Submission to the Ministry for the Environment

Transcription

1 Submission to the Ministry for the Environment On New Zealand s phase down of the hydrofluorocarbons to ratify the Kigali Amendment to the Montreal Protocol and associated supporting measures. This submission is made by Allan David Nicholls on behalf of The New Zealand Institute of Refrigeration Heating and Air Conditioning Engineers, Refrigerant Licence New Zealand, and Climate Change Companies Association NZ. IRHACE, CCCANZ and RLTB have elected councillors, officers and officials who represent the refrigeration and air conditioning industries, the motor trade air conditioning sector, refrigerant wholesalers, importers, chemical companies who manufacture and distribute refrigerants, as well as the dairy industry, the retail grocers association, representing large end users of refrigerants, as well as the local refrigeration and air conditioning manufacturers. Together, we support the phase down of hydrofluorocarbon (HFC) refrigerants to meet New Zealand s obligations under the Kigali Amendment to the Montreal Protocol. The proposed phase down, along with the inclusion of synthetic refrigerants into the Emissions Trading Scheme provides for two effective instruments to encourage the transition to lower climate impact refrigerants. Ratifying the Kigali Amendment, to cap and phase-down the climate impact of synthetic refrigerants in New Zealand will provide a pathway to dramatically reduce our emissions from HFC refrigerants. Page 1

2 How HFCs are used within the New Zealand Refrigeration and Air Conditioning industries. Q1 How would you characterize the use of HFCs in different sectors? The use of imported HFCs in the refrigeration and air conditioning sectors is wide ranging and includes but is not limited to; Domestic Refrigeration, Commercial cool stores and freezers, Industrial refrigeration systems, Commercial building air conditioning systems, Domestic, Commercial and Industrial ice making equipment, Domestic and commercial heat pumps, Domestic and commercial hot water heating systems, Air Drying systems, Freeze Drying equipment, Blood and plasma storage equipment, mobile air conditioning systems, Transport refrigeration systems, Refrigerated shipping containers. Accurate data on annual imports of HFCs is difficult to obtain, but it is our understanding that New Zealand annually imports some 500 ton of bulk HFC refrigerants, with a further 400 ton coming into the country contained within pre-charged domestic refrigerators and freezers, packaged air conditioning systems, automobiles, trucks, buses and agricultural machinery. It is estimated that approximately 40% of HFC imports are used to commission new or retrofitted refrigeration and air conditioning equipment, the remaining 60% being used within the associated service organizations of those industries. Q2 Are there alternatives to HFCs available in your business sector? Internationally there are alternatives to HFCs, and because New Zealand is part of the much wider global community, we will have access to these through our international suppliers of equipment and refrigerants as they become available. At this time, none of the alternatives available as drop ins to the HFC refrigerants have sufficiently low enough GWP values to meet the proposed maximum CO²-eq target, particularly as we get into Page 2

3 the later parts of the 2020 s. The industry has 2 choices to make to use one of the transitional lower GPW refrigerants, or to go directly to the end game and replace existing refrigeration and air conditioning equipment with equipment designed to run on Natural Refrigerants having zero GWP (Hydrocarbons, Ammonia or CO²). Each of these options present significant challenges to end users, installers and service organisations as well as to the general public at large. It is estimated that under the business as usual model if New Zealand were to continue to consume 500 ton of HFC refrigerants annually then as early as 2025 the industry could face shortages of product to service existing need. Q3 What are the costs and benefits of the phase down on your business? There will be significant cost to both industry and to end users through the proposed phase down. At present, the alternatives are significantly higher in cost even allowing for the decrease in ETS costs. Over time we would expect these high entry- to- market costs to diminish as suppliers of the refrigerants and equipment recover their research and development costs and more competitors enter into the market. Some end users (plant owners) will be forced to replace existing high GWP refrigerant dependant equipment prior to the normal or budgeted life expectancy of their plant. The need for premature replacement of some of this plant could be mitigated to some degree by the introduction of enhanced maintenance of their plant to try to reduce the incidence of refrigerant leakage. As a general statement, the lower the GWP of a synthetic refrigerant, the higher its flammability is going to be. New Zealand is introducing a new A2L flammability class into the regulatory framework to allow for the use of some of the transitional lower GWP refrigerants already being introduced. Industry will need to invest heavily in training across all sectors to accommodate for this significant change to the normal business practices if tragic events such as the cool store explosion at Tamahere are to be prevented. Page 3

