk ODS, but not to products containing ODS. The term ``the
amount'' in the CAA is substantially similar to ``the quantity'' in the
parallel definition of the AIM Act, which demonstrates that the AIM Act
provision can be interpreted in multiple ways, so Congress did not
speak directly to the question of whether ``consumption'' under the AIM
Act should include imports of products containing regulated substances.
As further explained elsewhere in this preamble, EPA is reasonably
interpreting the AIM Act to have a similar scope and meaning as title
VI. Lawson v. FMR LLC, 571 U.S. 429, 459 (2014) (``[P]arallel text and
purposes counsel in favor of interpreting . . . two provisions
consistently.'').
In addition, looking to the larger statutory context, in defining
``consumption'' in subsection (a)(3) of the AIM Act, Congress used the
phrase ``the quantity of'' the regulated substance not only to refer to
the quantity of the regulated substance imported into the United
States, but also to refer to the quantity of the regulated substance
produced in the United States, as well as the quantity exported from
the United States. The ``quantity of'' the regulated substance produced
in the United States is readily understood to include bulk substances,
particularly in light of the statutory definition of ``produce,'' but
it would be difficult to interpret this phrase to extend to products
containing HFCs. Such products could include either domestic or
imported HFCs. Interpreting the phrase ``the quantity of'' a regulated
substance to include only bulk substances reasonably applies the same
understanding of this term across all the instances where it is used in
the definition of consumption. These points further support EPA's views
that ``the quantity'' as used in the AIM Act is open to more than one
possible construction and that it can reasonably be read to be limited
to bulk substances. Since the definition of ``consumption'' in the AIM
Act can be read in different ways, this issue is not decided under the
first step of the Chevron analysis.
[[Page 55132]]
Since the AIM Act does not provide unambiguous direction as to
whether imported products containing HFCs should be considered part of
``consumption,'' EPA is given discretion to interpret the statute, as
long as such construction is reasonable, under the second step of the
Chevron analysis. Where Congress has not directly spoken to an issue or
has left ambiguity in the statute, that silence or ambiguity creates an
assumption that ``Congress implicitly delegated to the agency the power
to make policy choices that represent a reasonable accommodation of
conflicting policies that are committed to the agency's care by the
statute.'' National Ass'n of Mfrs. v. United States DOI, 134 F.3d 1095,
1106 (D.C. Cir. 1998). The ``power of an administrative agency to
administer a congressionally created . . . program necessarily requires
the formulation of policy and the making of rules to fill any gap left,
implicitly or explicitly, by Congress.'' Chevron, 467 U.S. at 843-44.
The Supreme Court has explained ``[w]e accord deference to agencies
under Chevron . . . because of a presumption that Congress, when it
left ambiguity in a statute meant for implementation by an agency,
understood that the ambiguity would be resolved, first and foremost, by
the agency, and desired the agency (rather than the courts) to possess
whatever degree of discretion the ambiguity allows.'' Smiley v.
Citibank (S.D.), N.A., 517 U.S. 735, 740-41 (1996). Accordingly,
Congress's silence with regard to whether imports of products
containing HFCs should be considered in the determination of
``consumption'' leaves a gap for the Agency to fill, which EPA is doing
in this rulemaking.
Excluding imports of products containing HFCs from the definition
of ``consumption'' is consistent with EPA's longstanding practice in
implementing nearly identical statutory language governing a nearly
identical industry under title VI of the CAA. As further explained in
Section II.B, there are significant similarities in the text,
structure, function, and purpose of the provisions for production and
consumption in the AIM Act and those in title VI of the CAA.
Accordingly, EPA is utilizing its experience interpreting similar
statutory terms under the CAA to phase out ODS when developing the AIM
Act's HFC allowance allocation and trading program.\33\ Moreover, the
close similarities in text, structure, function, and purpose between
title VI and the AIM Act make it reasonable to infer that Congress was
aware of EPA's approach of applying the ODS production and consumption
controls under title VI to bulk substances but not products, including
imported products, and did not intend to require EPA to depart from
that approach under the AIM Act. See FPC v. Sierra Pacific Power, 350
U.S. 348 (1956) (determining that an interpretation of the Natural Gas
Act was ``equally applicable'' to the Federal Power Act given that
``the provisions of the Federal Power Act relevant to [the] question
are in all material respects substantially identical to the equivalent
provisions in the Natural Gas Act.''). See also Arkansas Louisiana Gas
Co. v. Hall, 435 U.S. 571 (1981) (citing to FPC v. Sierra Pacific Power
for a similar premise); NTEU v. Chertoff, 452 F.3d 839, 857 (D.C. Cir.
2006) (``There is a presumption that Congress uses the same term
consistently in different statutes.''); Smith v. City of Jackson,
Miss., 544 U.S. 228, 233 (2005) (emphasizing the ``premise that when
Congress uses the same language in two statutes having similar
purposes, . . . it is appropriate to presume that Congress intended
that text to have the same meaning in both statutes'').
---------------------------------------------------------------------------
\33\ For purposes of implementing the ODS phaseout regulations
(40 CFR part 82, subpart A), EPA defined a controlled substance, in
part, as any listed ODS, whether existing alone or in a mixture, but
excluding any such substance or mixture that is in a manufactured
product other than a container used for the transportation or
storage of the substance or mixture. Any amount of a listed
substance that is not part of a use system containing the substance
is a controlled substance. If a listed substance or mixture must
first be transferred from a bulk container to another container,
vessel, or piece of equipment in order to realize its intended use,
the listed substance or mixture is a ``controlled substance.''
---------------------------------------------------------------------------
In addition to these considerations, including imports of products
containing HFCs in the calculation of consumption, and thereby
including them in the regulatory allocation and phasedown program,
would significantly increase the universe of regulated entities and
reporters subject to this program. New categories of affected
industries would include large-scale retailers that directly import
products such as air conditioning units, refrigerators, fire
extinguishers, and consumer aerosol products. These entities have never
been subject to allowance obligations under title VI, and EPA finds it
reasonable to infer that Congress did not expect or intend to place
allowance obligations on this vast array of entities under the closely
related provisions of the AIM Act. Courts have previously supported
statutory interpretations that enable sensible regulations as opposed
to readings that ``would radically transform those programs and render
them unworkable as written.'' Utility Air Regulatory Group v. EPA, 134
S. Ct. 2427, 2442 (2014) (holding that EPA was not compelled to
interpret the Clean Air Act's reference to ``any air pollutant'' as
requiring the Agency to consider greenhouse gases in determining
whether a source was major for purposes of new source review and CAA
Title V permitting).
Further, it would be administratively impossible for EPA to gather
data necessary to incorporate imports of products containing HFCs into
the statutorily defined calculation of the baseline to a degree that
matches the surety and caliber of data otherwise included in that
calculation. Congress directed EPA to add figures for consumption of
HCFCs and CFCs in 1989 in calculating baselines. If EPA were to read
such a reference to ``consumption'' as encompassing imports of products
containing chemicals, the Agency would need data on imports of products
containing HCFCs and CFCs back in 1989. We are not aware of any source
of this information, and it seems impossible that a comprehensive set
of businesses would have actual data from that time period that EPA
could obtain. One commenter noted that EPA could rely on estimates or
modeled data from that time period and provided trade data for certain
types of products that were imported in 1989, but such imprecise
calculations would not match the certainty of data on which EPA is
currently relying to calculate the baseline. In light of these
challenges, the ambiguity of the statutory text, and the close
similarities in the term ``consumption'' as used in title VI and the
AIM Act, EPA concludes that it is reasonable to interpret the statutory
term ``consumption,'' and the adopted reference of the term ``import,''
as including only bulk substances.
