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EPA's HFC Emissions Reduction and Reclamation Program Finalized
On September 23, 2024, the U.S. Environmental Protection Agency ("EPA") announced a final rule under the American Innovation and Manufacturing Act of 2020 ("AIM Act") establishing a new program overseeing hydrofluorocarbons ("HFCs"), which are greenhouse gases. This new rule is intended to increase oversight of HFC chemicals to reduce leaks from equipment that uses them. In taking another action regulating HFCs, EPA continues to demonstrate a focus on regulating this class of chemicals to meet the targets set under the AIM Act.
The new rule establishes the Emissions Reduction and Reclamation Program. Under this new program, EPA imposed new requirements for those operating covered equipment using HFCs for repairing leaking equipment, installing automated leak detection systems, as well as maximizing the reuse of existing HFCs. It does this by establishing a standard limiting the amount of new HFCs that can be contained within reclaimed HFC refrigerants. Further, the finalized rule works to minimize the amount of HFCs released from fire suppression systems.
These actions are meant to help minimize the releases of HFCs across the lifespan of refrigerant-containing equipment. Through this final rule, EPA estimates that from 2026 through 2050, the final rule will "provide additional cumulative greenhouse gas emissions reductions of approximately 120 million metric tons of carbon dioxide equivalent, an incremental net benefit of at least $6.9 billion." The final rule is part of the overall framework under the AIM Act to achieve an 85% HFC phasedown by 2036, enacting the Kigali Amendment to the Montreal Protocol.
With this final rule, EPA has now enacted final rules for all three ways the AIM Act authorizes EPA to address HFCs: (1) phasedown the production and consumption of HFCs through an allowance program; (2) facilitate the transition to new technologies through sector-based restrictions; and (3) promulgate regulations for purposes of maximizing reclaiming and minimizing releases of HFCs from equipment and ensuring the safety of technicians and consumers. EPA has previously implemented, under pillar (1), a 40% phasedown of HFCs through an allowance program beginning this year. EPA has also implemented sector-based restrictions for aerosols, foams, refrigeration, air conditioning, and heat pumps under pillar (2). The finalization of the most recent rule effectuates implementation under pillar (3).
According to EPA Administrator Michael S. Regan:
This rule is the final foundational step in our strategy to address HFCs, building on programs to reduce HFC production and imports, and to guide technologies to safer alternatives. Our HFC programs embody the Biden-Harris administration's strong belief that climate action opens up new opportunities for American technology and innovation.
In addition to EPA's continued regulation of HFCs, EPA is also taking enforcement actions against those who run afoul of these ever-evolving regulations. This latest final rule comes just months after previous enforcement actions taken by EPA and while there are still challenges to AIM regulations within the courts. Earlier this month, a three-judge panel in the U.S. Court of Appeals for the District of Columbia Circuit heard oral arguments for an industry challenge to the regulatory provision regulating the import and production of HFCs by setting allocations for each HFC producer under pillar (1) of the Act. IGas Holdings, Inc., et al v. EPA, Docket No. 23-01261 (D.C. Cir. Sep 14, 2023). Industry groups are challenging the regulation by arguing that EPA used flawed data when calculating allowances and did not act within its authority. Given the challenges made against prior HFC regulations, challenges to the newest rule under pillar (3) can be expected. Going forward, companies working with HFCs should continue to monitor this evolving legal landscape.