4 Proposed import permitting system. Q4 Q5 Q6 Do you agree with the government s preferred option for inclusion in the proposed import permitting system? What other options should be considered and why? We agree with the proposed option to require import permits for the 18 bulk HFCs and by extension for the blends containing these substances. However, we believe that the import of all refrigerants including those not covered under the Kigali Amendment such as HFOs, HCs and the naturals should also be tracked and accounted for. This data would provide valuable information to both the Ministry and to industry on the effectiveness of the transition to lower climate impact refrigerants and to assist to identify weaknesses should any arise within specific industry sectors. This could be achieved by requiring importers to register and, on an annual basis provide data on their imports. It is likely that most importers would have an import permit for HFCs as well as obligations under ETS and so the collation of the additional data should not be too onerous a burden. We appreciate that there is a cost for the Ministry to collate this data, however, funding for this activity could be generated by the imposition of a fee structure for the application of import permitting. Page 4

5 Q7 Q8 Q9 Do you agree with the proposed approach on who should have an import permit? To ensure that the industry has access to the best technology going forwards, it will be important for all current importers to have access to sufficient import permit commensurate with their current import volumes. We agree with the limiting of import permit to existing importers of HFCs. We recognise the difficulties in establishing an ideal base year time period to be used for the calculation of an individual importers allocation, but there is never going to be a perfect solution to this issue. The absence of any accurate data on historical HFC imports makes it difficult to explain the widely fluctuating year-on-year import volumes, but common opinion is that the use of base years for the calculation of future allocation might provide a fairer reflection on current import sector activity. Over time, import permit will become valuable asset given the diminishing nature of the phase down. We would like to see the imposition of a limitation on the life of import allocation, and for allocation to be subject to on-going justification of need. We would also like to see the Ministry impose arbitrary cut off dates beyond which it would not be possible to import specific high GWP refrigerants. We believe this initiative will be essential in our communication with our customers and end users who in the main only know refrigerants by their ASHRAE numbering convention (R404a, R134A etc, etc.). This initiative would be in line with the practices utilised during the very successful phase out of CFC and HFC refrigerants, where end users had certainty on the dates from which the refrigerants that their plant was dependent upon would no longer be available. We also believe that one of the requirements for the obtaining of import permit should be a commitment to the product stewardship of refrigerants including the collection of levy to fund end of life refrigerant destruction as well as funding on industry training. Most importers are already a party to product stewardship, but those who stand apart are getting a free ride at the expense of the responsible importers. All synthetic refrigerants have a climate change impact and the industry needs to take responsibility for the funding of both end of life destruction and for the creation of training material. Page 5

6 Q10 Q11 Q12 Do you agree with the proposed approach on how the baseline and phase down steps should be designed? The Ministers recent announcement that New Zealand s new HFC phase-down plan is open for consultation, seems to suggest that the decision to adopt a lower starting baseline entitlement and lower consumption at the completion of the phase down has been decided and is fait accompli This plan proposes to progressively reduce HFC consumption by more than 80% over the next 20 years. Between 2019 and 2036, New Zealand will reduce the levels of HFC imports from around 1340 ktco2eq to less than 260, meaning that New Zealand will meet its international commitments ahead of schedule, said Environment Minister Dr. Nick Smith upon tabling the proposals on 13 May The consultation document proposes a 25% reduction from our Kigali baseline entitlement, to commence the phase down in Whilst we support the concept of commencing the phase down with a reduction, as it sends the right message to the market place, unfortunately we don t have sufficient accurate information on actual imports to be able to ascertain whether this would impose HFC shortages. As outlined in Appendix 3 of the consultation document, the reduction from our Kigali entitlement will apply throughout the phase down and whilst this may not be an issue in the later part of the phase down, it may cause issues initially. If 500 ton truly reflects actual annual consumption, then we would need to achieve an average GWP of 3000 for all refrigerant consumed, to attain the proposed base-line imports restriction to 1338 ktco²--eq. by On paper, looking purely at what might happen in 2019, that number seems to be entirely achievable, but, by 2025 when under the proposal our imports must be restricted to ktco²-- eq., if consumption remains static, then we would be required to maintain an average GWP of less than Given that systems containing R404a (GWP 3922) make up a very large percentage of the installed base, then we believe that as early as 2025 the industry could face shortages of supply. There is some doubt that the industry would have the capability to either retrofit this plant to lower GWP refrigerants or to replace the entire R404a installed base by We note however, that the aforementioned lack of accurate data makes it very difficult to accept or to reject the proposed baseline numbers. Page 6