Defense spray. EPA is defining this term as ``an aerosol-based
spray used for self-defense, including pepper spray and animal sprays,
and containing the irritant capsaicin and related capsaicinoids
(derived from oleoresin capsicum), an emulsifier, and an aerosol
propellant.'' Two commenters stated their support of the proposed
definition for defense spray. EPA is finalizing the definition as
proposed.
Etching. EPA proposed to define etching as, ``in the context of
semiconductor manufacturing, a process type that uses plasma-generated
fluorine atoms and other reactive fluorine-containing fragments that
chemically react with exposed thin-films (e.g., dielectric, metals) or
substrate (e.g.,
[[Page 55133]]
silicon) to selectively remove portions of material. This includes
production processes using fluorinated GHG reagents to clean wafers.''
This definition is closely based on the definition of the electronics
manufacturing source category in the GHGRP (40 CFR 98.90(a)(1)) and on
the GHGRP definition of ``wafer cleaning'' (40 CFR 98.98).
Some commenters suggested that EPA expand the definition of
``etching'' to include ``wafer cleaning.'' EPA agrees that it is
appropriate to include ``wafer cleaning'' in the definition of
``etching'' and is doing so in the final rule. Wafer cleaning involves
using fluorinated GHG reagents to remove residual material from wafers,
and other etching processes involve using fluorinated GHG reagents to
remove materials from a substrate, which includes wafers. Under the
GHGRP, the same emission factors are used for wafer cleaning as for
other etching processes. Commenters also recommended that EPA use the
GHGRP definition of ``etching'' at 40 CFR 98.98 for consistency with
the GHGRP. In the final rule, we are retaining the language from the
description of etching in the GHGRP source category definition for
electronics at 40 CFR 98.90. This language is briefer and more
comprehensive than the definition of ``etching'' at 98.98, which
includes potentially limiting language. Another commenter said that EPA
should clarify that ``etching'' includes the use of HFCs as heat
transfer fluids in chillers used ``to control the temperature during
the etching process.'' EPA responds that the Agency interprets the AIM
Act's language on the ``exclusive use of the regulated substance solely
for . . . the etching of semiconductor material or wafers . . .'' to
not include processes adjacent to or in support of the application
itself. Therefore, EPA is not accepting this proposed addition to the
term.
Exchange value. The AIM Act defines ``exchange value'' as the value
assigned to a regulated substance in accordance with subsections (c)
and (e), as applicable. Subsection (c) includes a list of regulated
substances with listed exchange values. Subsection (e) includes a list
of ODS with listed exchange values. EPA is adopting the definition
contained in the AIM Act, including the tables, which EPA is
replicating in Appendix A of 40 CFR part 84.
Exchange value equivalent. EPA uses the term ``exchange value
equivalent'' or ``EVe'' to provide a common unit of measure between
HFCs. EVe is determined by multiplying the mass of a regulated
substance by the exchange value of that substance. For example, 50
kilograms of HFC-134a would be 71,500 kgEVe (50 x 1,430). This can also
be written as 71.5 metric tons exchange value equivalent (MTEVe). As
explained further in Section VII.A on allowances, EPA is issuing
allowances in units of 0.1 MTEVe. EPA is also using the term ``EV-
weighted'' to describe a number presented in exchange value
equivalents. For example, the size of an allowance is one EV-weighted
ton.
EVe allows for the comparison between different regulated
substances. For example, a blend containing multiple regulated
substances would have an EVe that could be used to determine the
quantity of allowances needed to produce or consume the regulated HFCs
that are components of the blend. However, the EVe would only reflect
the components of the blend that are regulated substances under the AIM
Act. In situations where the blend contains components that are not
regulated substances (e.g., HFOs), the EVe would not match the GWP of
the blend and would be slightly lower. This would be the case for
blends R-448A,\34\ R-449A, and R-450A, which contain a mix of HFCs and
HFOs.
---------------------------------------------------------------------------
\34\ Many blends contain HFCs and non-regulated substances such
as HFOs. For example, R-448A is made of five components, three of
which are HFCs regulated under the AIM Act and two of which are
HFOs. The percentage of the blend and the exchange value of the
constituents are: 26 percent HFC-32 (675), 26 percent HFC-125
(3,500), 21 percent HFC-134a (1,430), 20 percent HFO-1234yf (0), and
7 percent HFO-1234ze (0). The contribution of each HFC to the total
EVe of the blend is calculated by multiplying the percentage of the
blend made up of that HFC times its EVe, and the sum of the
contributions of all the blend constituents is the blend EVe. Thus,
the EVe of R-448A is (0.26 x 675) + (0.26 x 3,500) + (0.21 x 1,430)
+ (0.20 x 0) + (0.07 x 0) = 1,385.8.
---------------------------------------------------------------------------
One commenter agreed with EPA's proposed definition of ``exchange
value equivalent'' and the calculation of EVe for blends. The commenter
stated that the term correctly incentivizes the use of low-GWP
components.
Export. EPA is finalizing its proposed definition for export and is
clarifying that under this definition, HFCs admitted into a foreign-
trade zone or other duty deferral program under CBP regulations are not
exported for purposes of Part 84 regulations.
Final customer. EPA proposed to define this term as ``the last
person to purchase a bulk regulated substance before its intended
use.'' For each use of HFCs, the final customer can be different. For
example, an air conditioning contractor would generally be the final
customer in the residential air conditioning market. For foams, the
foam systems house would be the final customer, as they are making a
product (i.e., a foam system). Likewise, aerosol fillers, semiconductor
manufacturers, air conditioning and refrigeration equipment
manufacturers that ship equipment pre-charged, and fire extinguisher
manufacturers would be final customers. EPA requested comment on
whether a list of examples like this should be incorporated into the
definition and the Agency received comments in support of doing so. EPA
is finalizing the definition with a list of example final customers to
provide clarity. The examples provided in the definition are not
exhaustive.
Commenters also requested additional detail on who the final
customer would be in particular circumstances. Commenters were
primarily concerned with the burden associated with the certification
ID tracking system and sought to reduce uncertainty about who would be
subject to those requirements. EPA responds to this comment in Section
IX.G of this preamble.
Import. EPA is adopting the definition of the term ``import''
contained in subsection (b) of the AIM Act, which is nearly identical
to the definition of ``import'' in 40 CFR part 82, and adding one of
the three exemptions from the part 82 definition as proposed. EPA is
also clarifying that under this definition, whether HFCs are admitted
into or exiting a foreign-trade zone or other duty deferral program
under CBP regulations does not affect whether the HFCs are being
imported for purposes of Part 84. The AIM Act defines import as to land
on, bring into, or introduce into, or attempt to land on, bring into,
or introduce into, any place subject to the jurisdiction of the United
States, regardless of whether that landing, bringing, or introduction
constitutes an importation within the meaning of the customs laws of
the United States.
EPA is including an exemption for the offloading of used regulated
substances from a ship during servicing in a U.S. port. The Agency does
not consider material recovered from equipment onboard a vessel to be
an import as it is analogous to material that has been recovered from
air conditioning and refrigeration equipment during servicing,
maintenance, repair, and disposal on that vessel. The exemption is
limited to HFCs that are in an appliance or other piece of equipment
(e.g., for fire suppression) as it moves across international borders.