7 We would suggest that to provide some surety of sufficient supply, if the 25% reduction is imposed, the first phase down steps should be removed or the duration of the steps extended, until a clearer picture of the supply situation is established. Notwithstanding our comment above, we support however, the more frequent and regular steps as proposed, to assist with incentivising a shift to alternatives, by sending a regular message to industry and end users that the phase down is happening. Q13 Q14 Q15 Do you agree with the proposed approach on how permit should be allocated? The intention to use the average of 2013 to 2015 years for grandfathering entitlement could be viewed as being unfair, with some importers being granted permit in excess of their current import volumes and new importers who have recently entered the market having no grandfathering provision. As there appears to be no provision during the phase down, for reassessing the grandfathering entitlement, it is assumed that once this permit has been allotted to individual importers, their percentage of the total imports will stay in place for at least the next 20 years. Given the volatility of the market over recent years, this provision favors traditional importers over new importers and could be considered to be anti-competitive. It could also risk delays in the adoption of the new low GWP technologies. The 2013 and 2014 imports are likely to still be influenced by the introduction of ETS in 2013 and the stockpiling that occurred in 2011 and 2012 and therefore does not provide an accurate picture of the marketplace. In addition the new importers, who were not active in these years, would not share in this permit allocation and unless they were given preference in the allocation of the special permit, the viability of their business could be affected and their clients disadvantaged. Using only the data for both 2015 and 2016 would present a more accurate picture of the market. We believe that the grandfathering entitlement should be phased out over the first five years of the phase down and replaced with importers receiving an entitlement each year for a percentage (50%) of their previous year actual climate impact, imports. This would ensure that new importers are fairly treated and traditional importers who are no longer active do not have an unfair advantage based on historical usage and as suppliers move to lower GWP technologies, their entitlement would reflect their actual requirement. Page 7

8 Q16 Q17 Q18 Do you agree with the proposed approach on how imports of HFCs should be reported? The nature of the industry would make it very difficult for the importers or for the wholesalers to report usage of refrigerants even by sector that it was first sold into. Contracting companies are multi- skilled and routinely provide service and support to all sectors of the industry that they are involved with. A single cylinder of a specific refrigerant has applications for use within many if not all of the sectors identified in question one, and gathering accurate data on any particular sectors use would be fraught with difficulty. Other Proposed Rules. Q19 Q20 Q21 Do you agree with the proposed approach on how recycled imports of HFCs should be managed? We agree with the implementation of a permitting system for the import of used, reclaimed, recovered and recycled substances, similar to the system used for HCFCs. Q22 Q23 Q24 Do you agree with the proposed approach on how exports of HFCs should be managed? Under the Kigali Amendment our consumption is based on imports minus export, so the Ministry needs to account for the exports. Not replacing import permit, where the HFCs have been exported, is unacceptable. Page 8

9 It would appear that this has been proposed due to the EPA either not having the resources, or not wishing to bother. We believe that the Ministry has underestimated the current level of HFC exporting. The bulk ETS figures (excluding Recovery exports), show a 162% growth in exports and we assume that this has continued for the 2016 year. We believe that the major proportion of current exports is to our Pacific Island neighbors and this trade has been occurring for many years. The industry in the Pacific is reliant on the New Zealand industry for the supply of systems, components, parts and refrigerant, as well as technical support. It allows for purchase at volumes that suit their business resources and freight supply lines are more efficient than most other supply options. Given New Zealand s long trading history with our Pacific neighbors, we believe this would be out of step with our regional obligations. It is therefore imperative that replacement permits are available to compensate for exports, for the following reasons: Our Pacific Island neighbours rely on NZ, as suppliers of refrigerant and components and technical support. If our exporters decide to not to export HFCs, they will be left to find supply sources for the small quantities the use, which will not be easy especially with the new alternatives and potentially leave them vulnerable to counterfeit supplies. For suppliers that have an existing Pacific market, ceasing exporting could have an effect not only on their refrigerant income, but could also affect their component and part sales. It increases the total volume of refrigerants supplied to New Zealand, assisting with access to the new technologies. Exporting, without replacement permit would remove this volume from the NZ market. Given that the Ministry wants the industry to accept a 25% reduction from the baseline, this would be a further reduction and could be detrimental to the NZ industry. Replacement import quota for HFC exports is a mandatory requirement. Q25 Q26 Q27 Do you agree with the proposed approach on how the manufacture of HFCs should be managed? It is very unlikely that manufacturing of HFCs would occur in the New Zealand market place, it is highly unlikely that a manufacturing facility will ever be commissioned in New Zealand. We therefore agree with the proposed prohibition on the manufacture of HFCs. Page 9