This exemption recognizes that sometimes onboard equipment needs to be
serviced and used refrigerant offloaded. As noted in the proposal,
treating this as an import would create a perverse incentive to
improperly manage
[[Page 55134]]
regulated substances. EPA has taken a similar approach under CAA title
VI. Given such material is used, further sales or offer for sale of
this offloaded material for any purpose other than reclamation,
recycling for reuse onboard the vessel, recycling of fire suppression
agents, or destruction is prohibited. This limited exemption only
applies to used HFCs that were recovered during servicing from
equipment in use on the vessel. It does not apply to containers of
virgin HFCs. This situation is different from an import of used
regulated substances that is transported over the border, because it
would not otherwise be traveling across the border without the intent
to import into the United States. To ensure the integrity of the
allowance allocation and trading program, the marine vessel, aircraft,
or other aerospace vehicle must maintain records documenting the
company name, location of the appliance, date of recovery, person doing
the recovery, and the amount of HFC recovered and type of refrigerant
recovered for each servicing event.
One commenter recommended that EPA broaden the exemption for the
offloading of used material to aircraft and space vehicles since the
global nature of maritime vessels is similar to aerospace vehicles. EPA
agrees that servicing of aircraft and other aerospace vehicles that
arrive in the United States from another country is similar to the
servicing of marine vessels. Therefore, EPA is clarifying in the
definition that offloading used regulated substances recovered from
equipment onboard a marine vessel, aircraft, or other aerospace vehicle
during servicing in the United States is not considered an import.
EPA notes that overseas U.S. government locations, including on
vessels, in military units, and at fixed facilities (e.g., military
bases, embassies, or consulates) often require a supply of HFCs in
support of equipment, for example in air-conditioning, refrigeration,
and fire suppression. Some of these HFCs are routinely returned to the
United States and these returns by federal entities are not classified
as ``imports'' under current customs laws and regulations. EPA had not
considered the return of federally owned ODS to the United States to be
an import under CAA title VI and is maintaining that interpretation for
purposes of the HFC allowance allocation and trading program. Examples
of situations that would not qualify as imports include:
<bullet> U.S. naval vessels routinely carry spare HFC refrigerant
and fire suppressant cylinders for potential servicing and
replenishment requirements while deployed. If the HFCs in these
cylinders are not used while the vessel is underway, the vessel may
return to the United States and off-load the cylinders.
<bullet> U.S. Armed Forces units deploying to overseas locations
often transport HFCs in cylinders to service their military equipment
and upon return from deployment will bring any remaining HFCs back to
the United States with them.
<bullet> U.S. Government fixed facilities overseas have
refrigerants removed and recovered during equipment servicing or when
the equipment is replaced or retired from service. Since this
refrigerant may be excess or may need to be reclaimed prior to reuse in
other equipment, the recovered refrigerants may be shipped back to the
United States for reclamation or disposal if the host nation does not
have refrigerant reclamation or disposal capabilities.
Metered dose inhaler. EPA is defining an MDI as ``a handheld
pressurized inhalation system that delivers small, precisely measured
therapeutic doses of medication directly to the airways of a patient.
MDIs treat health conditions such as asthma and chronic obstructive
pulmonary disease and are approved for such use by the United States
Food and Drug Administration (FDA).'' This definition is substantially
similar to the definition of ``essential metered dose inhaler'' in 40
CFR part 82.
Commenters generally agreed with this definition. One commenter
recommended that the definition should be expanded beyond the treatment
of asthma and chronic obstructive pulmonary disease (COPD) to include
other conditions. EPA responds that the definition as proposed
encompasses other uses of MDIs so long as they are approved by the FDA.
While asthma and COPD may be the two most common conditions treated by
MDIs, the list is not exclusive, as indicated by the words ``such as.''
EPA is therefore finalizing the definition as proposed. We have updated
the market characterization to include other conditions treated by
MDIs.
Mission-critical military end uses. EPA proposed to define this
term as ``those uses of regulated substances by an agency of the
Federal Government responsible for national defense which have a direct
impact on mission capability, as determined by the U.S. Department of
Defense (DOD), including, but not limited to uses necessary for
development, testing, production, training, operation, and maintenance
of Armed Forces vessels, aircraft, space systems, ground vehicles,
amphibious vehicles, deployable/expeditionary support equipment,
munitions, and command and control systems.''
Commenters suggested that the definition is too narrow or ambiguous
and excludes uses of regulated substances by non-DOD federal entities
that are involved in national defense or security, and local, state,
and foreign governments. Commenters also requested that EPA ensure the
definition covers use of HFCs in equipment approved by the United
States Government for either Foreign Military Sales or Direct
Commercial Sales. Commenters asked for clarification that uses by
federal defense contractors, including those used within the
manufacture of mission-critical products, are covered.
EPA is not expanding the definition of ``mission-critical military
end uses'' (emphasis added) to cover non-military applications.
Expanding the definition to cover non-military applications, even if
related to national defense or security, would not be consistent with
the statute. The definition directs the DOD to determine what end uses
are mission-critical; it is not appropriate to provide that authority
to state, local, or foreign governments. EPA is also not amending its
proposed definition to include Foreign Military Sales and Direct
Commercial Sales. Under Foreign Military Sales, the United States
Government manages new sales of defense equipment to foreign allies and
partners. Under Direct Commercial Sales, the U.S. Department of State
provides regulatory approvals for sales negotiated privately between
foreign end users and American companies. DOD is involved in reviewing
both types of sales. Such sales could already be covered under the
proposed definition as they are included in the ``production . . . of
Armed Forces vessels . . .'' DOD must determine such sales to be
mission-critical.
Onboard aerospace fire suppression. EPA is finalizing a definition
of this term as ``use of a regulated substance in fire suppression
equipment used onboard commercial and general aviation aircraft,
including commercial-derivative aircraft for military use; rotorcraft;
and space vehicles,'' which differs in some respects from the proposed
definition based on EPA's consideration of public comments. EPA is also
finalizing a separate definition for space vehicles consistent with the
definition in 40 CFR 82.3. EPA requested comment on whether the
definition of onboard aerospace fire suppression should include general
aviation, which consists of private and/
[[Page 55135]]
or business aircraft, which may not have the same requirements as
commercial aircraft for onboard aerospace fire suppression systems. The
proposed definition excluded military aircraft because they are covered
under the definition of mission-critical military end uses.
Commenters from the onboard aerospace fire suppression sector
requested that EPA provide flexibility in the use of application-
specific allowances within the aerospace and defense sectors or revise
the definition for onboard aerospace fire suppression to allow the use
of HFCs for military onboard aerospace fire suppression so that fire
suppression systems are not limited to commercial aircraft
applications, as opposed to aircraft used for military, recreational,
or test purposes. Specifically, one commenter stated that there is not
a clear distinction between commercial use and military use of HFCs for
onboard aerospace fire suppression equipment. The commenter explained
that in some cases, aircraft intended for sale to military customers
are built using commercial aircraft designs that are modified for
military use, and in other cases, the aircraft is built to commercial
specifications and then modified for military use (``commercial
derivatives''). Another commenter recommended that EPA allow for the
use of HFCs for military onboard aerospace fire suppression under this
application due to uncertainties involved in the mission-critical
military end use application. EPA is modifying the definition to
include commercial derivatives for military use and rotorcraft.
As noted in the proposal, EPA has previously defined ``space
vehicle'' under title VI regulations at 40 CFR 82.3 as a man-made
device, either manned or unmanned, designed for operation beyond
Earth's atmosphere. This definition includes integral equipment such as
models, mock-ups, prototypes, molds, jigs, tooling, hardware jackets,
and test coupons. Also included is auxiliary equipment associated with
test, transport, and storage, which through contamination can
compromise the space vehicle performance. EPA requested comment on
whether ``space vehicle,'' as defined in 82.3, is inclusive of
applications that would be considered as onboard aerospace fire
suppression.
A comment regarding the definition of ``space vehicle'' asked that
it explicitly cross-reference the part 82 definition and extended to
include aircraft in addition to space vehicles. EPA has included a
definition of ``space vehicle'' that is consistent with the definition
in 40 CFR 82.3 for clarity. It appears that in asking the definition to
be extended to include aircraft, the commenter is requesting that HFCs
used for fire suppression systems in models, mock-ups, prototypes, etc.
for any onboard aerospace application, including aircraft, also be
included within the definition of onboard aerospace fire suppression.
EPA is not finalizing this suggestion. The Agency understands that
there are a limited number of space vehicles and that the conditions
they operate in are unique and include exposure to extreme heat and
cold cycling, ultra-vacuum, atomic oxygen, and high-energy radiation.
Given this set of factors does not apply to aircraft, it is appropriate
to use a narrower definition for space vehicles that is consistent with
the approach taken under the CAA.
Some commenters asked for the definition for onboard aerospace fire
suppression to include aerospace applications of HFCs necessary to
suppress the development of in-flight fires, and not solely fire
extinguishing ``equipment'' and ``systems.'' A commenter provided an
example of HFC solvents to clean or flush oxygen systems. The Agency
does not view this as fire suppression but as a solvent use. The Agency
will only consider HFC use in systems or equipment that are discharged
to extinguish live fires, or in specialized applications for explosion
suppression and inerting against explosions and fires. These are the
technical definitions of what these systems and equipment are made to
do.\35\ An overly broad interpretation of ``onboard aerospace fire
suppression'' would undercut the intent of the AIM Act.
---------------------------------------------------------------------------
\35\ Robert T. Wickham. ``Status of Industry Efforts to Replace
Halon Fire Extinguishing Agents,'' March 2002. Available at <a href="https://www.epa.gov/sites/default/files/2015-07/documents/status.pdf">https://www.epa.gov/sites/default/files/2015-07/documents/status.pdf</a>.
---------------------------------------------------------------------------
Process agent. The AIM Act uses the term ``process agent'' without
defining it. EPA is defining the term as ``the use of a regulated
substance to form the environment for facilitating a chemical reaction
or inhibiting an unintended chemical reaction (e.g., use as a solvent,
catalyst, or stabilizer) where the regulated substance is not consumed
in the reaction, but is removed or recycled back into the process and
where no more than trace quantities remain in the final product. A
feedstock, in contrast, is consumed during the reaction.'' \36\ This
definition matches the definition used by the Montreal Protocol's
Technology and Economic Assessment Panel (TEAP) and is well-established
and understood in the ODS context.\37\
---------------------------------------------------------------------------
\36\ The term ``consume'' in the AIM Act has two separate
meanings. In the context of describing transformation/feedstock uses
of HFCs, the word ``consume'' is used to mean the decomposition of
the substance. For example, subsection (b)(7)(B) excludes from the
definition of ``produce'' ``the manufacture of a regulated substance
that is used and entirely consumed (except for trace quantities) in
the manufacture of another chemical.'' (emphasis added).
\37\ Montreal Protocol on Substances that Deplete the Ozone
Layer, Medical and Chemical Technical Options Committee 2018
Assessment Report. United Nations Environment Programme, 2018.
Available at <a href="https://ozone.unep.org/sites/default/files/2019-04/MCTOC-Assessment-Report-2018.pdf">https://ozone.unep.org/sites/default/files/2019-04/MCTOC-Assessment-Report-2018.pdf</a>.
---------------------------------------------------------------------------
EPA received comments that the proposed definition of process agent
is too narrow in that it is limited to processes involving chemical
reactions. Commenters suggested that the definition be expanded to
include physical processes. Commenters did not provide additional
information to explain what the differences are between a chemical
reaction and a physical process, nor did they explain what specific
actions may be excluded by using the proposed definition. EPA has been
unable to find physical processes discussed in TEAP documents related
to process agents; however, the Agency has found discussion of process
agents inhibiting an unintended chemical reaction. This fits within the
proposed definition that process agents are used to ``form the
environment'' where the process occurs. EPA is finalizing the
definition with the additional description of inhibiting unintended
chemical reactions but is not including reference to physical
processes, as the Agency does not have sufficient information
supporting a change.
Production/Produce. EPA is adopting the definition of the term
``produce'' that is found in subsection (b) of the AIM Act. While
substantially similar to the definition of the term ``production'' at
40 CFR 82.3, there are a few differences. First, the AIM Act definition
does not use the word ``transformed'' but rather textually incorporates
most of the definition of the defined term ``transform'' from Sec.
82.3. Second, the definition specifically excludes the reclamation of a
regulated substance from the term production. This exclusion was not
found in Sec. 82.3 but matches EPA's long-held interpretation in CAA
title VI programs that reclamation does not constitute production and
that reclaimed material is inherently reused/recycled.
EPA proposed that the definition of production specifically exclude
``the inadvertent or coincidental creation of insignificant quantities
of a regulated
[[Page 55136]]
substance during a chemical manufacturing process, resulting from
unreacted feedstock, from the listed substance's use as a process agent
present as a trace quantity in the chemical substance being
manufactured, or as an unintended byproduct of research and development
applications.'' This phrase appears in the 40 CFR 82.3 definition of
``controlled substance.'' The exclusion of these four types of
insignificant quantities is more properly considered in defining what
qualifies as production, given they describe acts of ``creation'' or
``resulting from'' or ``byproduct of.'' Such insignificant quantities
created in the above-listed circumstances are considered regulated
substances, but are not considered production. Combining all of the
exclusions under one term increases clarity when interpreting the terms
``produce'' and ``regulated substance'' together.
Based on public comments received, EPA is finalizing an addition to
the listed circumstances addressed by the exclusion, specifically
clarifying that it covers the inadvertent or coincidental creation of
insignificant quantities of a regulated substance ``during
semiconductor manufacturing processes.'' EPA estimates that 6 to 9
metric tons of HFC-23 were generated as a byproduct per year from 2017
to 2019 across all semiconductor manufacturing facilities that reported
to the GHGRP. Semiconductor manufacturers reporting to the GHGRP are
estimated to have accounted for 98 percent of HFC-23 generating
activity (i.e., layer-weighted area of semiconductors produced) by
semiconductor manufacturers in the United States in 2017.\38\ Total
byproduct generation of HFC-23 from 2017 to 2019 was calculated by
first estimating consumption of HFC-23 based on reported emissions of
HFC-23 to the GHGRP, reported emissions of other fluorinated greenhouse
gases, the emission factors used, and the reported fab-wide destruction
or removal efficiencies. Byproduct generation was then estimated by
using the ratio of byproduct emissions to total calculated uncontrolled
emissions of HFC-23. The resulting estimates showed a decline between
2017 and 2019. Byproduct generation of HFC-23 from individual
fabrication plants was estimated to average approximately 140 kg per
plant, with no fabrication plant generating more than 1.1 metric tons.
Such a small amount falls under EPA's intended definition of
``insignificant quantities,'' and therefore EPA finds it reasonable to
finalize a definition that includes text clarifying that such
insignificant quantities are excluded from the definition of
production.
---------------------------------------------------------------------------
\38\ World Fab Forecast (2017). Inventory of U.S. Greenhouse Gas
Emissions and Sinks: 1990-2019. U.S. EPA 2021. Available at <a href="https://www.epa.gov/ghgemissions/inventory-us-greenhouse-gas-emissions-and-sinks-1990-2017">https://www.epa.gov/ghgemissions/inventory-us-greenhouse-gas-emissions-and-sinks-1990-2017</a>.