10 Non-party trade provisions. Q28 Q29 Q30 Do you agree with the proposed approach on how non-party trade provisions should be managed? In order to meet our obligations under the Kigali amendment, we agree with the preferred option for non-party trade provisions. Reducing demand for HFCs, and moving to alternatives to HFCs. Q31 What barriers /issues do you face to move to alternatives to HFCs? At this time, there are very few alternatives to HFCs that can be utilized within the existing installed base within New Zealand or internationally. Internationally the large scale use of HFO s is still very much in its infancy and current indications due to flammability issues, that the use of HFO s will be limited to self-contained low charge type systems. The industry has the choice of replacing plant with equipment that will operate on one of the natural refrigerants (Hydrocarbons, Ammonia or Carbon Dioxide) or to retrofit existing equipment with a transitional lower GWP refrigerant until such time a viable alternative to HFCs become available. With minor exception, mainstream refrigeration within New Zealand are totally un-prepared to safely work with flammable refrigerants in anything other than self-contained low charge systems. There is an urgent need for the implementation of an accreditation scheme to restrict the use of flammable refrigerants to suitably trained personnel, as well as for suitable training programs to train those workers. The regulatory framework that regulates the inspection and consent processes needs up-dating to allow for the safe use of flammable refrigerants. Q32 What would reduce your demand for high GWP HFCs. The effect of the Emission Trading Scheme, which penalises high GWP refrigerants, will continue to influence market decisions, especially if the value of carbon units continues to rise. However, there will always be those users, due to the scale of their business, who will resist the capital expenditure needed to shift to lower GWP alternatives. Phase out dates (bans) for the use of high GWP refrigerants, such as R404A and R507 etc. in new systems and for servicing existing systems, will send a clear message to the market place that users need to make provision for change. Page 10

11 Supporting Measures. Q33 Q34 Q 35 What are your suggestions for supporting measures? What problems would these measures address? What would be the impact on New Zealand of these measures being put into place? There are a number of supporting measures that would assist in the safe transition to lower GWP technologies. These could include: Accreditation of workers handling (especially flammable) HFC/HFOs. We understand that the measures to ratify the Kigali Amendment will be in the form of Regulations to the existing Ozone Layer Protection Act. Clause 11 of the Act allows the Minister to call for accreditation of workers : 11 Accreditation of persons handling ozone depleting substances (1) Any person whose business is or includes (a) the installation, servicing, modifying, or dismantling of any equipment containing or designed to use, or manufactured using, any ozone depleting substance; or (b) The direct handling of ozone depleting substances involving a possible risk of release of those substances into the atmosphere, may be required, by regulations made under section 16, to be accredited. Requiring industry workers to demonstrate that they have both the knowledge and skills to handle climate impact refrigerants in a safe and environmentally friendly way, so as to obtain accreditation, would assist with ensuring safe work practices and reducing environmental emissions. Controls on pre-charged equipment. From an environmental perspective, there should be a clear definition on what constitutes pre-charged so the reductions achieved in the bulk phase-down are not just replaced by an increase in pre-charged refrigerant imports. The controls should include climate impact import caps (or targets), to ensure that pre-charged imports are required to move to lower GWP technologies, in a similar pattern to the bulk phase down under Kigali. Setting end use dates (bans) for high GWP refrigerants in new systems, where alternatives are available (such as R404A and R507A in cooling/chiller systems). In addition, end use date (bans) on using high GWP refrigerants for servicing existing systems, where drop-in alternatives are available. Page 11

12 Promoting the implications of the phase down to both the industry and end users, including planning for change and information on low GWP alternatives, would contribute a smooth transition to lower GWP technologies. This could be in the form of seminars or technical bulletins, targeted to specific industry sectors. Mandating industry training for handling flammable refrigerants under Health and Safety Regulations. Other Comment IRHACE, CCCANZ and RLNZ would welcome the opportunity to meet with and to discuss the issues and our submission with the Ministry, at a time and location of its choosing. Given our combined representation across all sectors of the New Zealand refrigeration and air conditioning industries, we believe we have a vital role to play in finding equitable solutions to the issues raised. Page 12