---------------------------------------------------------------------------
In addition, EPA is finalizing a change to this regulatory text to
clarify that each of the listed circumstances is an independent
circumstance and if insignificant quantities are inadvertently or
coincidentally created in any of these five circumstances, they are
exempt from the definition of production. Specifically, EPA is
finalizing the following text in the regulations: ``Insignificant
quantities of a regulated substance inadvertently or coincidentally
generated from any of the following, independent circumstances:''
before listing the five circumstances.
Reclaim. EPA is defining reclaim as ``the reprocessing of regulated
substances to all of the specifications in Appendix A of 40 CFR part
82, subpart F [based on AHRI Standard 700-2016] that are applicable to
that regulated substance and to verify that the regulated substance
meets these specifications using the analytical methodology prescribed
in section 5 of Appendix A of 40 CFR part 82, subpart F.'' The final
definition is unchanged from the proposal.
Some commenters recommended that EPA establish in the definition of
``reclaim'' a limit on the amount of virgin refrigerant that could be
included. Put another way, if a recovered refrigerant is blended with
more than a certain threshold of virgin refrigerant to bring it to AHRI
700 standards, the resulting refrigerant would not meet the regulatory
definition of reclaimed material. Commenters noted California's
proposed requirement that reclaimed HFCs contain no greater than 15
percent new refrigerant by weight, and recommended that EPA adopt a
similar benchmark in its definition of reclaim. EPA may consider
establishing standards regarding the amount of virgin product permitted
to be used in ``reclaimed'' material in the future, but this regulatory
definition is not the appropriate place to address this issue. Given
the early stage of AIM Act implementation and stakeholder engagement,
EPA also does not have sufficient information at this time to make a
reasoned decision on what benchmark to set, if any.
Regulated substance. The AIM Act uses the term ``regulated
substance'' to refer to HFCs statutorily listed in the AIM Act and any
such substance added to the list in the future consistent with
subsection (c)(3)(A). EPA is defining the term as ``a hydrofluorocarbon
listed in the table contained in subsection (c)(1) of the AIM Act and a
substance included as a regulated substance by the Administrator under
the authority granted in subsection (c)(3). A current list of regulated
substances can be found in Appendix A of this part.'' The final
definition is unchanged from the proposal.
One commenter suggested EPA clarify that only saturated HFCs can be
added to the list of regulated substances through the procedure in
subsection (c)(3). EPA declines to make this addition to the
definition. Subsection (c)(3) contains multiple limitations on what can
be designated as a regulated substance, including that the chemical is
a saturated HFC and has a minimum exchange value. For purposes of
clarity, EPA is keeping the definition of regulated substances distinct
from the process and limitations for designating additional regulated
substances.
Structural composite preformed polyurethane foam. EPA is defining
this term as ``a foam blown from polyurethane that is reinforced with
fibers and with polymer resin during the blowing process, and is
preformed into the required shape (e.g., specific boat or trailer
design) to increase structural strength, while reducing the weight of
such structures.'' The final definition is unchanged from the proposal.
One commenter suggested a modified definition, which would describe
``structural composite preformed polyurethane foam'' as ``a foam blown
from polyurethane that is extruded or injected into reinforcing fiber
fabric material to impart the fabric with dimensional shape to create
preformed elements that are later assembled together, impregnated with
resin and/or otherwise cured to form a composite structure (e.g.,
specific boat or trailer design).'' The commenter explained that the
modified definition more accurately and succinctly describes the
structural composite preform technology for marine and trailer use. EPA
is finalizing the definition as proposed to avoid creating an
inadvertently restrictive definition and to keep the ideas of increased
structural strength and weight reduction in the definition.
Transhipment. EPA proposed to define transhipment consistent with
the definition in 40 CFR 82.3 for ODS. However, based on interagency
consultation, EPA is revising its definition slightly by replacing the
phrase ``interstate commerce'' with ``U.S. commerce.'' This minor
alteration in terminology will align this
[[Page 55137]]
requirement more closely with trade regulations administered by CBP and
is a more accurate expression of EPA's intended meaning. The term
``transhipment'' is defined as the continuous shipment of a regulated
substance, from a foreign country of origin through the United States
or its territories, to a second foreign country of final destination,
as long as the shipment does not enter U.S. commerce. A transhipment,
as it moves through the United States or its territories, cannot be
repackaged, sorted, or otherwise changed in condition.
EPA's use of this term is similar but not identical to an ``entry
for transportation and exportation'' under 19 U.S.C. 1553 and 19 CFR
18.20 through 18.24, and a ``transportation entry'' under 19 CFR 18.1.
CBP regulations expressly allow in-bond merchandise to be transferred
from one conveyance to another--what the shipping industry typically
calls ``transloading'' or a ``transshipment'' (see 19 CFR 18.3). CBP
regulations also allow in-bond merchandise to be shipped in a
conveyance that contains other merchandise that is not being shipped
in-bond, so long as the in-bond merchandise is clearly identified (see
19 CFR 18.4(b)). However, EPA is not fully aligning with those
practices for transhipments of HFCs. Under the definition finalized in
this rule, a transhipment, as it moves through the United States or its
territories, cannot be repackaged, sorted, or otherwise changed in
condition. The full text of all definitions finalized in this rule can
be found in 40 CFR 84.3.
VI. How is EPA establishing the HFC production and consumption
baselines?
The first step in phasing down HFCs through an allowance allocation
and trading program is to establish the U.S. production and consumption
baselines. It is from these baselines that EPA determines the total
amount of allowances. By applying the AIM Act's percentage-based
phasedown, which EPA implements via the total annual production and
consumption allocations, the Agency derives in a stepwise manner the
amount of allowances available compared to the baseline over the period
of time encompassed in the statutory phasedown schedule.
A. What are the components of the production and consumption baselines?
Subsection (e)(1) of the AIM Act directs EPA to establish a
production baseline and a consumption baseline and provides the
equations for doing so. The equations comprise an HFC component, an
HCFC component, and a CFC component. Specifically, the production
baseline is equal to the sum of: (i) The average annual quantity of all
regulated substances produced in the United States from January 1,
2011, through December 31, 2013, and (ii) 15 percent of the production
level of HCFCs in calendar year 1989, and (iii) 0.42 percent of the
production level of CFCs in calendar year 1989. For the purposes of
establishing the baselines, EPA must use the exchange values assigned
by Congress to develop an exchange value-weighted amount for both
production and consumption. The equation representing the production
baseline calculation is:
[GRAPHIC] [TIFF OMITTED] TR05OC21.000
Similarly, the AIM Act defines the consumption baseline as equal to
the sum of (i) the average annual quantity of the consumption \39\ of
regulated substances in the United States from January 1, 2011, through
December 31, 2013, and (ii) 15 percent of the consumption of HCFCs in
calendar year 1989, and (iii) 0.42 percent of the consumption of CFCs
in calendar year 1989. The equation representing the consumption
baseline calculation is below.
---------------------------------------------------------------------------
\39\ Consumption is equal to production plus imports minus
exports.
[GRAPHIC] [TIFF OMITTED] TR05OC21.001
EPA's proposal that the HFC consumption baseline consist of bulk
HFCs and not include imports of HFCs contained in products garnered
multiple comments, both opposed and in favor. Similarly, some
commenters raised the
[[Page 55138]]
related issue of whether consumption allowances should be required to
import HFCs contained in products. Some commenters pointed to the AIM
Act's description of the consumption baseline in subsection (e)(1)(C),
which states that it includes ``all regulated substances consumed in
the United States'' (emphasis added) to include imports of HFCs
contained in products in the baseline period. Commenters stated that
the AIM Act does not distinguish between ``bulk'' HFCs and those
contained in products but, rather, plainly states that all regulated
substances are to be included.
As explained further in the definitions portion of this final
notice, the AIM Act definition of ``consumption'' does not directly or
unambiguously address whether that term should include imports of
products containing HFCs or be limited to imports of bulk HFCs. Because
the statute is ambiguous, EPA has discretion to develop a reasonable
definition of the term in order to implement the statutorily required
HFC phasedown. For the reasons provided in Section V on definitions,
EPA is defining ``consumption'' to be limited to bulk substances.
Therefore, the statutory language commenters cite in AIM Act subsection
(e)(1)(C), which addresses the calculation of the consumption baseline
and which refers to ``all regulated substances consumed in the United
States,'' is better understood to refer to all consumption, which
necessarily limits this directive to bulk substances in light of EPA's
previously described interpretation of that term. Accordingly, EPA is
finalizing the consumption baseline calculation with only bulk HFCs as
proposed.
While EPA recognizes that the AIM Act is a distinct authority from
title VI of the CAA, it is also true that many of the AIM Act's
statutory provisions addressing the HFC phasedown are written and
structured similarly to statutory or regulatory provisions under title
VI addressing the ODS phaseout. Under the phaseout requirements for ODS
(40 CFR part 82, subpart A), only imports and exports of bulk
controlled substances are counted as part of the consumption cap.\40\
As explained in more detail in Section V of this final notice, it is
reasonable to interpret and implement those terms in a similar manner
when there is no indication to suggest disparate treatment. Further,
during Congressional testimony on the AIM Leadership Act (a prior
version of the AIM Act, but similar to the allowance allocation and
trading text in the final AIM Act) before the House Energy and Commerce
Committee, EPA was asked how the legislation compared to CAA title VI,
and EPA responded that ``most of the main components, particularly the
phasedown, [are] very similar.'' \41\ If members of the Committee had
intended the terms ``consume'' and ``consumption''--which are identical
to the terms used under CAA title VI--to include products containing
HFCs, it is reasonable to anticipate that they would have made their
intention clear in the statutory text given that such an interpretation
would be a significant divergence from EPA's implementation of the ODS
phaseout under title VI of the CAA.
---------------------------------------------------------------------------
\40\ This approach is also consistent with the approach taken
under the Montreal Protocol. Decision I/12A, taken at the first
Meeting of the Parties to the Montreal Protocol, defines
``controlled substances'' as bulk chemical. As such, the production
and consumption schedules under the Montreal Protocol only apply to
bulk chemical.
\41\ See <a href="https://www.congress.gov/116/meeting/house/110388/documents/HHRG-116-IF18-Transcript-20200114.pdf">https://www.congress.gov/116/meeting/house/110388/documents/HHRG-116-IF18-Transcript-20200114.pdf</a> on pages 22 and 23.
---------------------------------------------------------------------------
There would be severe implementation difficulties resulting from
including imports of products containing HFCs in the consumption
baseline and requiring allowances for imports of such products. If the
HFC allocation framework under the AIM Act were expanded beyond bulk
substances to include imports of products containing HFCs, the
regulated importer community would be at least double in number. Many
if not all of these entities have never been subject to regulation of
this kind and would therefore likely be caught unawares and be
unfamiliar with EPA's general approach to the allocation program. Some
commenters were not persuaded by this concern, which EPA also described
in the proposed rule. A few commenters stated that this is also true of
establishing the program of application-specific allowances while
others stated that these concerns do not override the clear language of
the statute. EPA disagrees that the statutory language is clear on this
point. As noted in the definitions portion of this final rule, the
language in the AIM Act is ambiguous as to whether ``consumption''
should include imports of products containing HFCs, and thus is also
ambiguous as to whether the baseline calculation and allowance system
should include imported products containing HFCs. Given the statutory
ambiguity, EPA is taking many considerations into account to determine
that the definition of ``consumption'' is most appropriately read to be
limited to import of bulk substances. Including imported products in
the consumption baseline calculation would by necessity require the
Agency to issue consumption allowances to all importers of products
containing HFCs. Put another way, all such products would be prohibited
from being imported effective January 1, 2022, absent participation in
an allowance allocation system.
Commenters did not dispute EPA's estimate that the regulated
universe would at least double--or more--if HFCs contained in imported
products were included in the allowance system. EPA's experience with
the ODS phaseout taught the Agency that regulated substances can be in
products ranging from silly string to niche medical devices. These
products were often manufactured or imported by small businesses that
only learned of the phaseout when informed by their suppliers. While it
is true that the application-specific allowance system will require
allocations to end users, which is different than under title VI,
Congress limited the universe to a discrete number of applications,
which are expressly listed in (e)(4)(B)(iv).
Commenters in favor of including imports of HFCs contained in
products expressed concern that domestic manufacturers of such products
would be at a competitive disadvantage to imported products. They argue
that because product manufacturers abroad can acquire HFCs that are not
subject to the AIM Act's phasedown restrictions, domestic manufacturers
would be disadvantaged by needing to acquire HFCs within the United
States which they believe would be more expensive. Other commenters
argued that undercounting the baseline results in a more stringent
phasedown schedule than Congress intended. Some commenters expressed
concern that the volume of HFCs in products is currently equal to 10
percent of bulk HFC consumption and is growing. Without controls,
commenters said failure to include imports of HFCs in products will
continue to allow HFCs into the country, further damaging the Earth's
climate system.
EPA plans to achieve the objectives in the AIM Act to phase down
HFCs and at the same time avoid the relocation of HFC production. Among
the authorities provided in the AIM Act, EPA's assessment is that other
subsections of the Act present opportunities for addressing use of HFCs
in products separate from the production and consumption controls being
finalized in this rule. In particular, subsection (i) of the AIM Act is
a powerful tool in and of itself, providing both interested parties and
EPA with significant
[[Page 55139]]
potential to address the use of HFCs in products. This view appears to
be consistent with other stakeholders as well, given the Agency has
received more than a dozen petitions from companies, industry
associations, environmental groups, and states under AIM Act subsection
(i). The submitted petitions request restrictions on HFCs in a wide
range of applications, including use of HFCs in the types of products
mentioned in comment.\42\
---------------------------------------------------------------------------
\42\ The petitions received to date are publicly available at
<a href="https://www.epa.gov/climate-hfcs-reduction/petitions-under-aim-act">https://www.epa.gov/climate-hfcs-reduction/petitions-under-aim-act</a>
and at <a href="https://www.regulations.gov">https://www.regulations.gov</a>, under Docket ID No. EPA-HQ-OAR-
2021-0289.
---------------------------------------------------------------------------
EPA disagrees with commenters that not including imports of
products containing HFCs in the definition of consumption puts domestic
manufacturers at a competitive disadvantage or will not achieve
necessary environmental benefits. More than 120 countries have joined
the Kigali Amendment to the Montreal Protocol, including most if not
all of the countries with significant trade in products containing HFCs
with the United States, such as Mexico, Japan, Germany, and China.
Joining the Kigali Amendment entails a phasedown of HFC production and
consumption, so the supply of HFCs in those countries will be limited
in ways that are similar to the AIM Act restrictions implemented in the
United States. Major United States trading parties, including Japan and
Germany, have baseline figures based on the same historical data points
as directed by the AIM Act and used to establish the baseline in this
rule, and the Kigali Amendment phasedown schedule for those countries
matches the phasedown schedule established in the AIM Act.
For some countries, including Mexico and China, baselines for the
phasedown of HFCs consistent with the Kigali Amendment will be set
based on 2020-2022 production and consumption. In those countries, a
cap on production and consumption becomes effective as of January 1,
2024. Any HFC production or consumption that is used to manufacture and
export products containing HFCs would count as production and
consumption in the country exporting the products, not the country
receiving the products via import. Commenters are concerned that
companies in countries with a later phasedown schedule could increase
their production and consumption in the years used to determine the
baseline for those countries, resulting in increased access to HFCs for
the duration of the phasedown. In the near term, it is very unlikely
companies operating in those countries would find it worthwhile or even
be able to expand their production or consumption to service a
hypothetical expanded products market for the United States. The time
remaining to execute tactics aimed at expanding the baseline is
exceedingly brief given that it is already late in 2021 and it is
difficult to dramatically ramp up production and manufacturing in a
short timeframe. It is also unlikely there would be significant
incentive to do so prior to the cap on production that begins in 2024
since the reduction in allowed U.S. consumption in 2022 and 2023 is
limited to 10 percent and would not create much ``room'' or demand for
an increase in imports of products containing HFCs in the near term.
Further, companies would also need to make investments to offshore or
ramp up production in other countries while the U.S. regulatory
landscape is actively unfolding and could run the risk of stranding
assets depending on decisions EPA makes in near term rules. Combined,
these are additional reasons to expect that importation of products
containing HFCs will not affect the environmental benefits of the
program established in this rule or the competitiveness of U.S.
domestic manufacturers.
EPA's experience in implementing title VI of the CAA supports these
expectations. Under the Agency's experience in phasing out ODS under
title VI of the CAA, where other countries committed to similar
phaseouts under the Montreal Protocol, the Agency did not see
unaddressed documented harm to domestic product manufacturers or lack
of environmental benefits. Where EPA did see the potential for harm,
the Agency established requirements to address products containing ODS
through other authorities under title VI, which ameliorated competitive
impacts on domestic manufacturers in sectors that might have otherwise
experienced such impacts. In addition, there is reason to believe that
manufacturers of products that currently contain HFCs will respond to
the HFC phasedown by transitioning away from HFCs themselves. EPA is
aware that some categories of products containing HFCs, including
appliances where the refrigerant is factory-charged, such as household
refrigerators, are already transitioning from HFC-134a to hydrocarbons
and a full transition is anticipated no later than 2025. Therefore, EPA
does not agree with comments that suggest significant growth for all
products containing HFCs. However, if there are unanticipated
documented challenges for domestic product manufacturers or lagging
environmental benefits counter to EPA's expectations, EPA retains the
discretion to revisit its approach to products containing HFCs in the
future.
Lastly, we note that this rulemaking only addresses the framework
for allocating production and consumption allowances under subsection
(e) of the AIM Act. EPA intends to consider opportunities for
addressing products containing HFCs under other subsections of the AIM
Act in future actions. One authority currently under consideration by
EPA is subsection (i) of the AIM Act, which authorizes EPA to
``restrict, fully, partially, or on a graduated schedule, the use of a
regulated substance in the sector or subsector in which the regulated
substance is used.'' Subsection (i) also provides opportunity for
outside parties to file a petition with EPA for a rule establishing
such a restriction and establishes a time frame for EPA to act on those
petitions. As noted previously, EPA has received more than a dozen
petitions under subsection (i) requesting restrictions on the use of
HFCs in products including aerosols, foams, refrigeration units, air
conditioners (e.g., residential, commercial, and motor vehicle), and
dehumidifiers. The statutory deadline under subsection (i) for granting
or denying the first five of the pending petitions received by the
agency is October 10, 2021, and EPA intends to meet that deadline. If
EPA were to finalize rulemaking consistent with the requests in these
petitions, it would result in restrictions on the use of HFCs in
domestically manufactured and imported products under subsection (i).
As with any rulemaking, EPA anticipates that a rulemaking under
subsection (i) would include an opportunity for public participation on
these issues.
In response to comments that EPA is undercounting the baseline by
not including products, and thereby accelerating the HFC phasedown, EPA
disagrees. The commenter's suggestion seems premised on a misconception
that imports of products containing HFCs could be included in the
baseline, but not in the allowance system. The key question is whether
imports of products containing HFCs are included in the terms
``consume'' and ``consumption.'' If imports of products containing HFCs
are part of consumption, they would be calculated into the consumption
baseline, but also consumption allowances would be required for future
import of products containing HFCs. As explained previously, the
statute does not speak directly to this question, so
[[Page 55140]]
EPA is using its discretion to interpret the terms ``consume'' and
``consumption'' to not include imports of products containing HFCs.
Under this interpretation, HFCs contained in imported products are not
covered by the allocation system, and they cannot be included in the
baseline. Consumption allowances will not be required to import
products containing HFCs, and as described in the prior paragraph, EPA
intends to consider ways to address HFC use in products under other
subsections of the AIM Act. For this rule, we are using a consistent
accounting system for both the baseline and the allowance system that
does not incorporate products containing HFCs.
Further, without adequate data to establish a baseline that
accurately reflects products, EPA would run a significant risk of
creating a baseline that is too small to account for the full scope of
imported products used today. While Subpart QQ of the GHGRP contains
data about imports of foams and appliances containing HFCs, it does not
capture all regulated substances contained in items including fire
suppression equipment or consumer aerosol products. If the Agency were
to include HFCs contained in products in the baseline figures, it also
would need to include data reflecting HCFCs and CFCs contained in
products in 1989 to complete the baseline formula. The Agency does not
have these data and it would be administratively impossible to
comprehensively collect such decades-old data now (as opposed to bulk
CFC and bulk HCFC data which the Agency already collected many years
ago and has used under title VI of the CAA as a basis for establishing
and implementing the phaseout schedule and allowances for both CFCs and
HCFCs for 30 years).
Some commenters disagreed that it would be administratively
impossible to collect data on HCFCs and CFCs contained in products in
1989 to complete the baseline formula. Commenters noted that volumes
would be small given most appliances were domestically produced at that
time. One commenter provided data on imports of window units to that
effect. When multiplied by the percentages in the baseline formula,
commenters stated, the effect would be minimal compared to the HFC
element of the calculation. EPA does not dispute commenters' points,
but the commenters also do not dispute EPA's fundamental point that it
is administratively impossible to collect a comprehensive set of data
on HCFCs and CFCs imported into the United States inside of products in
1989 of a similar quality to the data EPA holds on bulk HCFCs and CFCs.
Commenters, at most, allege that EPA could make an informed guess at a
number to add to the baseline calculation. But such a guess would not
match the surety and caliber of data otherwise included in the baseline
calculation--which is based on actual data--and is not sufficient to
determine the baseline calculation with a level of certainty that is
necessary to meet the directive Congress provided to EPA in the AIM
Act. Further, it is reasonable to presume that Congress knew that we
would lack such 1989 data given EPA's implementation of the ODS
phaseout was limited to bulk substances, and this provides further
support that EPA's interpretation of ``consumption'' as limited to bulk
is reasonable. Furthermore, even if commenters' statement that we could
develop a figure to estimate 1989 imports for products imported that
contained CFCs and HCFCs were correct, this does not undermine all the
other reasons EPA has provided for its reasonable interpretation that
``consumption'' is limited to bulk substances.
EPA is also finalizing its approach of not including transhipment
amounts within the baseline. In addition to the prior discussion on why
imports of HFCs contained in products are not included in the baseline
calculation, transhipment imports are not included in the definition of
``consumption.'' A transhipment is the continuous shipment of a
regulated substance, from a foreign country of origin through the
United States, to a second foreign country of final destination.
Transhipments do not enter U.S. commerce. The sum effect of this
activity is zero since the regulated substance is both imported (which
would be added to the consumption baseline) and exported (which would
be subtracted from the consumption baseline) in identical quantities.
1. How is EPA determining the HFC component of the production and
consumption baselines?
In order to calculate the production and consumption baselines, EPA
has determined the annual production and consumption of the statutorily
listed HFCs in the years 2011, 2012, and 2013. EPA has used multiple
sources of data to calculate HFC consumption and production figures for
2011 through 2013: (1) Data reported to EPA's GHGRP; (2) data received
in response to the notice of data availability (NODA) published
February 11, 2021; (3) data from Customs in the Automated Customs
Environment (ACE) and confirmed through letters sent out under CAA
section 114 (EPA ICR 2685.01); and (4) data received in response to the
notice of proposed rulemaking by the comment due date. EPA received new
or revised production, import, export, and destruction data, all of
which affect the final baseline values.
The GHGRP requires various facilities and suppliers to annually
report data related to GHGs to EPA (see 40 CFR part 98). Subpart OO,
``Suppliers of Industrial Greenhouse Gases,'' is the section relevant
to reporting on HFC production and consumption. Because the HFCs listed
as regulated substances under the AIM Act are industrial GHGs, EPA has
collected a significant amount of data relevant to HFC production and
consumption as defined under the AIM Act. EPA used these data as a
starting point for estimating the historical HFC production and
consumption figures necessary to calculate baselines under the AIM Act.
Further discussion of the GHGRP can be found in the notice for the
proposed rule.
The data available through GHGRP significantly contribute to EPA's
ability to calculate the amount of HFCs produced and consumed in the
United States in 2011-2013 for purposes of determining the AIM Act
baselines. However, there are known gaps in the GHGRP data, and EPA has
made best efforts to fill these gaps. EPA published a NODA on February
11, 2021, outlining available information and perceived data gaps (86
FR 9059). Further discussion of the NODA and data collection efforts
taken prior to proposal can be found in the proposed rule.
EPA invited additional public input through the proposed rulemaking
and has separately sent letters under the authority of subsection
(k)(1)(C) of the AIM Act and section 114 of the CAA to companies that
may have relevant data.\43\ Specifically, EPA attempted to contact
companies that may not have been reporting to GHGRP, either because
they had failed to report and were out of compliance or because they
were below the GHGRP reporting threshold. These companies were asked to
submit any data on HFC production, import, export, transformation, and
destruction between 2011 and 2019 that they had not already submitted
to GHGRP Subpart OO. To find these companies, EPA obtained a list from
U.S. Customs and Border Protection (CBP) of all companies that appeared
to import HFCs between 2011 and 2019. This list contained roughly 400
companies. EPA first sent letters to
[[Page 55141]]
these companies, requesting they submit any relevant data. EPA then
attempted to find email addresses for these companies and sent a copy
of the request letter by email as well.
---------------------------------------------------------------------------
\43\ View Information Collection Request (ICR) Package at
<a href="https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=202103-2060-005">https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=202103-2060-005</a>.
---------------------------------------------------------------------------
Roughly 130 companies responded to the letter or the follow-up
email. A small fraction of these companies actually had relevant data
to submit. EPA reviewed any new or updated data for accuracy. EPA used
this more complete dataset to calculate the AIM baseline and each
company's historical annual HFC production and consumption.
2. What is the HFC component of the production and consumption
baselines?
The equations in the AIM Act for the production and consumption
baselines include the average annual production and consumption of HFCs
between January 1, 2011, and December 31, 2013. Based on the
information reported to the GHGRP and gathered through recent data
collection efforts, average HFC consumption in 2011 through 2013 was
260.7MMTEVe and average HFC production in 2011 through 2013 was 338.3
MMTEVe for those three years. A memo to the docket (``HFC Production
and Consumption Data--Final Rule'') provides the aggregated data for
each of the three years similar to that provided in the NODA and the
proposed rule. As envisioned in the proposed rule, these values have
changed by about 2 percent based on the data collected since the rule
was proposed.
3. What are the HCFC and CFC components of the production and
consumption baselines?
The equations in the AIM Act for the production and consumption
baselines include HCFC and CFC components from 1989. That year was
designated under the Montreal Protocol as the baseline year used for
several class I substances (Groups III, IV, and V in the Montreal
Protocol) as well as for class II substances (HCFCs). See, e.g., 74 FR
66412 (December 15, 2009). As a result, EPA has previously developed a
complete accounting of ODS production, import, and export during that
year.\44\ These values are unchanged from the proposed rule.
---------------------------------------------------------------------------
\44\ For more information on historical U.S. ODS production and
consumption data, please visit the United Nations Environment
Programme's website at <a href="https://ozone.unep.org/countries/profile/usa">https://ozone.unep.org/countries/profile/usa</a>.
---------------------------------------------------------------------------
Specifically, the 1989 production and consumption levels for HCFCs
are 216.9 MMTEVe and 210.3 MMTEVe respectively, and the 1989 production
and consumption baselines for CFCs are 2,799.8 MMTEVe and 2,784.5
MMTEVe respectively. Fifteen percent of the 1989 HCFC production and
consumption baselines is 32.5 MMTEVe and 31.5 MMTEVe respectively,
while 0.42 percent of the 1989 CFC production and consumption baselines
is 11.8 MMTEVe and 11.7 MMTEVe respectively.
B. What are the final HFC production and consumption baselines?
Using the equation provided in the AIM Act, and based on the data
available to the Agency, EPA is establishing in this final rule the
production baseline of 382.6 MMTEVe and the consumption baseline of
303.9 MMTEVe. 40 CFR 84.7(b) includes the baseline values in MTEVe.
Table 5--Inputs for Calculation of Production and Consumption Baselines
----------------------------------------------------------------------------------------------------------------
Percentage in Modified value
Input Value (MMTEVe) baseline (%) (MMTEVe)
----------------------------------------------------------------------------------------------------------------
2011-2013 average HFC production............................. 338.3 100 338.3
1989 HCFC production......................................... 216.9 15 32.5
1989 CFC production.......................................... 2,799.8 0.42 11.8
--------------------------------------------------
Production baseline...................................... .............. .............. 382.6
2011-2013 average HFC consumption............................ 260.7 100 260.7
1989 HCFC consumption........................................ 210.3 15 31.5
1989 CFC consumption......................................... 2,784.5 0.42 11.7
--------------------------------------------------
Consumption baseline..................................... .............. .............. 303.9
----------------------------------------------------------------------------------------------------------------
EPA received a comment that providing draft baselines that are
subject to change in the final rule deprives commenters of the ability
to comment on the actual baseline. EPA disagrees. EPA provided the best
data available to the Agency at the time of proposal. After further
analysis EPA finds that these values have increased by approximately 8
MMTEVe and 5 MMTEVe, respectively. This is a 2.3 percent and 2.0
percent increase and is substantively similar to the proposed value for
commenters to consider. While EPA acknowledges that the exact baseline
figures were not identified at the proposal stage, EPA did provide
sufficient information regarding the methodology to be used to reach a
final baseline figure, and commenters were able to provide comment on
this methodology. EPA provided notice of the steps the Agency would
take to collect data to further inform the baseline calculation,
including highlighting known data gaps in the numbers provided at
proposal. Commenters were also given notice of the calculation
methodology EPA would use to determine the production and consumption
baselines given that the formulas are provided for in the statute.
Another commenter stated that the GHGRP data are heavily flawed and
result in a ``possibly significant'' undercount of imports because they
exempt from reporting companies that import below a 25,000
MTCO<INF>2</INF>e threshold. EPA acknowledges this differe
[…truncated; see source link]Indexed from Federal Register on October 5, 2021.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.